U.S. Department of Justice, Petition of the United States for Rehearing in U.S. v. American Express
American Express operates a platform that facilitates transactions between merchants and cardholders. The platform’s appeal to merchants depends on attracting cardholders, and vice-versa. The panel discards bedrock antitrust principles under the mistaken belief that those principles cannot properly account for the interdependence of the platform’s two sides. Its decision conflicts with Supreme Court and Second Circuit precedent on two important questions of law:
1. The panel fails to apply the basic principle that a relevant market is “composed of products that have reasonable interchangeability for the purposes for which they are produced—price, use, and qualities considered.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956). Under this principle, distinct competitions on different sides of a platform are in “separate though interdependent markets.” Times-Picayune Publ’g Co. v. United States, 345 U.S. 594, 610 (1953). Here, services to cardholders and services to merchants are in “interrelated, but separate” markets. United States v. Visa U.S.A., Inc., 344 F.3d 229, 238-39 (2d Cir. 2003). In holding that the relevant market must include the
services provided to “both merchants and cardholders,” Op. 57, the panel misapplies du Pont, ignores Times-Picayune, and erroneously distinguishes Visa.
2. The panel departs from this Court’s burden-shifting approach to the rule of reason. The plaintiff bears an initial burden of demonstrating that the challenged 2 restraint has an “adverse effect on competition as a whole in the relevant market”; if it does, the burden shifts to defendants “to offer evidence of the pro competitive effects of their agreement”; and if they do, the burden shifts back to the plaintiff. Geneva Pharms. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 506-07 (2d Cir. 2004). The panel, however, erroneously requires plaintiffs not only to prove an adverse effect but also to account for any benefits in step one, proving “net harm.” Op. 57, 60. This improperly collapses the three-step approach into a single step. As a result, millions of merchants continue to pay higher credit-card fees and nearly every American continues to pay higher retail prices.
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