“Ohio v. American Express Co.”Decision of the Supreme Court 25 June 2018 – Case No. 15-1454

To determine whether a restraint violates the rule of reason, a three-step, burden-shifting framework applies. Under this framework, the plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers in the relevant market.The fact that two-sided platforms charge one side a price that is below or above cost reflects differences in the two sides’ demand elasticity, not market power or anticompetitive pricing. Price increases on one side of the platform likewise do not suggest anticompetitive effects without some evidence that they have increased the overall cost of the platform’s services. Thus, courts must include both sides of the platform – merchants and cardholders – when defining the credit-card market.A market should be treated as one sided when the impacts of indirect network effects and relative pricing in that market are minor.This is not the case for two-sided transaction platforms, like the credit-card market. These platforms facilitate a single, simultaneous transaction between participants. To optimize sales, the network must find the balance of pricing that encourages the greatest number of matches between cardholders and merchants. Because they cannot make a sale unless both sides of the platform simultaneously agree to use their services, two-sided transaction platforms exhibit more pronounced indirect network effects and interconnected pricing and demand. Transaction platforms are thus better understood as supplying only one product.In two-sided transaction markets competition cannot be accurately assessed by looking at only one side of the platform in isolation and thus, only one market should be defined.Evidence of a price increase on one side of a two-sided transaction platform cannot by itself demonstrate an anticompetitive exercise of market power. To demonstrate anticompetitive effects on the two-sided market as a whole, the plaintiffs must prove that an antisteering provision increases the cost of transactions above a competitive level, reduced the number of transactions, or otherwise stifled competition in the market.