AXP American Express Company

By Brent Kendall 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 27, 2018).

WASHINGTON -- American Express Co.'s card rules for merchants prompted strong reactions at the Supreme Court Monday, as the justices considered whether to revive a government antitrust lawsuit challenging the company's approach.

At issue is an AmEx policy that says retailers and other businesses that accept AmEx cards are prohibited from providing incentives that encourage customers to pay with cards on other networks like Visa or Mastercard that charge lower fees.

During an hour-long oral argument, Justices Sonia Sotomayor and Neil Gorsuch dominated questions from the bench and offered starkly different views of the case.

Justice Sotomayor told an AmEx lawyer that the company's rules undermined "the essence of competition" and deprived consumers the option of receiving discounts for alternative forms of payment.

"If I go to a cash register and the merchant says to me, 'I'll give you a 1% discount today if you don't use AmEx,' I sit there and think to myself, 'Do I need the airplane rewards or the train rewards, or do I want the 1%?' " Justice Sotomayor said. "But this anti-steering removes that competition."

She spoke more than 35 times during the argument.

Justice Gorsuch, for his part, pressed an attorney for Ohio, one of 11 states that brought the challenge to the AmEx rules to the high court. He suggested AmEx, which has a smaller market share than Visa and Mastercard, doesn't have the market power necessary to impose anticompetitive terms. He also said AmEx card rewards provided notable benefits to consumers.

"My question is, do you have any evidence that, on a net basis, consumers pay more" because of the AmEx rules, Justice Gorsuch said. "I don't believe you have," he told Ohio State Solicitor Eric Murphy.

Justice Gorsuch spoke about 30 times during the session.

The outcome of the case wasn't clear, because a majority of justices didn't signal their views and both sides received tough questions from the court.

AmEx lawyer Evan Chesler said the fees that merchants pay the company fuel benefits for consumers.

"Every reward, every seat on a plane to Aruba, every ticket to a Billy Joel concert, every cash-back reward that's given is a price discount to the consumer," he said.

Mr. Murphy from Ohio said AmEx's rules "raised the prices that all four credit-card companies charge merchants."

The Supreme Court's review comes after a federal appeals court in 2016 ruled for AmEx and threw out the government's case.

The Justice Department and a group of states first sued AmEx in 2010, an early headline case for Obama-era antitrust enforcers. They won a trial court ruling that barred the company's rules, but then lost at the Second U.S. Circuit Court of Appeals.

The department under Trump administration leadership declined to seek Supreme Court review after the appellate loss, but on Monday it supported the states' position and urged the justices to revive the case.

The case has high stakes for AmEx's business model but also could have broader ramifications for other companies that have multisided business platforms, especially in the tech sector.

Like AmEx, many leading technology companies have markets in which they do business with end-use consumers on one side of their business and with merchants and advertisers on the other.

A decision is expected by the end of June.

(END) Dow Jones Newswires

February 27, 2018 02:47 ET (07:47 GMT)

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