Amicus Curiae Brief — Ohio v. Am. Express Co., 138 S. Ct. 355 (2017) (No. 16-1454)

“Supers

FILED

JUL - 5 2017

No. 16-1454 | OFFICE OF THE CLERK _

In the Supreme Court of the United States

STATES OF OHIO, CONNECTICUT, IDAHO, ILLINOIS,

LOWA, MARYLAND, MICHIGAN, MONTANA, RHODE Is-

LAND, UTAH, AND VERMONT,

PETITIONERS

v.

AMERICAN EXPRESS COMPANY, AND AMERICAN EXPRESS

TRAVEL RELATED SERVICES COMPANY, INC.,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR DISCOVER FINANCIAL SERVICES

AS AMICUS CURIAE IN SUPPORT OF

OF PETITIONERS

ELIZABETH P. PAPEZ*

ANDREW C. NICHOLS

Winston & Strawn LLP

1700 K Street, N.W.

Washington, DC 20006

(202) 282-5000

epapez@winston.com

*Counsel of Record

Counsel for Amicus Curiae

Cart

QUESTION PRESENTED

This case asks how Section 1 of the Sherman Act,

which bans unreasonable restraints of trade, applies

to “two-sided” platforms that unite distinct customer

groups. Such platforms are ubiquitous, ranging from

eBay (serving buyers and sellers), to newspapers

(serving readers and advertisers). Here, credit-card

networks bring cardholder customers together with

merchant customers for ordinary transactions. When

doing so, Respondents American Express Company

and American Express Travel Related Services Com-

pany (“Amex”) contractually bar merchant customers

from steering cardholder customers to credit cards

that charge merchants lower prices. Applying the

“rule of reason,” the district court held that: (1) the

Government proved that Amex’s anti-steering provi-

sions were anticompetitive because they stifled com-

petition among credit-card companies for the prices

charged to merchants, and (2) Amex failed to estab-

lish any procompetitive benefits. The Second Circuit

reversed. It held that, to prove that the anti-steering

provisions were anticompetitive (and so to transfer

the burden of establishing procompetitive benefits to

Amex), the Government bore the burden to show not

just that the provisions had anticompetitive pricing

effects on the merchant side, but also that those anti-

competitive effects outweighed any benefits on the

cardholder side. The question presented is:

Under the “rule of reason,” did the Government's

showing that Amex’s anti-steering provisions stifled

price competition on the merchant side of the credit-

card platform suffice to prove anticompetitive effects

and thereby shift to Amex the burden of establishing

any procompetitive benefits from the provisions?

il

TABLE OF CONTENTS

QUESTION PRESENTED ...................:cccceecsseeseesereeenees i

INTEREST OF AMICUS CURIAE. ............ccccccceceseeeees 1

IIIT niece aacecndnsviaudnnsserintessesnicntevatevossunion nitess 7

SUMMARY OF ARGUMENT? .....000........ccccecceeceneeseenens 4

REASONS FOR GRANTING THE WRIT.................. 7

Il. The Panel Opinion Conflicts With

Precedents from This Court and Other

EADS I I i aS AR 2G ee Be 7

Il. The Decision Below Departs from the

Sherman Act’s Central Tenet. ........................... 15

Ill. This Case Is a Strong and Timely Vehicle

for Reviewing Issues of Exceptional

Importance to Multiple Industries.................... 18

IIE sicnccsscescscsigisaserennientneis saiaheiemmiaecubeniiith 20

TABLE OF AUTHORITIES

Page(s)

Cases

Amadeo v. Zant,

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Anderson v. Bessemer City, N.C.,

I ee SE Wibbiiccdssnincthicndocecesvepeneaveced 6, 14-15

Atl. Richfield Co. v. USA Petroleum Co.,

ny Ty I i a aces scnnmensneunes 10, 16

Brown Shoe Co. v. United States,

I See ceeasebbunesente 16

Eastman Kodak Co. v. Image Technical

Services, Inc.,

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F.T.C. vy. Lundbeck, Inc.,

650 F.3d 1236 (8th Cir. 2011) .0.......0..ccc cece eeeee 8

F.T.C. vy. Superior Court Trial Lawyers

Ase’n, 403 U.S. 411 (1GB0)......ccrcccssscscsccscvcssccsceseses 16

Fineman v. Armstrong World Indus., Inc.,

fs Pept .: a 8

Foster v. Dalton,

ee I, Mi bdiescscccercdsevecoencdndsvacsstatns 14

Kimble v. Marvel Entm't, LLC,

135 S. Ct. 2401 (2015) .........ccececccscccssessseesseseseeeees 15

iv

Nat'l Collegiate Athletic Ass'n v. Bd. of

Regents of Univ. of Ohkla.,

468 U.S. 85 (1984) ...........0...... OE REAM ASE EEE E Caer ee Oe 4

Nat'l Soc’y of Profil Eng’rs v. United States,

en III 1s cnarinitteanenionuiesedees ed 7, 16

Pac. Bell Tel. Co. v. Linkline Comme’ns, Inc..,

I a cicatdmteebebbniene 15

In re Payment Card Interchange Fee &

Merch. Disc. Antitrust Litig.,

No. 1:05-MD-1720-MB-JO, Dkt. No. 6923........... 20

Photos Etc. Corp. v. Home Depot U.S.A., Inc.,

Oe i I al atc esasen 19

Scandia Down Corp. v. Euroquilt, Inc.,

772 F.2d 1423 (7th Cir. 19066) ................cccccccereors 14

United States v. EJ. du Pont de Nemours &

Co.,

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United States v. Topco Assocs., Inc.,

rn oo aalinetemanetnieiniieee 6

Statutes

| BFR RE Arar 2 2, 3, 4, 6, 8, 10, 15, 16, 18

Other Authorities

2017 Supplement, 5E Phillip Areeda &

Herbert Hovenkamp, Antitrust Law

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INTEREST OF AMICUS CURIAE’

Discover Financial Services operates the Discover

payment network and, along with certain affiliates

and third parties, issues Discover-branded payment

cards to consumers. As detailed in the District

Court's opinion, (F.g., Pet. App. 70a-86a), Discover

competes directly with Respondents American Ex-

press Company and American Express Travel Relat-

ed Services (collectively “Amex”) on both sides of the

“two-sided” (merchant-cardholder) platform described

in the decision below. (Pet. App. 39a-40a.) Discover

competes with Amex, Visa, and MasterCard in selling

network services to merchants and acquiring banks.

(Pet. App. 70a, 117a.) And Discover competes with

Amex and numerous Visa and MasterCard affiliated

banks in issuing payment cards to cardholders. (/d.)

Discover has a direct interest in this action be-

cause the opinion below reinstates Amex network

rules—known as “nondiscriminatory provisions” or

“NDPs”—that preclude merchants from steering

transaction volume to Discover in exchange for lower

merchant fees on Discover-branded card payments.

(E.g., Pet. 8; Pet. App. 100a-10la, 203a-207a.) As the

District Court found, the removal of the NDPs would

result in Discover aggressively competing on both

sides of the two-sided platform by offering lower fees

to merchants and robust rewards to cardholders.

(Pet. App. 219a-220a.)

” Pursuant to Rule 37.2(a), Discover provided timely notice of

its intention to file this brief. All parties have consented. In

accordance with Rule 37.6, no counsel for any party has au-

thored this brief in whole or in part, and no person or entity,

other than Discover, has made a monetary contribution to the

preparation or submission of this brief.

2

STATEMENT

The panel opinion reverses a trial judgment in the

government's favor on grounds that break from set-

tled antitrust precedents and threaten competition in

a host of multi-billion dollar industries. Discover

submits this brief to elaborate undisturbed aspects of

the trial record that make this case an especially

strong and timely vehicle for addressing these conse-

quential departures from federal antitrust law.

The opinion below resolves Amex’s appeal of trial

findings that “Amex unreasonably restrained trade in

violation of § 1 of the Sherman Act, 15 U.S.C. § 1, by

entering into agreements containing nondiscrimina-

tory provisions (“NDPs”) barring merchants from (1)

offering customers any discounts or nonmonetary in-

centives to use credit cards less costly for merchants

to accept, (2) expressing preferences for any card, or

(3) disclosing information about the costs of different

cards to merchants who accept them.” (Pet. App. 4a.)

Petitioners and other government plaintiffs initially

brought this enforcement action c aallenging Visa and

MasterCard NDPs as well as the Amex provisions

addressed in the panel opinion. (Pet. App. 66a.) Visa

and MasterCard resolved the claims against them in

a 2012 consent decree, but Amex continued to liti-

gate. (Pet. App. 66a-67a.) Discover—the only new

network to enter the payment card industry in dec-

ades, (Pet. App. 154a)—testified as a government

witness about the anticompetitive effect of the chal-

lenged Amex rules on network competition. (Pet.

App. 154a, 203a-207a, 212a-214a, 219a-220a.)

After a seven-week bench trial, the District Court

issued a 150-page opinion holding that Amex’s NDPs

unreasonably restrained trade in the U.S. General

3

Purpose Credit Card (“GPCC”) market, i.e., the mar-

ket in which Amex competes with Visa, MasterCard,

and Discover to provide payment network services to

merchants and banks. (Pet. App. 69a-7la.) Specifi-

cally, the District Court found that Amex’s NDPs ac-

tually and “adversely affected competition” among

the networks, (Pet. App. 148a)—notably by preclud-

ing Discover from reaping a “competitive reward for

offering merchants lower swipe fees’—and “thereby

suppress[ed] an important avenue of horizontal in-

terbrand competition.” (E.g., Pet. App. 197a (internal

quotation marks and citations omitted).) The trial

judgment relied on scores of unrefuted facts support-

ing this conclusion, (Pet. App. 100a-10la, 196a-197a,

203a-212a), and expressly found that “the failure of

Discover’s low-price value proposition is emblematic

of the harm done to the competitive process by

Amex’s rules against merchant steering.” (Pet. App.

206a.) The District Court further found that these

anticompetitive effects were not justified by the

NDPs’ benefits to cardholders, (Pet. App. 7la, 229a;

see also id. 228a-258a), and thus held that the rules

could not be enforced consistent with the Sherman

Act. (Pet. App. 7la, 259a.)

The Second Circuit reversed and ordered judg-

ment in Amex’s favor. (Pet. App. 54a.) Specifically,

the panel held that the District Court erred as a mat-

ter of law in defining the relevant product market as

the market for network services to merchants and

banks, rather than as the market for network ser-

vices to merchants, banks, and cardholders. (Pet.

App. 3la-40a.) Citing this new market definition, the

panel held that the government’s trial evidence could

not prove “net” anticompetitive effects across both

“sides” (merchant and cardholder) of Amex’s “two-

4

sided platform.” (Pet. App. 49a-53a.) The panel thus

reinstated the NDPs that Amex admits preclude mer-

chants from steering business to networks that offer

merchants more competitive prices and services.

(Pet. App. 100a-101a (citing Amex trial testimony on

the ways in which the NDPs “block Amex-accepting

merchants from encouraging their customers to use

any credit or charge card other than an American

Express card, even where that card is less expensive

for the merchant to accept”); (Pet. App. 197a (“Ameri-

can Express itself recognizes the absence of competi-

tion on the basis of merchant pricing in the network

services market.”).)

SUMMARY OF ARGUMENT

The opinion below breaks from controlling law in

several respects. First, it departs from settled prece-

dents defining antitrust product markets as compris-

ing only goods or services that are reasonably inter-

changeable to the consumers whose choices are re-

strained by the allegedly anticompetitive practice.

Second, it departs from precedents from this Court

and other circuits on appellate treatment of trial find-

ings. Third, the panel’s unprecedented approach to

market definition and the trial record violates the

Sherman Act’s central tenet by protecting a particu-

lar competitor (Amex) over an undisputed form of

price competition. (See, e.g., Pet. App. 100a; 197a.)

Although the text of the Sherman Act prohibits

“le]very contract * * * in restraint of [interstate] trade

or commerce,” 15 U.S.C. § 1, this Court has construed

the statute to “prohibit only unreasonable restraints

of trade.” E.g., Nat'l Collegiate Athletic Ass’n v. Bd. of

Regents of Univ. of Okla., 468 U.S. 85, 98 (1984) (em-

phasis added). Market definition is critical to as-

5

sessing whether a challenged restraint is unreasona-

ble because its competitive impact depends on the

availability of substitutes for the products or services

it allegedly restrains. Accordingly, this Court has

long held that the “relevant market for antitrust pur-

poses is determined by the choices available to” con-

sumers of the restrained product or service, e¢.g.,

Eastman Kodak Co. v. Image Technical Services, Inc.,

504 U.S. 451, 481-482 (1992), and is defined by

“products that have reasonable interchangeability”

with it. Jd. at 482 (quoting United States v. E.I. du

Pont de Nemours & Co., 351 U.S. 377, 404 (1956)).

The panel opinion purports to acknowledge these

settled principles. (Pet. App. 32a.) But it goes on to

abandon them (and create a conflict with precedents

from this Court and others) in holding that an anti-

trust product market includes any product or service

whose price or output is allegedly “affect[ed]” by the

price or output of the product or service allegedly re-

strained. (Pet. App. 39a); (Pet. 18-24.) As the Dis-

trict Court observed, there is “no authority” for defin-

ing an antitrust product market to match an anti-

trust defendant's chosen business model. (Pet. App.

119a-120a.) Indeed, the Second Circuit itself has (un-

til now) agreed with this Court that “[t]he relevant

market is defined as all products ‘reasonably inter-

changeable by consumers for the same purposes,’ be-

cause the ability of consumers to switch to a substi-

tute restrains a firm’s ability to raise prices above the

competitive level.” Geneva Pharm. Tech. Corp. v.

Barr Labs. Inc., 386 F.3d 485, 506 (2d Cir.2004)

(quoting United States v. EJ. du Pont de Nemours &

Co., 351 U.S. 377, 395 (1956)). The panel opinion

cannot be reconciled with these precedents.

The opinion also cannot be reconciled with the tri-

6

al record. Although he panel opinion concedes that

market definition is a “deeply fact-intensive” exercise,

(Pet. App. 32a), it is not supported by any findings

that the services Amex provides to cardholders are

“interchangeab[le]” with the services it provides to

merchants. E.g., Kodak, 504 U.S. at 482. That is no

surprise, because the District Court found exactly the

opposite under controlling law. (See Pet. App. 114a-

122a, 127a); see also, e.g., Kodak, 504 U.S. at 482;

Geneva Pharm., 386 F.3d at 497 (defining relevant

market by reference to “distinct customer group|[s]”

with different price sensitivities).

These points are critical, because they highlight

the panel opinion’s departure not only from control-

ling law on antitrust market definition, but also from

this Court’s precedents on appellate treatment of tri-

al findings. This Court has long held that where, as

here, an appellate panel identifies no clear error in

such findings, it “may not reverse” simply because it

“would have weighed the evidence differently.”

Amadeo y. Zant, 486 U.S. 214, 223, 228 (1988) (quot-

ing Anderson v. Bessemer City, N.C., 470 U.S. 564,

573-574 (1985)) (reversing circuit court for “en-

gag[ing] in impermissible appellate factfinding’). Yet

that is what the panel opinion does.

As detailed below, Discover operates the same

type of two-sided (merchant-cardholder) platform

that Amex operates. (See Pet. App. 70a, 86a.) The

panel opinion does not dispute this, or disturb the

trial findings that the services these and other card

networks provide to merchants are not “interchange-

able” with the services they provide to cardholders.

(E.g., Pet. App. 11la; 117a-120a, 127a); (see also id.

203a-207a, 219a (respecting this distinction while

recognizing the “symbiotic relationship” between the

7

two “sides” of Amex’s network platform). The panel

opinion simply substitutes a “necessarily affects” test

on product pricing for this Court’s interchangeability

standard for market definition, (Pet. App. 39a), and

disregards large portions of the trial record in order

to protect Amex’s model of competing with Visa and

MasterCard. (See, e.g., Pet. App. 48a-49a & n.51 (ex-

pressing concerning that the “relief sought by the

government in this case could * * * increase market

concentration by reducing Amex’s share to Visa’s and

MasterCard’s benefit”).) lronically, the result is a

controlling circuit opinion that uses “rule of reason”

analysis to do exactly what this Court has held such

analysis should not: namely, treat “competition itself

[ajs unreasonable.” Nat7 Soc’y of Profl Eng’rs v.

United States, 435 U.S. 679, 696 (1978). Review is

warranted because the panel decision threatens com-

petition in the payment card industry and other mul-

ti-billion rarkets that increasingly employ two-sided

business ple-tforms, (Pet. 20-25), and because the trial

record here—including and particularly the undis-

turbed findings regarding Discover—make this case a

strong and timely vehicle for addressing the question

presented.

REASONS FOR GRANTING THE WRIT

I. The Panel Opinion Conflicts With Prece-

dents from This Court and Other Circuits.

The panel opinion purports to apply controlling

law to the “evidence presented at trial.” (Pet. App.

52a.) But its analysis departs starkly from this

Court’s precedents and circuit law on market defini-

tion and appellate treatment of trial findings.

As noted, this Court has long held that the “rele-

8

vant market for antitrust purposes is determined by

the choices available to” consumers of the restrained

product or service, e.g., Kodak, 504 U.S. at 481-482,

and is therefore defined by “products that have rea-

sonable interchangeability” with it. Jd. (quoting Du

Pont, 351 U.S., at 404); (see also Pet. 19-21 (citing au-

thorities).) The panel opinion pays lip service to

these standards in stating that the relevant market is

comprised of “all products ‘reasonably interchangea-

ble by consumers for the same purposes,” (Pet. App.

32a (emphasis added; internal quotation marks and

citations omitted)), and in acknowledging that “mar-

ket definition is a deeply fact-intensive inquiry,” (id.).

But its analysis rejects these controlling principles in

holding that the relevant market for assessing the

NDPs’ anticompetitive impact includes not only net-

work services to merchants, but also services to card-

holders. (See Pet. App. 39a-40a, 49a-50a.)

The panel justified its unprecedented approach to

market definition on the grounds that Amex com-

petes with Visa and MasterCard by operating a “two-

sided” platform that generates network revenue from

both groups of customers. (Pet. App. 16a, 39a-40a,

50a-5la.) But this Court has never held that a de-

fendant’s decision to provide services to two distinct

groups of consumers should define the product mar-

ket relevant to alleged Sherman Act violations. In-

deed, this Court has expressly rejected such argu-

ments. (See Pet. 20-25 (citing authorities).) The rea-

son is simple. Interchangeability requires similar

products or services as well as similar customer

needs and preferences. See, e.g., F.T.C. v. Lundbeck,

Inc., 650 F.3d 1236, 1239-1243 (8th Cir. 2011) (apply-

ing this Court’s precedents to define relevant product

market by reference to the “reasonable interchangea-

9

bility” of products and affirming trial court finding

that two pharmaceutical drugs were not reasonably

interchangeable even though FDA classified them as

therapeutically equivalent); Fineman v. Armstrong

World Indus., Inc., 980 F.2d 171, 198-200 (3d Cir.

1992) (same where evidence supported trial finding

that resilient floor covering in issue was not reasona-

bly interchangeable with other types of floor cover-

ings). That is exactly the analysis the District Court

correctly applied here. (See Pet. App. llla, 117a-

120a, 127a.)

The District Court found that although “mer-

chants and their customers jointly make the decision

of which method of payment is used for any given

transaction, the customer neither sees nor pays the

additional cost when networks increase the price of

network services to merchants (other than in the

form of higher retail prices, which are paid by all con-

sumers).” (Pet. App. 127a.) Accordingly, the “relevant

consumer for purposes of assessing price sensitivity

in the proposed market and for identifying reasona-

bly interchangeable substitute products is the mer-

chant.” (/d.)

The panel opinion’s contrary conclusion cannot be

squared with controlling law or the trial record. The

undisturbed trial findings concerning Discover, (Pet.

8)—-which again operates the same type of “two-

sided” network Amex does, (Pet. App. 23a)—illustrate

why. Discover entered the payment card industry in

1985, (Pet. App. 154a), with “breakthrough value

propositions” on both “sides” of the market the panel

opinion describes, (id. 203a.) “Cardholders could re-

ceive the first GPCC card with rewards feature at no

annual fee.” (/d.) And merchants had access to “a

low-price alternative to the existing GPCC networks”

10

that “pricied] its network services ‘very aggressively’

*** setting all-in discount rates significantly below

those of its competitors.” (Pet. App. 203a-204a.)

These “value propositions” reflected a competitive

strategy to gain market share by setting merchant

“rates significantly below” those of other networks

while still offering robust rewards to cardholders.

(Id.)

This strategy was part of a “major campaign” to

“help[]” merchants “control payment costs” by steer-

ing to Discover. (Pet. App. 204a.) Discover an-

nounced this campaign in 1999 in a speech before a

trade industry group, and implemented it through a

wide variety of merchant outreach initiatives. (Pet.

App. 204a-205a.) These efforts included sending let-

ters “to every merchant on its network” to alert them

of the other networks’ price hikes and encouraging

them “to save money by shifting volume to Discover,”

and also included offering other merchants additional

discounts from Discover’s “already lower prices if [the

merchants] would steer customers to Discover.” (ld.

204a.) Discover recommended that the merchants

use “point-of-sale signage” to effectuate the steering

and recommended that the merchants pass on their

steering-based savings to customers. (/d. 204a-205a.)

These and other practices that Amex admits its

NDPs preclude, (see Pet. App. 100a-101a), are para-

digmatic examples of the kind of price competition

the Sherman Act protects. See, e.g., Atl. Richfield Co.

v. USA Petroleum Co., 495 U.S. 328, 340 (1990) (“Low

prices benefit consumers regardless of how those

prices are set, and so long as they are above predato-

ry levels, they do not threaten competition.”) But the

NDPs prohibit them. (/d.) Discover learned from

merchant interviews that the “merchant restrictions

11

imposed by the other payment networks denied mer-

chants the ability to express a preference for Discover

or to employ any other tool by which they might steer

share to Discover’s lower-priced network.”! (/d.) And

the District Court expressly found that Amex’s NDPs

precluded Discover—a “significant competitor in [the

GPCC] market,” (Pet. App. 86a)—from engaging in

precisely the “two-sided” (merchant and cardholder)

platform competition the panel opinion cites as cen-

tral to the antitrust inquiry here. (F.g., Pet. App.

39a-40a; 67a; 203a-207a.)

Notably, the District Court found that Amex’s

NDPs “render it nearly impossible for a firm to enter

the relevant market by offering merchants a low-cost

alternative to the existing networks.” (Pet. App.

203a.) In support of this finding, the District Court

cited unrefuted trial evidence that Discover’s attempt

in the 1990s to compete with other networks by offer-

ing merchants lower fees and better service failed,

(Pet. App. 203a-207a), because the NDPs “denied

merchants the ability to * * * steer share to Discov-

er’s lower-priced network” in exchange for such bene-

fits, (Pet. App. 205a).

These findings were more than sufficient to affirm

the trial judgment under market definition prece-

dents from this Court and multiple circuits. Accord-

ingly the panel was forced to break from these deci-

sions to justify its contrary conclusion. The conse-

quences of this undeniable split from settled law are

grave. Left undisturbed, the panel opinion’s ap-

' Although the District Court noted that Discover's efforts were

thwarted by the combination of Visa’s, MasterCard’s, and

Amex’s anti-steering restraints, it also found that Amex’s rules

alone would have prevented Discover from steering. (Pet. App.

206a-207a n.43) (emphasis added).

12

proach to market definition—which the panel found

sufficient to disregard the clear and undisturbed trial

findings here—could be cited in defense of virtually

any anticompetitive conduct as long as the defendant

could say it “necessarily affects” prices or other bene-

fits to a related but distinct group of consumers. (Pet.

App. 39a.)

The panel opinion purports to downplay the gravi-

ty of this new and unprincipled approach to market

definition on the ground that it is necessary to ac-

count for the “feedback effect” between the two

“sides” of the platform Amex operates to compete

with Visa and MasterCard. (E.g., Pet. App. 39a

(holding that the district court erred in “declin{[ing] to

define the relevant product market to encompass the

entire multi-sided platform” because “the price

charged to merchants necessarily affects cardholder

demand, which in turn has a feedback effect on mer-

chant demand (and thus influences the price charged

to merchants)”.) But this assertion simply under-

scores the need for review, because the District Court

expressly recognized the “two-sided nature of’ Amex’s

platform in its “antitrust analysis.” (Pet. App. 79a;

see also id. 80a-84a, 1llla-112a, 117a-120a, 125a-

128a, 197a, 203a-207a.) It simply (and rightly) found

that the NDPs’ anticompetitive effects on the mer-

chant “side” of the platform were not excused by the

benefits they provide Amex cardholders. (Pet. App.

117a-120a, 125a-128a, 203a-207a.)

In support of this conclusion, the District Court

cited trial evidence and findings that the services

Amex and other networks provide to merchants and

cardholders are “distinct, involving different sets of

rivals and the sale of separate, though interrelated,

products and services to separate groups of consum-

13

ers.” (Pet. App. 119a.) It then cited precedents from

this Court and others in concluding that there is “no

authority * * * that requires the court to define the

relevant product market to encompass the entire

multi-sided platform” that Amex chose to adopt as a

business model. (Pet. App. 119a-120a (citing Times—

Picayune Publ’g Co. v. United States, 345 U.S. 594,

610 (1953)).

The panel opinion does not address, much less re-

spect, these precedents or findings, (Pet. 21-23 (citing

authorities)), all of which support the District Court's

conclusion that it is “not necessary that the relevant

product market be defined by reference to how Amer-

ican Express chooses to compete in the industry.”

(Pet. App. 118a.) In reaching this conclusion, the

District Court amply addressed the panel’s concern

with the “feedback” effects of two-sided business plat-

forms. (E.g., Pet. App. 126a.) The District Court con-

sidered extensive fact and expert evidence on these

effects, (see, e.g., Pet. App. at 118a-120a, 229a-250a),

and ultimately concluded that the NDPs resulted in

higher prices for both the merchant and cardholder

“sides” of Amex’s platform. (Pet. App. 207a-212a.)

The reason, the District Court explained, is that the

NDPs enable Amex to charge higher merchant fees

“without fear of other networks undercutting their

prices,” (id. 210a), and merchants “pass most, if not

all, of their additional costs along to their customers

in the form of higher retail prices,” (id. 210a-211a).

In making these findings, the District Court care-

fully considered the NDPs’ benefits to Amex card-

holders. It merely found those benefits limited and

insufficient to justify the rules’ anticompetitive ef-

fects on merchants, because all consumers pay the

high retail prices that result from the high merchant

14

fees, but not all consumers are premium Amex mem-

bers who receive its cardholder rewards. (Pet. App.

2lla-212a.) Based on this and other trial eviuence,

the District Court found that removal of Amex’s

NDPs would: (i) “restor[e] downward competitive

pressure on merchant prices” that would benefit the

merchant “side” of Amex’s platform,” (Pet. App. 217a-

218a); and (ii) would also “benefit consumers” while

protecting cardholder choice, (id. at 219a-220a).

The panel opinion does not disturb—or even

acknowledge—these findings or the extensive and

Discover-specific evidence supporting them. (See Pct.

App. 4a-54a, 206a-207a, 219a.) Accordingly, the opin-

ion would warrant review as a departure from settled

law even if the relevant antitrust market could be de-

fined as including both “sides” of Amex’s network

platform. See, e.g., Amadeo, 486 U.S. at 223, 228-229

(holding that, absent a finding of clear error, an ap-

pellate court may not ignore or reweigh factual find-

ings to reverse a trial judgment); Anderson, 470 U.S.

at 574-575 (emphasizing trial court “expertise” in fact

finding); Foster v. Dalton, 71 F.3d 52, 55 (1st Cir.

1995) (affirming the district court’s trial findings

even though the panel would have weighted the evi-

dence differently); Scandia Down Corp. v. Euroquilt,

Inc., 772 F.2d 1423, 1427-29 (7th Cir. 1985) (rejecting

invitation to reweigh the trial evidence and affirming

the district court’s factual findings).

Here, the trial record, “viewed in its entirety,”

plainly “permits” the conclusion, Anderson, 470 U.S.

at 573-574, that the NDPs have a “net” anticompeti-

tive effect in the market for “network services to mer-

chants,” (Pet. App. 23a), which is the only product

market consistent with this Court’s precedents and

the record below, (see id. 20-25). Further, and criti-

15

cally, the record permits the same conclusion even if

the market is defined to include both the merchant

and consumer sides of the network platform the panel

opinion describes. (Pet. App. 39a-40a; 79a, 83a, 86a,

100a-101a, 191a-258a.) Left undisturbed, the panel's

contrary conclusions could be invoked to shield anti-

competitive conduct in any number of industries from

proper antitrust scrutiny by further muddying an ar-

ea of law that demands “clear rules,” (Pet. 16 (quot-

ing Pac. Bell Tel. Co. v. Linkline Comme'ns, Inc., 555

U.S. 438, 452 (2009)), and exacerbating the already

“notoriously high litigation costs and unpredictable

results” of antitrust litigation under the “rule of rea-

son.” (Pet. 16 (quoting Kimble v. Marvel Entmtt,

LLC, 135 S. Ct. 2401, 2411 (2015) (citation omitted).)

Review is warranted for these reasons alone.

Il. The Decision Below Departs from the Sher-

man Act’s Central Tenet.

The panel opinion’s departure from the law and

record is particularly troubling because it sanctions

precisely the type of policy judgment the Sherman

Act forbids. The decision amounts to a determination

that protecting Amex’s “unique” method of competing

with Visa and MasterCard, (Pet. App. 87a), is more

important than allowing Discover’s low-price version

or, for that matter, any inter-network price competi-

tion on merchant network fees at all. (/d. 39a-40a,

49a-53a.) In upholding a “restraint that effectively

blocks interbrand competition on price” because

Amex says it could compete better without price pres-

sure, (Pet. App. 235a), the panel opinion endorses ex-

actly the “frontal assault on the basic policy of the

Sherman Act” this Court has admonished against.

E.g., Profl Eng’rs, 435 U.S. at 695; (Pet. App. 235a,

16

240a-241a).

As this Court has explained, the Sherman Act

does not authorize courts to draw lines between

“good” competition and “bad” competition, but rather

reflects a “legislative judgment that ultimately [all

forms of] competition will produce not only lower

prices, but also better goods and services.” F.T.C. v.

Superior Court Trial Lawyers Ass'n, 493 U.S. 411,

423 (1990) (quoting Profl Eng’rs, 435 U.S. at 695).

Any line-drawing among types of competition is a

task reserved for Congress. See United States v. Top-

co Assocs., Inc., 405 U.S. 596, 611 (1972) (“If a deci-

sion is to be made to sacrifice competition in one por-

tion of the economy for greater competition in anoth-

er portion this too is a decision that must be made by

Congress and not by private forces or by the courts.”).

And to date its judgment has been to protect “‘compe-

tition, not competitors.” Ail. Richfield, 495 U.S. at 338

(quoting Brown Shoe Co. v. United States, 370 U.S.

294, 320, (1962) (emphasis in original) (explaining

that “[t]o hold that the antitrust laws protect compet-

itors from the loss of profits due to [nonpredatory]

price competition would, in effect, render illegal any

decision by a firm to cut prices in order to increase

market share”) (citation omitted)).

The panel opinion disregards this fundamental

principle in holding that the NDPs and Amex busi-

ness model they protect are more important than

price competition, including the form of price compe-

tition offered by Discover that the District Court ex-

pressly recognized in its factual findings. (Pet. App.

203a-207a, 219a); (Pet. 8, 33.) As the District Court’s

opinion illustrates, such a stark departure from this

Court's precedents is not necessary to ensure proper

consideration of antitrust challenges involving two-

17

sided business platforms.

As noted, the trial record directly links the NDPs’

destruction of Discover’s low-cost merchant pricing

initiative to harm on both the merchant and card-

holder “sides” of Amex’s platform. For example, the

District Court found that the NDPs forced Discover to

“abandon[]” its low-price campaign to merchants be-

cause, as Discover’s President, Roger Hochschild, tes-

tified: giving the merchants a “discount without get-

ting anything in return didn’t make business sense”

for Discover. (Pet. App. 206a.) The District Court

then went on to find that this restraint on merchant

choice harms cardholders, because “inflated merchant

discount rates are passed on to all customers—-Amex

cardholders and non-cardholders alike—in the form

of higher retail prices.” (E.g., Pet. App. 193a; see also

id. 210a-211a.)

Based on these and other aspects of the trial rec-

ord, the District Court found the failure of Discover’s

low-price campaign “emblematic of the harm done to

the competitive process by Amex’s rules against mer-

chant steering.” (Pet. App. 206a.) And it found that

enjoining the NDPs would redress this harm by al-

lowing Discover or other networks “aggressively [to]

pursue a strategy of lowering [their merchant] prices”

in exchange for volume while still robustly competing

for cardholders through rewards and steering bene-

fits. (Pet. App. 219a-220a.) Such competition, in

turn, would result in a boon to consumers in form of

more rewards and lower prices. (/d.)

For all of these reasons, the District Court did not

“err[]” in “declin{ing] to define the relevant product

market to encompass the entire multi-sided plat-

form.” (Pet. App. 39a (internal quotation marks and

18

citation omitted).) It simply (and correctly) recog-

nized that the merchant “side” of the platform consti-

tutes a distinct product market under this Court's

precedents and those of other circuits, (Pet. App.

114a-122a), and left it to competition (rather than the

courts or Amex’s NDPs) to decide the “optimal mix of

revenue as between the two sides.” 2017 Supple-

ment, 5E P. Areeda & H. Hovenkamp, Antitrust Law

{ 562e (4th ed. 2016). That is what the Sherman Act

contemplates, and what the panel opinion disregards

in conflict with the statute and this Court’s decisions

applying it.

Ill. This Case Is a Strong and Timely Vehicle

for Reviewing Issues of Exceptional Im-

portance to Multiple Industries.

The reach and impact of the panel's decision is not

confined to this case or the NDPs it challenges. As

the Petition notes, “two-sided” business models are

increasingly ubiquitous. (See Pet. i.) The panel opin-

ion’s significance outside the payment card industry

is detailed in the Petition. (Pet. 25-35.) But the

threat it poses to competition within the payment

card industry alone merits attention.

The Second Circuit is home to a longstanding mul-

ti-district litigation challenging various Visa and

MasterCard rules and fees, including anti-steering

rules analogous to the Amex NDPs the panel rein-

stated below. Last year Visa and MasterCard negoti-

ated—but the Second Circuit disapproved—a $7 bil-

lion settlement of various MDL claims that would

have immunized a host of network rules from future

antitrust challenges. See In re Payment Card Inter-

change Fee & Merch. Disc. Antitrust Litig., 827 F.3d

223, 231-240 (2d Cir. 2016), cert. denied sub nom.

19

Photos Etc. Corp. v. Home Depot U.S.A., Inc., 137 S.

Ct. 1374 (2017). On remand two putative nationwide

merchant classes assert, among other things, that:

Because of the Anti-Steering Restraints

[the panel opinion upheld below], a

Credit or Debit-Card Network that

charges [lower] Merchant-Discount Fees

** * will not be able to make inroads on

the monopoly positions of Visa and Mas-

terCard. While * * * competitors such as

Discover stand ready, willing, and able

to compete with the Defendants by offer-

ing lower fees to Merchants, the Defend-

ants’ rules prevent and restrain any

such competition by ensuring that in-

creased efficiency and lower prices will

not lead to increased market share for

competitors * * * *

In re Payment Card Interchange Fee & Merch. Disc.

Antitrust Litig., No. 1:05-MD-1720-MB-JO, Dkt. No.

6923, Proposed Amended MDL Damages Complaint

* 188 (E.D.N.Y.); see also id., Dkt. No. 6910, Proposed

Amended MDL Injunctive Compl. 4 157 (similar).

Absent review, the panel opinion will threaten

proper antitrust analysis of these and related claims

within the Second Circuit. Like the Amex NDPs the

panel reinstated below, many of the Visa and Mas-

terCard rules challenged in these pending actions

could be cast as restraining network competition over

merchant fees or services in order to protect or bene-

fit cardholders. Accordingly—and perversely—the

panel’s decision to break from the law and record to

protect rules the panel perceived as central to Amex’s

ability to compete with Visa and MasterCard, (see,

20

e.g., Pet. App. 48a-49a n.51), could end up being used

to defend a host of Visa and MasterCard rules from

antitrust challenges going forward.

CONCLUSION

The Court should grant the petition for a writ of

certiorari.

Respectfully submitted.

ELIZABETH P. PAPEZ*

ANDREW C. NICHOLS

Winston & Strawn LLP

1700 K Street, N.W.

Washington, DC 20006

(202) 282-5000

epapez@winston.com

*Counsel of Record

July 6, 2017