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United States v. American Express Co.

United States District Court, E.D. New York

May 7, 2014

UNITED STATES OF AMERICA, et al., Plaintiffs,
v.
AMERICAN EXPRESS CO., et al., Defendants

Page 188

[Copyrighted Material Omitted]

Page 189

For United States of America, Plaintiff: Andrew J. Ewalt, Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC; Craig W. Conrath, Antitrust Division, Litigation III, U S Department Of Justice, Washington, DC; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Gregg I. Malawer, Department of Justice, Antitrust Division, Washington, DC; J Robert Kramer, John Read, U.S. Department of Justice, Antitrust Division, Litigation Iii, Washington, DC; Joseph P. Vardner, U.S. Dept of Justice, Antitrust Division, Washington, DC; Mark Hamer, Department of Justice, Washington, DC.

For State of Connecticut, Plaintiff: Ethan C. Glass, U.S. Department of Justice, Washington, DC; Michael E. Cole, Hartford, CT; Rachel O. Davis, PRO HAC VICE, Office of the Attorney General, State of Connecticut, Hartford, CT; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Iowa, Plaintiff: Ethan C. Glass, U.S. Department of Justice, Washington, DC; Layne M. Lindebak, PRO HAC VICE, Iowa Department of Justice, Des Moines, IA; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Maryland, Plaintiff: Ellen S. Cooper, Baltimore, MD; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Gary Honick, PRO HAC VICE, Office of the Attorney General, State Of Maryland, Baltimore, MD; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Michigan, Plaintiff: D.J. Pasco, Michigan Department of Attorney General, Lansing, MI; D.J. Pascoe, Michigan Department of Attorney General, Corporate Oversight Division, Lansing, MI; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Missouri, Plaintiff: Kyle A. Poelker, LEAD ATTORNEY, Missouri Attorney General's Office, Jefferson City, MO; Anne E. Schneider, PRO HAC VICE, Attorney General of Missouri, Jefferson City, MO; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Ohio, Plaintiff: Ethan C. Glass, U.S. Department of Justice, Washington, DC; Mitchell L. Gentile, PRO HAC VICE, Office of the Ohio Attorney General, Columbus, OH; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Texas, Plaintiff: Kim Mae Van Winkle, LEAD ATTORNEY, Texas Attorney General's Office, Austin, TX; Bret Fulkerson, PRO HAC VICE, Office of the Texas Attorney General, Austin, TX; David Ashton, Texas Attorney General, Antitrust Section, Austin, TX; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Jeffrey Cullinane, PRO HAC VICE, Office of the Attorney General, State Of Texas Antitrust Division, Austin, TX; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Illinois, Plaintiff: Chadwick O. Brooker, PRO HAC VICE, Illinois Attorney General, Chicago, IL; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Robert W. Pratt, PRO HAC VICE, Office of the Illinois Attorney General, Chicago, IL; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Tennessee, Plaintiff: Ethan C. Glass, U.S. Department of Justice, Washington, DC; Victor J. Domen, PRO HAC VICE, Tennessee Attorney General Office, Nashville, TN; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Montana, Plaintiff: Chuck Munson, PRO HAC VICE, Montana Department of Justice, Helena, MT; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Nebraska, Plaintiff: Gregory Walklin, LEAD ATTORNEY, PRO HAC VICE, Nebraska Department of Justice, Lincoln, NE; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Idaho, Plaintiff: Brett T DeLange, LEAD ATTORNEY, PRO HAC VICE, Office of the Idaho Attorney General, Consumer Protection Division, Boise, ID; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Oscar S. Klaas, Idaho Attorney General, Boise, ID; Stephanie Nicole Guyon, PRO HAC VICE, Office of the Idaho Attorney General, Consumer Protection Unit, Boise, ID; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Vermont, Plaintiff: Ryan Kriger, LEAD ATTORNEY, Vermont Attorney General, Montpelier, VT; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Utah, Plaintiff: David N. Sonnenreich, Ronald J Ockey, PRO HAC VICE, Office of the Attorney General of Utah, Salt Lake City, UT; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Arizona, Plaintiff: Ethan C. Glass, U.S. Department of Justice, Washington, DC; Nancy M Bonnell, Office of the Attorney General, Phoenix, AZ; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of Rhode Island, Plaintiff: Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For State of New Hampshire, Plaintiff: David Anthony Rienzo, PRO HAC VICE, New Hampshire Department of Justice, Concord, NH; Ethan C. Glass, U.S. Department of Justice, Washington, DC; Bennett Matelson, U.S. Department of Justice, Antitrust Division, Washington, DC.

For American Express Company, American Express Travel Related Services Company, Inc., Defendants: Evan R. Chesler, LEAD ATTORNEY, Cravath, Swaine & Moore, New York, NY; Donald L. Flexner, Eric Brenner, Philip C. Korologos, Boies, Schiller & Flexner LLP, New York, NY; Kevin J Orsini, Cravath, Swaine & Moore LLP, New York, NY; Matthew S. Tripolitsiotis, Boies Schiller & Flexner LLP, Armonk, NY; Robert M. Cooper, Boies, Schiller & Flexner LLP, Washington, DC; Thomas E.L. Dewey, Dewey Pegno & Kramarsky LLP, New York, NY; William T. Thomas, Boies Schiller & Flexner, Fort Lauderdale, FL.

For Individual Plaintiffs in 11-Md-2221, also known as All Plaintiffs in 11-md-2221, Interested Party: Kenny Nachwalter, Miami, FL; Linda P. Nussbaum, Grant & Eisenhofer P.A., New York, NY; William Jay Blechman, PRO HAC VICE, Kenny Nachwalter, P.A., Miami, FL.

For Class Plaintiffs in 11-Md-2221, Interested Party: Tracey L. Kitzman, Friedman Law Group, LLP, New York, NY.

OPINION

Page 190

MEMORANDUM & ORDER

NICHOLAS G. GARAUFIS, United States District Judge.

The United States of America and the attorneys general of seventeen states have sued Defendants American Express Company and American Express Travel Related Services Company, Inc. (collectively " Amex" ), alleging anti-competitive behavior in violation of Section 1 of the Sherman Antitrust Act. (Am. Compl. (Dkt. 57).) In particular, Plaintiffs allege that Defendants' so-called " anti-steering" provisions violate Section 1 because they prevent merchants who accept Amex payment cards from steering customers to alternative card brands, such as Visa, MasterCard, or Discover. (Id.) This, they argue, reduces competition for payment card services at the merchant level and enables Amex to charge merchants higher prices for these services than it could in a competitive market. (Id.) On September 26, 2013, Defendants moved for summary judgment on Plaintiffs' claim. (Not. of Defs. Mot. for Summ. J. (Dkt. 281).) The court DENIES Defendants' motion for summary judgment because genuine issues of material fact remain in dispute.[1]

I. FACTS

A. The Credit and Charge Card Industry

There are four major issuers of credit and charge cards[2] in the United States: Visa, MasterCard, Amex, and Discover. (Pls. Rule 56.1 Counter-Stmt. of Material Facts in Opp'n to Defs. Mot. in Favor of Summ. J. (" Pls. 56.1" ) (Dkt. 296-1) ¶ 287.) Amex first entered the payment card industry in 1958, with a charge card for use at travel and entertainment providers. (Mem. in Supp. of Defs. Mot. for Summ J.

Page 191

(" Defs. Mem." ) (Dkt. 282-1) at 5.) Its main competitors at the time were Diners Club and Carte Blanche, which both specialized in the same market. (Id.)

Meanwhile, banks began to offer payment cards that not only allowed customers to charge items to be paid at the end of the month, but also provided revolving lines of credit. Their efforts eventually created two non-profit joint ventures run by consortium of banks, Visa and MasterCard. (Defs. Stmt. of Material Undisputed Facts in Supp. of their Mot. for Summ. J. (" Defs. 56.1" ) (Dkt. 282-2) ¶ 13.) They were managed by boards of directors elected by the member banks. (Id. ¶ 14.) They also had exclusivity agreements that mandated that banks not issue competititors' cards, including Amex cards. (Id. ¶ ¶ 14-15.)

Amex first began offering credit cards in the late 1980s, seeking to challenge the two joint ventures in the general purpose credit and charge card market. (Defs. Mem. at 6.) It was joined in this effort by Discover, which in 1985 was the last entrant into the general purpose credit and charge card market. (Pls. 56.1 ¶ 418.) While Amex positioned itself as a premium brand, Discover sought to grow its network by offering lower fees to merchants. (Id. ¶ ¶ 418-419.)

Although the exclusivity rules that once governed the banks have now been lifted as the result of a lawsuit, most still issue either Visa or MasterCard credit cards. (Defs. 56.1 ¶ ¶ 71, 80-81.)

A. How Amex Credit and Charge Cards Work

Although they disagree over its implications, the parties agree that the market for general purpose credit and charge cards is two-sided. Defendants sell their services to both merchants and cardmembers in order to allow these two groups of customers to interact with each other. (Defs. 56.1 ¶ ¶ 3-9; Pls. 56.1 ¶ ...


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