The antitrust case – Ohio v. American Express Co. – pending before the Supreme Court of the United States has given rise to a debate over antitrust laws. Although, the case is related to the credit card industry, analysts have observed that the case could have sweeping consequences for the ways in which antitrust law is being applied concerning the tech giants.
The observation came in light of the bipartisan consensus that has formed around the idea that big tech platforms must be subject to greater scrutiny. Further the US Senator Elizabeth Warren in a recent speech, “charged tech giants with using their heft to snuff out competition,” which renewed the debate over antitrust laws.
However, the decision in the antitrust case (currently before the Supreme Court) could shield America's largest tech platforms from serious antitrust scrutiny.
Court Proceedings So Far
The U.S. Supreme Court on Monday heard the case of Ohio v. American Express, regarding the nature of antitrust law with reference to two-sided markets. The case raises concerns about the exercise of market power by large organizations that serve multiple groups of users.
In general, the SC case centers around the credit card industry giants like American Express, Visa, and Mastercard for imposing anticompetitive restrictions on merchants – that prevents them from driving customers into using other cards (such as Discover).
Irrespective of millions of merchants and a significant number of cardholders, the credit card business is still controlled by four firms; this is, suffice to say that the credit card industry is a classic case of oligarchy. Merchants who require payment networks don’t have any real bargaining power, and are rather stuck paying high rates to the larger firms. As a result, higher costs ultimately get passed on to consumers.
The case was first brought by the United States Department of Justice (DOJ) that filed a civil anti-trust lawsuit against Visa, MasterCard, and American Express in the district court.
The district court ruled in favor of the Justice Department and the states, after finding that American Express’s “anti-steering provisions stifled price competition and violated the antitrust laws”. While Mastercard and Visa settled with the DOJ before trial, American Express however, defended its practice and continued to fight the lawsuit in the Appeals Court.
The Appeals court ruled in favor of American Express in the antitrust law, and introduced a special set of rules, making it a lot more difficult to win important antitrust cases and to stop anticompetitive behavior. Although the suit was dropped by the Department of Justice and other states, eleven states filed a petition in the Supreme Court demanding to hear the case “on how anti-trust measures should be applied a two-sided market”.
If the Supreme Court approves the Second Circuit decision, it would create de facto antitrust immunity for the dominant platforms. Since technology has enabled the growth of big tech companies like Amazon, Apple, Facebook, and Uber that serve multiple groups of users, the firms are set to become prime beneficiaries of the Second Circuit’s warped analysis.
For instance, Amazon could claim a two-sided platform status as it helps buyers and sellers of goods connect with each other; Google can claim such status because it facilitates a market between advertisers and search users.
Considering that an industry trade group representing the America’s tech platforms filed an amicus brief in favor of American Express, could be the reason behind why tech giants are lining up behind the Second Circuit’s approach. Clearly, if the approach is ratified it would become much more difficult to use the antitrust laws against the tech platforms.