Merchant plaintiffs that do not accept American Express credit cards do not have antitrust standing to argue that American Express’s anti-steering rules harm them by encouraging competing credit card providers to increase their merchant fees

New York



Antitrust Standing Denied to Merchants Who Were Not Directly Impacted by Allegedly Anti-Competitive Behavior In In re Am. Express Anti-Steering Rules Antitrust Litig., 20-1766 (2d Cir. Nov. 22, 2021), the plaintiff-appellants sought monetary and injunctive relief from the defendant-respondents (collectively “Amex”), alleging that Amex’s anti-steering rules caused merchant fees to rise across the market. The plaintiffs sought monetary and injunctive relief for harm caused to them as a result of the market-wide rise in credit card merchant fees. The district court held that the plaintiffs did not have antitrust standing and dismissed the claims. On appeal, the appellant-plaintiffs challenged the holding that they did not have standing to bring the claims.All credit card companies charge merchants a fee for every transaction processed. According to the appellants, Amex charges higher merchant fees than its competitors. To avoid the higher fees, merchants, in the absence of any restraint prohibiting the practice, might “steer” their customers toward using another form of payment that is associated with lower fees for the merchant. “Steering” may be accomplished by asking the customer to use a different method of payment, by offering benefits for using other payment methods, or by imposing a surcharge on the use of Amex cards. Amex has discouraged steering by inserting anti-steering provisions into its contracts with merchants.The appellants alleged that Amex’s anti-steering provisions, when combined with Amex’s higher merchant fees, raised fees throughout the industry. The appellants alleged that competing networks have no economic incentive to compete in the market by offering lower merchant fees because merchants cannot educate cardholders and steer transactions to the cards with lower fees. The appellants did not accept Amex as a payment method but claimed that they were injured by the higher merchant fees across the industry (at 9). The Law The United States Court of Appeals for the Second Circuit explained that in order to demonstrate antitrust standing, a private plaintiff must show both that (at 12):it suffered a special kind of antitrust injury, andit is a suitable plaintiff to pursue the alleged antitrust violations and thus is an efficient enforcer of the antitrust laws.Whether a plaintiff is an “efficient enforcer” depends on four factors (at 12):the directness or indirectness of the asserted injury;the existence of more direct victims or the existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement;the extent to which the claim is “highly speculative”; and,the importance of avoiding either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other (at 10). The Court’s Ruling The Court held that the appellants failed to show that they suffered a direct injury from the alleged antitrust violation. At the first step, Amex raised the price for Amex-accepting merchants through Amex’s anti-steering rules. However, Amex did not raise the appellants’ fees. The Court noted that Amex could not have raised the appellants’ fees since they did not accept American Express cards. The appellants were allegedly injured when Amex’s competitors raised their own prices. The appellants argued that Amex’s imposition of increased merchant fees enabled the competitor companies to increase their own merchant fees. However, Amex enabling other credit card companies to raise the appellants’ fees does not establish the “direct relation” between injury and antitrust violation that the first-step rule requires (at 15-16).The Court also held that the appellants failed the “efficient enforcer” test because neither the first nor the second factors of the test weighed in favor of the plaintiffs. The appellants did not suffer a direct injury from the alleged antitrust violation. Amex raised the price for Amex-accepting merchants through the Anti-Steering Rules; however, Amex did not raise the appellants’ fees. The injuries, therefore, were not proximately caused by Amex; the alleged antitrust violation was instead a “remote” cause of the injuries (at 16).With respect to the second factor, the Court noted that denying the appellants a remedy on the basis of its antitrust allegations is unlikely to leave a significant antitrust violation undetected or unremedied. The merchants who have a relationship with Amex were harmed at the first step by Amex’s anti-steering rules and those merchants had already sued Amex (at 16).The Court affirmed the judgment of the district court that the appellants were not efficient enforcers of the antitrust laws and therefore lacked antitrust standing (at 21).

April 14, 2022
In re Am. Express Anti-Steering Rules Antitrust Litig., 20-1766 (2d Cir. Nov. 22, 2021)
Federal Courts (2nd Circuit)