In a test of antitrust law, the justices ruled 5 to 4 that the company could use contracts to stop merchants from steering consumers to other cards.<\/b>
\nWASHINGTON \u2014 American Express did not violate the antitrust laws by insisting in its contracts with merchants that they do nothing to encourage patrons to use other cards, the Supreme Court ruled on Monday.
The decision has implications not only for what one brief called \u201can astronomical number of retail transactions\u201d but also for other kinds of markets, notably ones on the internet, in which services link consumers and businesses.
Such \u201ctwo-sided platforms,\u201d the court said, require special and seemingly more forgiving antitrust scrutiny.
The vote was 5 to 4, with the court\u2019s more conservative members in the majority. Justice Clarence Thomas, writing for the majority, said the specialized nature of credit-card transactions justified what in other circumstances might have been anti-competitive conduct.
Retailers pay so-called swipe fees when customers use credit cards. American Express charges higher fees than Visa or Mastercard, meaning that merchants have good reason to prefer those other cards.
But credit card networks create \u201ctwo-sided platforms,\u201d Justice Thomas wrote, and they \u201cdiffer from traditional markets in important ways.\u201d Since card companies deal with both merchants and consumers, he wrote, people challenging actions as anticompetitive must take account of the effect on both sets of market participants.
Viewed that way, Justice Thomas wrote, American Express promoted competition by designing rewards programs to attract affluent customers.
\u201cAmex\u2019s business model sometimes causes friction with merchants,\u201d he wrote. \u201cTo maintain the loyalty of its cardholders, Amex must continually invest in its rewards program. But, to fund those investments, Amex must charge merchants higher fees than its rivals.\u201d
\u201cEven though Amex\u2019s investments benefit merchants by encouraging cardholders to spend more money, merchants would prefer not to pay the higher fees,\u201d Justice Thomas wrote. \u201cOne way that merchants try to avoid them, while still enticing Amex\u2019s cardholders to shop at their stores, is by dissuading cardholders from using Amex at the point of sale.\u201d
The steering agreements were justified in these circumstances, Justice Thomas wrote.
\u201cWhile these agreements have been in place,\u201d Justice Thomas wrote, \u201cthe credit-card market experienced expanding output and improved quality. Amex\u2019s business model spurred Visa and Mastercard to offer new premium card categories with higher rewards. And it has increased the availability of card services, including free banking and card-payment services for low-income customers who otherwise would not be served.\u201d
Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Samuel A. Alito Jr. and Neil M. Gorsuch joined the majority opinion.
Justice Stephen G. Breyer read his dissent from the bench, a rare move indicating profound disagreement. He said the implications of the ruling were vast and could hurt competition in many realms.
\u201cI particularly fear the interpretive impact of the majority\u2019s discussion of what it calls \u2018two-sided platforms,\u2019 in an era when that term might be thought to apply to many internet-related goods and services that are becoming ever more important,\u201d Justice Breyer said.
Merchants expressed disappointment with the decision.
\u201cToday\u2019s ruling is a blow to competition and transparency in the credit card market,\u201d said Stephanie Martz of the National Retail Federation. \u201cThe American Express rules in question have amounted to a gag order on retailers\u2019 ability to educate their customers on how high swipe fees drive up the price of merchandise.\u201d
A spokeswoman for Cravath, Swaine & Moore, which represented American Express, said the company had emerged victorious in what she called \u201cone of the most significant government antitrust enforcement actions in history.\u201d
In 2010, the Justice Department and 17 states sued several credit card companies, saying that their steering practices had violated the antitrust laws. Visa and Mastercard settled, but American Express fought the case.
In 2015, Judge Nicholas G. Garaufis of the United States District Court in Brooklyn ruled that contracts forbidding merchants to steer customers toward other forms of payment were an unlawful restraint of trade.
The United States Court of Appeals for the Second Circuit, in New York, disagreed, ruling that Judge Garaufis had unduly focused on merchants\u2019 interests \u201cwhile discounting the interests of cardholders.\u201d
\u201cThis approach does not advance overall consumer satisfaction,\u201d Judge Richard C. Wesley wrote for a unanimous three-judge panel. \u201cThough merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction \u2014 and if a particular merchant finds that the cost of Amex fees outweighs the benefit it gains by accepting Amex cards, then the merchant can choose to not accept Amex cards.\u201d
Eleven states asked the Supreme Court to hear the case, Ohio v. American Express, No. 16-1454, saying that the appeals court\u2019s decision was at odds with established antitrust principles and affected \u201can astronomical number of retail transactions in the United States.\u201d
The Supreme Court affirmed the appeals court\u2019s decision.
In dissent, Justice Breyer faulted every part of the majority\u2019s analysis. He said that the way American Express deals with merchants should be considered in isolation and that its contracts were anti-competitive.
He added that two-sided transactions were commonplace.
\u201cConsider a farmers\u2019 market,\u201d Justice Breyer wrote. \u201cIt brings local farmers and local shoppers together, and transactions will occur only if a farmer and a shopper simultaneously agree to engage in one.\u201d
\u201cWhat about travel agents that connect airlines and passengers?\u201d he asked. \u201cWhat about internet retailers, who, in addition to selling their own goods, allow (for a fee) other goods-producers to sell over their networks?\u201d
\u201cNothing in antitrust law, to my knowledge, suggests that a court, when presented with an agreement that restricts competition in any one of the markets my examples suggest, should abandon traditional market-definition approaches and include in the relevant market services that are complements, not substitutes, of the restrained good,\u201d Justice Breyer wrote.
Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan joined the dissent.
American Express, Justice Breyer concluded, had other ways to achieve its goals.
\u201cIf American Express\u2019 merchant fees are so high that merchants successfully induce their customers to use other cards, American Express can remedy that problem by lowering those fees or by spending more on cardholder rewards so that cardholders decline such requests,\u201d Justice Breyer wrote. \u201cWhat it may not do is demand contractual protection from price competition.\u201d<\/p>\n

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