On June 25, 2018, the US Supreme Court in a 5-4 decision held that credit-card company American Express (“Amex”) did not violate federal antitrust law by requiring merchants to contractually agree to “antisteering provisions.” These antisteering provisions prohibit merchants from “steering” cardholders at the point of purchase away from using their Amex card in favor of other credit cards to avoid having to pay Amex’s higher merchant fees. The Court’s decision, validating these provisions under antitrust law, is significant because of how the Court defined the relevant product market in determining that the provisions had no substantial anticompetitive effect that harms consumers. In examining the intricacies of credit-card transactions, the Court found that credit-card networks are two-sided “transaction” platforms that “facilitate a single, simultaneous transaction between participants.”

Accordingly, the Court reasoned that: (A) the relevant antitrust market for a “two-sided” credit-card market must include both “sides” of the market (i.e., merchants and cardholders); and (B) the plaintiffs, the United States and several States, failed to show that Amex’s antisteering provisions caused the required anticompetitive effects on both sides of that market.

Two-sided platforms

A “two-sided platform” brings two distinct groups of customers or “sides” together by serving as an intermediary that provides interrelated products or services to both groups. For instance, the Court found that Amex is a two-sided platform because it brings together a cardholder and merchant in a single credit-card transaction by providing the cardholder with instant credit and rewards, while providing the merchant with a quick, risk-free, and guaranteed payment. The Supreme Court recognized that credit-card networks like Amex reflect a special type of “transaction” platform where the networks cannot serve one side of the platform without simultaneously serving the other side. Two-sided platforms, the Supreme Court further explained, often involve “indirect network effects,” where the value of the platform to one side depends on the number of members on the other side. For example, cardholders place a higher value on a credit card accepted by more merchants, and merchants likewise place a higher value on a network with access to more cardholders. Such “indirect network effects,” the Court observed, require a balancing of the prices charged to each side to maximize the value to both sides.

Amex’s antisteering provisions

The Court found that Amex balanced the two sides of the platform by charging merchants higher fees, on one side, to fund its investments in rewards programs for its cardholders, on the other side. Amex put its antisteering provisions in place to prevent merchants from reaping the benefits from their access to Amex cardholders while trying to avoid Amex’s higher fees by discouraging use of Amex cards at the point of sale. The provisions prohibit merchants from a number of “steering” practices, such as restrictions or fees on Amex cards or unequal promotion of other cards, but they do not prevent steering toward non-credit-card payments, such as cash or debit cards.

Defining and analyzing the anticompetitive effects of a two-sided platform

In applying the “rule of reason” to analyze the competitive effects of the “vertical” antisteering provision in Amex’s contracts with merchants, the Court employed a three-step, burden-shifting framework agreed to by the parties: First, the plaintiffs bear the initial burden to prove that the antisteering provision has an anticompetitive effect, i.e., harms consumers, in a relevant antitrust market. Second, if the plaintiffs satisfy that initial burden, then defendant Amex must show a procompetitive justification for the antisteering provisions. Third, if Amex meets that burden, the plaintiffs must show that Amex could have reasonably achieved the same procompetitive efficiencies through less anticompetitive means.

The Supreme Court’s analysis in this case starts and ends with the first step, finding that the plaintiffs failed to meet their initial burden of showing the required anticompetitive effect in a relevant market. The Court rejected the plaintiffs’ argument that a relevant market need not be defined in this case because they offered direct evidence of adverse effects on competition—namely, increased merchant fees. The Court reasoned that vertical restraints “often pose no risk to competition unless the entity imposing them has market power, which cannot be evaluated unless the Court first defines the relevant market.” In analyzing the proper relevant market, the Court held that “courts must include both sides of the platform—merchants and cardholders—when defining the credit-card market” and that the plaintiffs “wrongly focuse[d] on only one side of the two-sided credit-card market” or the high merchant fees. The Court quickly qualified, however, that “it is not always necessary to consider both sides” for all two-sided platforms, such as where the platform has weak “indirect network effects” and relative pricing. Two-sided “transaction” platforms like Amex, on the other hand, have strong “indirect network effects” that require simultaneous participation by both sides for a single transaction and should, thus, be viewed as a single market containing both sides.

Having defined the relevant market to include both merchants and cardholders, the Supreme Court next found that the plaintiffs failed to prove the required anticompetitive effects in that relevant market, as plaintiffs had staked their entire case on Amex’s higher fees charged to merchants only. The plaintiffs, the Court explained, could not demonstrate anticompetitive effects – higher transaction costs or reduced output or transactions – “by looking at merchants alone.” And, as the Court found, the plaintiffs had failed to show that the costs of credit-card transactions to both merchants and cardholders was higher than it would be in a competitive market. Instead, the Court recognized, while the antisteering provisions were in effect, Amex and other credit-card companies engaged in “robust interbrand competition,” and credit-card transactions had increased in not only number but also in quality in the form of greater cardholder rewards.

Because the plaintiffs failed to satisfy their initial burden of proving anticompetitive effects, the Supreme Court found no violation of the antitrust laws under Section 1 of the Sherman Act.


The Supreme Court’s decision will bear on how parties and courts should approach antitrust claims involving two-sided platforms, which have a growing presence in today’s economy with the proliferation of online marketplaces and other platforms that connect consumers and merchants or service providers. While this case lends support to certain transactions involving a two-sided platform or analogous structure “that exhibit more pronounced indirect network effects and interconnected pricing and demand,” it distinguishes certain other two-sided markets where “the impacts of indirect network effects and relative pricing in that market are minor.”

The decision also contains important reminders for antitrust litigants generally. The majority emphasizes that proper market definition is an essential obligation of plaintiffs in cases where harm to competition turns on the existence of market power. Furthermore, it highlights the heavy burden antitrust plaintiffs confront in coming forward with evidence of anticompetitive effects, before any burden shifts to defendants to show procompetitive benefits.

We will continue to monitor developments in this area and stand ready to assist you in analyzing these issues.

If you have any questions about the above decision or any related issues, you can contact us at Darryl Anderson, Michael Swartzendruber, Gerald Stein, Geraldine Young or Abraham Chang.


Partner-in-Charge, Dallas
Senior Associate

Recent publications

Subscribe and stay up to date with the latest legal news, information and events . . .