In Ohio v. American Express, the Court issued its most notable antitrust opinion in over a decade. The decision establishes a special rule for analyzing the conduct of companies that operate in “two-sided transaction platforms,” significantly raising the burden that plaintiffs must meet at the very earliest stage of litigation. Given the Court’s decades-long hostility towards antitrust plaintiffs (including government enforcers), the result of the case was not much of a surprise. What was a surprise was how clumsily the Court reached the outcome. 

The basic question in the case was whether the “anti-steering” provisions imposed by American Express violate Section 1 of the Sherman Act. Like other credit card companies, American Express charges merchants a fee for processing credit card transactions, but its fees are much higher than those charged by Visa and Mastercard. Critically, AmEx prohibits merchants from encouraging consumers to use any other credit card—so even if Discover, for example, charges half the fees that AmEx does, a merchant can’t show any form of preference for Discover. As the District Court found, this made it effectively impossible for other credit card companies to win business through offering merchants lower fees: because merchants couldn’t communicate the lower fees to consumers, the lower fees didn’t translate into greater competition. This, the District Court held, made AmEx’s restraints anticompetitive. 

The Second Circuit reversed. It reasoned that, since American Express serves both merchants and cardholders, this “two-sided” market required special analysis. It held that plaintiffs alleging anticompetitive harm to merchants must also show that cardholders were worse off overall, at the very first stage of “rule of reason” analysis.  

A 5-4 majority of the Supreme Court affirmed the Second Circuit, creating a new type of analysis for companies that serve as “two-sided transaction platforms.” Reasoning that these forms of businesses present unique competition issues, the Court essentially redefines what constitutes “anti-competitive” in the context of these business models, making it extraordinarily more difficult for plaintiffs to successfully show harm. Given that a growing share of our commerce and communications is being mediated through firms that arguably fit the “two-sided” definition, the new rule risks exempting from a swath of antitrust law some of the biggest firms in our political economy, including Amazon, Apple, and Microsoft. 

As Justice Breyer’s dissent forcefully points out, the majority opinion shows stunning disregard for traditional antitrust principles. First is the general issue of whether it even makes sense to introduce a new form of analysis for “two-sided” platforms. While “two-sided” is relatively new as an academic concept, firms that fit this definition have been around for centuries and include commodities exchanges (linking farmers and food companies) and banks (connecting borrowers and depositors). Recent academic work analyzing these markets focuses on the pricing decisions faced by platform firms, which may differ from how non-platform firms approach pricing. As the majority writes, “Striking the optimal balance of the prices charged on each side of the platform is essential for two-sided platforms to maximize the value of their services.” Critically, though, the conduct at issue in this case is not AmEx’s pricing, but AmEx’s restraint on merchants from effectively communicating price differences. In other words, the majority’s holding rests on a distinction that matters—if it matters at all—when analyzing conduct not at issue in this case. In this way, the Court creates a special rule that is totally untethered from the conduct that could justify an exception in the first place. The outcome is doubly perverse given that studies and experience show that platform firms enjoying network effects are more likely to achieve monopolistic positions—a fact that should weigh in favor of rules that increase antitrust scrutiny of these firms rather than drastically limit it.

Second, the Court’s special rule turns on a concept that is too contested to sustain a critical legal distinction. As the Open Markets Institute explained in an amicus brief, there is no consensus on what constitutes a “two-sided” market, and the parameters of leading definitions can be read broadly. Moreover, the majority relies on a definition that is even less bounded than the definition offered by those who coined the term, likely creating an even broader exception than that constructed by the Second Circuit. Justice Thomas, writing for the majority, seeks to limit the exception to “two-sided transaction platforms,” defined as platforms that “cannot make a sale unless both sides of the platform simultaneously agree to use their services.” But this definition still covers a huge swath of business activity, including—as Justice Breyer muses—entities ranging from farmers’ markets to travel agencies. The Court’s primary factor for establishing when the special analysis applies is the strength of the “indirect network effects”—an inquiry with which lower courts will struggle. Applying the test, too, will involve a high likelihood of error, since asking judges to balance competitive effects across distinct markets—even as many of these effects are incommensurable—is unreasonable.

The Court’s new rule will suppress legitimate antitrust suits. This was not a necessary result: even if one thinks that two-sided platforms warrant special analysis, the Court could have structured a rule such that defendants—not plaintiffs—carried the burden of showing that the conduct at issue benefited a different set of customers than those alleging injury. Requiring that plaintiffs conclusively disprove this—at the very first stage of litigation—all but creates an insurmountable hurdle.

This decision comes at a time when politicians, journalists, and members of the public increasingly recognize that America has a major market power problem and that rehabilitating antitrust is vital. Through American Express, the Court lends further credibility to the growing public perception that the judiciary is hostile to plaintiffs in antitrust suits, and that this hostility has delivered an antitrust jurisprudence that cannot check market power in the ways that Congress intended. Indeed, for decades courts have imported values into antitrust that are directly at odds with the legislative history. Calls urging that Congress clarify and revitalize antitrust law have been growing. This opinion is sure to strengthen that case.   

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