Amex ruling refreshes US antitrust debate, but EU stresses distance
4 September 2018. By Lewis Crofts and Leah Nylen.
When do systems like payment cards or Internet platforms break antitrust rules? That question has long taxed enforcers, and a June ruling by the United States’ highest court has prompted fresh debate as justices appeared to raise the bar for finding a breach.
The decision is taking center-stage in a global debate over the ability of antitrust law to tackle tech megaliths owning online platforms, app stores, social networks or search engines.
But the European Commission has stressed that Europe — where most of the headline-grabbing enforcement takes place — works differently, and the American Express judgment won’t cramp its style.
The June 25 decision, authored by Republican Supreme Court Justice Clarence Thomas, said that US enforcers focused too heavily on the merchant side of the credit-card market and didn’t take into account the effect that American Express’ anti-steering rules have had on customers who use the cards.
Two findings at the heart of the ruling have set the tech world alight with speculation over how certain kinds of platform will find it easier to avoid antitrust risk. In short: What kind of platforms does the US high court’s opinion apply to? And how do you assess the effects?
— Platform definition —
Firstly, the court said credit-card systems were different from other types of platforms, such as a newspaper, because the two sides interact directly and immediately through a transaction.
Tech platforms are likely to argue that they fall into the American Express category because their users simultaneously receive ads in exchange for a free service. And platforms making transactions — such as Uber or Airbnb — can argue that enforcers need to weigh alleged harms on one side against potential benefits on the other to arrive at an overall positive “pro-competitive” view of the platform.
The second point plays into a long-running debate in Europe over how investigators need to weigh the overall legal and economic context of suspect conduct before ruling it anticompetitive.
“We read the Amex judgment with interest but it is clear that a judgment from a US Court does not and cannot impact the European Commission’s assessment of the legality of a specific conduct, which is carried out under EU competition law,” a spokesman for the EU regulator said.
While companies may bring Amex-inspired arguments to the EU’s door to contest antitrust accusations, they can expect some principled rebuttals.
Notably, EU law doesn’t recognise the newly defined categories of platforms, transactional or otherwise. While the US debate may focus on whether your platform falls inside or outside the Amex pot, the EU’s assessment won’t hinge on the legal definition of a platform or a “two-sided market.”
Expect the antitrust conference circuit to be awash with claims the new US approach is more attuned to platform specifics and provides more legal certainty. The counterclaimants will say that the EU assessment is better because it’s not tied to market definition, and the US approach is less empirical and amounts to a formalistic straitjacket.
— Efficiencies —
Secondly, while the Amex judgment weighs the benefit to one group of consumers against those to another group, the EU stance is much narrower, making such "cross-market efficiencies" very rare, if not non-existent.
While economists may find the data to prove the above, it’s politically difficult for a European commissioner to stand before the world’s press and declare some customers will suffer because others get a better deal. It’s a very high bar.
The Amex judgment has also raised the question of when investigators should look into the potential positive effects that might outweigh any restrictions.
Under EU law, this comes at the end of the process once a restriction has been found and it is up to the defendants to argue the broader benefits outweigh the anticompetitive harm. Under Amex, this step is brought forward and is for the plaintiff to disprove at the outset.
For European investigators, the Amex ruling gets things back to front and it would be unfair to burden plaintiffs with disproving a point upfront and based on the information available then.
In contrast, some companies could argue life isn’t so different in Europe.
The early-stage assessment exists under European law anyway following the judgments of the EU’s own courts, they may argue. Those rulings demand that investigators take into account the “legal and economic context” when preparing their case.
For such companies, the assessment of benefits that may counterbalance alleged harm is just that: part of the “legal and economic context.”
— Payments cards —
More specific to payments, the commission is quick to stress that a case such as Amex would never have got out of the blocks in Europe.
The conduct at issue doesn’t even make the antitrust grade in Europe because it is subject to across-the-board regulation — arguably a stricter form of prohibition. EU rules on payment services and fee mechanisms have prohibited anti-steering rules since 2009.
“Under some of the rules regulating financial markets and payment services in the EU, anti-steering rules such as the ones implemented by Amex in the US are not allowed in the EU,” the commission spokesperson said.
— US law in Europe —
Barely a merger passes these days, without both Europe and America proclaiming a near telepathic approach to assessing markets, where they arrive at an identical conclusion albeit by different paths.
But for antitrust theories — particularly at a time when technology is uprooting long-held doctrines — Europe and America are uncomfortable bedfellows.
Nevertheless, antitrust judgments in one jurisdiction affect the global debate and force regulators elsewhere to justify — and in some cases rethink — the way they do things. The Amex judgment will doubtless feed into the EU’s own fights over credit card platforms and Internet offerings.
Yet, Europe has a history of nodding politely at US rulings and then ignoring them.
A landmark 2004 ruling in the US Supreme Court known as Trinko severely limited antitrust cases that allege monopolization and refusals to deal.
The decision didn’t put the EU off its stride. Three months later, it punished Microsoft for abusing the all-important information needed to interoperate with its products. Similarly, a few years later, EU judges on appeal turned up their noses at the US ruling on Trinko.
In 2013, the US Supreme Court also set out its stance on agreements between pharma companies to keep cheaper generic versions off the market, saying the assessment should hinge on the “rule of reason” considering the potential procompetitive benefits against the anticompetitive effects of the conduct.
This appeared to differ from an EU decision a week later — and still under appeal — that said in Europe investigators could view the pay-for-delay deals as being designed purposely to restrict competition, a more potent conclusion.
It will be for companies such as Google and Visa — both involved in EU disputes over platforms — to see if the Amex case gains any traction with European enforcers or judges.