Today, the Retail Litigation Center (RLC) filed an amicus brief in support of a petition for Supreme Court review of a Second Circuit decision that allows American Express’s anti-steering rules to stay on the books. Amex’s rules prevent retailers from offering benefits to consumers who choose to use cards with lower processing fees. The RLC’s brief was carefully calibrated to add the voice of the retail industry to a strong chorus of amici briefs from multiple viewpoints supporting the petition.
"Credit card fees are the second highest cost of doing business for many of our nation’s retailers and processing credit card transactions drives up prices for American families each and every day,” said RLC President Deborah White. “American Express has intentionally stifled competition by imposing rules that prohibit merchants from incentivizing customers to use lower cost cards.”
The Second Circuit’s decision reversed the trial court’s ruling (a 150-page opinion based on weeks of testimony) that Amex’s conduct violates the Sherman Act. The Second Circuit did not disturb the district court’s extensive factual findings but instead distorted antitrust principles to reach its conclusion. This approach has significant implications for “new economy” enterprises, like Facebook, Uber and Airbnb. The Second Circuit denied rehearing en banc; a petition for a writ of certiorari was filed by eleven states to seek en banc review.
The RLC brief urges the Court to grant review because of the significance of the market at stake:
“This case warrants certiorari because it concerns nearly every dollar that Americans spend using a credit card as well as retail prices throughout the economy, regardless of the form of payment used by the consumer at check-out.”
The link between price and demand is essential to competition but is missing under Amex’s anti-steering rules:
“In a functioning competitive market, customers steer their business to lower priced alternatives; lower prices yield higher demand. When McDonald’s lowers its Big Mac prices, more customers buy Big Macs and fewer buy Burger King’s Whoppers.”
The brief argues that American Express’ anti-competitive rules are stifling cost savings for consumers.
“Though Visa and Mastercard settled this case and agreed to remove their equivalent anti-steering rules, no Amex-accepting merchant can ‘offer a discount to MasterCard holders if they use a Visa card instead.’ Because every major retailer—90% by volume—accepts Amex, the rules challenged here not only insulate Amex from competition, but effectively suppress competition among all credit card companies,” the brief said.
“Consumers are also harmed by these rules. Cardholders are deprived of the right, as economic actors, to decide for themselves whether the benefit of rewards is worth increased prices. And all consumers pay higher retail prices. Worse, only certain customers receive cardholder benefits in return for those higher prices at checkout. Many others receive nothing: “a lower income shopper who pays with cash or food stamps is subsidizing the costs of the premium rewards conferred by American Express on its relatively small, affluent cardholder base.”
To read a full copy of the brief, click here.
The brief was drafted by Debbie Greenberger of Emery Celli.
The Retail Litigation Center is a public policy organization that identifies and engages in legal proceedings that affect the retail industry. The RLC, whose members include some of the country's largest retailers, was formed to provide courts with retail industry perspectives on significant legal issues, and highlight the potential industry-wide consequences of legal principles that may be determined in pending cases.