American Express has rules that prohibit merchants from discriminating against American Express cards in favor of those issued by other card networks. On February 18, 2015, following a seven-week trial, Judge Garaufis in the Eastern District of New York issued a decision siding with the United States Department of Justice (DOJ), and holding that these Non-Discrimination Provisions (NDPs) were restraints of trade in violation of Section 1 of the Sherman Act (the "Decision"). The Decision was based on a full Rule of Reason analysis of the competitive effects of the challenged provisions. The DOJ's victory, including a finding that American Express had market power notwithstanding its 26.4% share of the relevant market, is likely to embolden the agency and private plaintiffs to bring challenges under the rule of reason to other "vertical restraints," i.e., agreements between firms at different levels of the production and distribution process relating to the terms on which they may buy or sell goods or services.
BACKGROUND
The DOJ filed a complaint in October 2010 against Visa, MasterCard, and American Express challenging certain rules that prohibited merchants from discriminating against that network's cards in favor of other networks' cards. The DOJ did not challenge rules forbidding surcharges at the point of sale, or rules that prohibit disparaging the network's brand or cards, or providing inaccurate...
