714 F.Supp.3d 65
E.D.N.Y.2024Background
- This multidistrict antitrust litigation (In re Payment Card Interchange Fee & Merchant Discount Antitrust Litigation, No. 05‑MD‑1720) challenges Visa and Mastercard network rules (notably Honor‑All‑Cards and anti‑steering/no‑surcharge/no‑discount rules) and related practices as unlawfully restraining competition and inflating merchant fees (interchange/merchant discount fees).
- Plaintiffs are merchant groups (Direct Action Plaintiffs, Equitable Relief Class, and opt‑outs such as Grubhub) seeking injunctive relief and damages for a damages period beginning in 2004; defendants include Visa, Mastercard, and various issuing and acquiring banks (some claims arise from pre‑ and post‑IPO structures of the networks).
- The Supreme Court’s Ohio v. American Express (Amex) decision requires two‑sided market analysis for platforms where the product is a transaction; plaintiffs therefore must show anticompetitive effects on the two‑sided transactions market (merchants and cardholders) via direct evidence (higher prices, reduced output, or reduced quality) or indirect evidence (market power plus evidence of harm).
- Plaintiffs offered extensive expert evidence (pricing, profitability, international benchmarks, pass‑through, and issuer profitability) arguing two‑sided supracompetitive pricing, reduced or distorted output, entry barriers, and other competitive harms; defendants moved for summary judgment under Amex and Mastercard separately moved arguing lack of market power.
- The district court applied the rule of reason (declining per se/quick‑look disposition), accepted the two‑sided market definition for credit and debit transactions, granted summary judgment on one‑sided claims, but denied in part and granted in part summary judgment under Amex — specifically denying Mastercard’s motion on market power and denying defendants’ motions to dismiss two‑sided claims, finding triable issues of fact on price, output, and stifled competition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable standard (per se / quick look / rule of reason) | Network restraints are horizontal and suspect; rule of reason initial burden met by showing price‑component fixing | Rule of reason applies; not a per se case; restraints may be necessary for two‑sided platforms | Rule of reason applies; court declines per se/quick look and analyzes under Amex framework |
| Market definition (one‑sided vs two‑sided) | Relevant markets are two‑sided credit and debit transaction markets (merchants + cardholders) | Defendants accepted two‑sided market for motion purposes but emphasize two‑sided analysis limits plaintiffs | Court adopts two‑sided markets for credit and debit transactions per Amex and proceeds accordingly |
| Prima facie showing of anticompetitive effect (price/output/quality) | Plaintiffs: expert and empirical evidence show supracompetitive two‑sided prices, distorted output, entry barriers, inferior quality; but‑for world need not be precisely quantified | Defendants: plaintiffs lack empirical before‑and‑after but‑for price/output estimates; rewards could decline in but‑for world; observed growth in transactions negates reduced‑output claim | Plaintiffs offered sufficient empirical and expert evidence (profits, benchmarks, pass‑through, entry barriers) to raise triable issues on price, output, and stifled competition; summary judgment denied on two‑sided claims |
| Market power (Mastercard) | Plaintiffs: indicia (high profits, ability to price discriminate, barriers to entry, contractual rules forcing merchant behavior) support jury finding of market power | Mastercard: <30% share and declining share preclude market power as a matter of law; plaintiffs must prove market power | Court: rejects bright‑line 30% rule here; finds sufficient evidence for a jury to find Mastercard market power and denies Mastercard’s summary judgment motion |
Key Cases Cited
- Ohio v. American Express Co., 138 S. Ct. 2274 (2018) (two‑sided platform market definition; plaintiff must show harm on the market as a whole or market power plus showing of harm)
- United States v. American Express Co., 838 F.3d 179 (2d Cir. 2016) (Second Circuit decision vacating district court’s one‑sided finding; background to Amex litigation)
- US Airways, Inc. v. Sabre Holdings Corp., 938 F.3d 43 (2d Cir. 2019) (two‑sided market application and types of direct evidence—supracompetitive price, reduced output, reduced quality—that can satisfy Amex)
- 1‑800 Contacts, Inc. v. FTC, 1 F.4th 102 (2d Cir. 2021) (Second Circuit on requirement that direct evidence be empirical, not purely theoretical or anecdotal)
- Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (limits on speculative economic inferences; applicable principles regarding proof of anticompetitive effect)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (summary judgment in antitrust — guard against inferences equally consistent with competition)
- United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003) (market power analysis for card networks; use of market share, barriers to entry, and other indicia)
- NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (1984) (rule‑of‑reason framework and recognition that some horizontal restraints may be necessary for product existence)