United States District Court, E.D. New York
IN RE AMERICAN EXPRESS ANTI-STEERING RULES ANTITRUST LITIGATION
AMERICAN EXPRESS COMPANY and AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC, Defendants. This Document Relates to The Consolidated Class Action ANIMAL LAW, INC., IL FORNO, INC., ITALIAN COLORS RESTAURANT, JASA INC., LOPEZ-DEJONGE, INC., PLYMOUTH OIL CORP. d/b/a LIBERTY GAS STATION, CLAM LAKE PARTNERS, LLC, QWIK LUBE, LLC, and LAJOLLA AUTO TECH, INC, on behalf of themselves and all others similarly situated, Plaintiffs,
MEMORANDUM & ORDER
NICHOLAS G. GARAUFIS, UNITED STATES DISTRICT JUDGE.
bring claims against Defendants American Express Company and
American Express Travel Related Services Company, Inc.
(together, "Amex") on behalf of two putative
classes: (1) a class of merchants who accept Amex cards
pursuant to a Card Acceptance Agreement ("CAA")
with Amex (the "Amex Class"); and (2) a class of
merchants who do not accept Amex cards and who have no
contract with Amex (the "Non-Amex Class").
(See Second Amended Consolidated Class Action
Complaint ("SAC") (Dkt. 864).) Currently pending
before the court are two motions: (1) Amex's motion to
stay proceedings and compel arbitration of all the Amex
Class's claims; and (2) Amex's motion to dismiss all
of the Non-Amex Class's claims under Federal Rules of
Procedure 12(b)(1) and 12(b)(6). (See Mot. to Compel
& Mot. to Dismiss ("Mot.") (Dkt. 875).)
following reasons, Amex's motion to compel arbitration is
GRANTED and its motion to dismiss is GRANTED as to the
action challenges non-discrimination provisions (the
"Anti-Steering Rules") contained in the CAAs. (SAC
¶ 1.) Plaintiffs allege that the Anti-Steering Rules
unreasonably restrain interbrand price competition among
general purpose credit and charge card networks ("credit
card networks") because they: "(1) stifle
competition among the networks; (2) impose supracompetitive
merchant fees, with corresponding offsetting credit card user
economic benefits; (3) increase the overall price of credit
card transactions above competitive levels; and (4) raise
consumer retail prices throughout the country, thereby
reducing output." (Id.)
background of this case-including the procedural history, the
restraints on competition, the workings of the credit-card
market in general, and Amex's platform in particular,
etc.-have been discussed at great length in this court's
previous opinions in this matter and in the related case
brought by the federal government. See In re Am.
Exp. Anti-Steering Rules Antitrust Litig.. 361 F.Supp.3d
324, 331-34 (E.D.N.Y. 2019); In re Am. Exp. Anti-Steering
Rules Antitrust Litig.. No. 1 l-MD-2221 (NGG), 2016 WL
748089, at *l-4 (E.D.N.Y. Jan. 7, 2016); United States v.
Am. Exp. Co. ("U.S. v. Amex"). 88
F.Supp.3d 143, 149-67 (E.D.N.Y. 2015), rev'd.
838 F.3d 179 (2d Cir. 2016), aff'd sub nom. Ohio v.
Am. Exp. Co. ("Ohio"), 138 S.Ct. 2274 (2017).
The court facts and aspects of the procedural history
necessary to introduce and to decide the instant motion are
laid out below.
class representatives fall into two groups. The
representatives of the Amex Class, which accept Amex cards,
are: (1) Animal Land, Inc., a Georgia corporation; (2) II
Forno, Inc., a California corporation; (3) Italian Colors
Restaurant, a California business; (3) Jasa Inc., a Louisiana
corporation; (4) Lopez-Dejonge, Inc., an Alabama corporation;
(5) Plymouth Oil Corp. d/b/a Liberty Gas Station, a
Pennsylvania corporation, and (6) Clam Lake Partners, LLC
(successor in interest to previous class representative
Firefly Air Solutions, LLC), a Minnesota corporation.
(Id. ¶¶ 5-11). The representatives of the
Non-Amex Class, which do not accept Amex cards, are: (1) Qwik
Lube, LCC, a New York corporation and (2) LaJolla Auto Tech,
Inc., a California corporation. (Id. ¶¶
12-13.) Plaintiffs also assert the existence of two
California Subclasses: A California Amex Subclass and a
California Non-Amex Subclass. (Id. ¶ 104(c).)
The California Amex Subclass is represented by II Forno, Inc.
and Italian Colors Restaurant, and the California Non-Amex
Subclass is represented by LaJolla Auto Tech., Inc.
(Id.) All Plaintiffs are merchants. (Id.
American Express Company is a New York corporation.
(Id. ¶ 14.) Defendant American Express Travel
Related Services Company, Inc. is a Delaware corporation with
its principal place of business in New York, New York.
(Id. ¶ 15.) It is a wholly owned subsidiary of
American Express Company. (Id.)
The Relevant Market
lay out two geographic markets: (1) the United States for
Counts One, Two, and Three; and (2) California for Counts
Four and Five. (SAC ¶ 22.) The relevant product market
is the two-sided credit card market, including all
transactions provided by Amex and its competitors,
MasterCard, Discover, and Visa. (Id ¶ 23.)
The Credit Card Industry
one of four significant competitors in the nationwide credit
card market. (SAC ¶ 25.) The others are Visa,
MasterCard, and Discover; in 2018, the Supreme Court
described their market shares as Visa 45%, Amex 26.4%,
MasterCard 23.3%, and Discover 5.3%. (Id. ¶ 51
(citing Ohio, 138 S.Ct. at 2282).) According to Plaintiffs,
these market shares have not meaningfully changed in many
card companies provide services both to cardholders, who use
the cards to purchase goods and services, and to merchants,
who accept those cards as payment in exchange for goods and
services. These credit card companies thus operate a
two-sided platform, offering services to two, distinct groups
(merchants and consumers) and facilitating transactions
between them. See Ohio, 138 S.Ct. at 2280.
Credit card companies need to make a sale to both sides of
the market to succeed; after all, "no credit-card
transaction can occur unless both the merchant and the
cardholder agree to use the same credit-card network."
Id. (See also SAC ¶ 18.) Amex offers
services directly to both merchants and consumers. (SAC
Plaintiffs allege, "[w]hen a consumer uses a credit
card, the merchant's point of sale terminal transmits a
record of the transaction to the card's network."
(Id. ¶ 20.) The network then pays, or
facilitates the payment of, money for that transaction to the
merchant, consisting of the purchase price charged to the
customer minus the fee that network or bank charges
merchants. (Id.) Consumers may also pay fees to use
their credit cards and get rewards for making purchases with
a particular card. (Id. ¶ 21.) Unlike its
competitors, who charge variable merchant fees depending on
the particular card the individual consumer is using,
"Amex charges a single, typically higher merchant fee
for all Amex credit cards." (Id ¶ 32.)
Plaintiffs further allege that, unlike its competitors,
"Amex's revenues are primarily dependent on its
merchant fees."Id. ¶ 34.)
Relevant Version of the Agreement
to Amex, the "current, operative" form of the CAA
between Amex and the merchants in the Amex Class has been in
effect since October 2018. (Mot. at 5.) Plaintiffs do not
state whether they disagree or disagree with this assertion,
but do note:
In the [SAC], Plaintiffs assert that Amex arbitration
agreements also state ". . . the arbitrator's
authority to make awards is limited to awards to you and us
alone." SAC ¶ 90. For years, this language was
contained in the Amex arbitration agreement, but was removed
by Amex in the 2018 edition of the agreement. Notwithstanding
this change, the 2018 agreement continues to prohibit
Plaintiffs from obtaining market-wide injunctive relief
(Pls. Resp. Mem. in Opp'n to Mot. ("Opp'n")
(Dkt. 879) at 2 n.6.) Amex does not dispute this
characterization of the changes made in 2018, and agrees with
Plaintiffs that the agreement prohibits Plaintiffs from
obtaining market-wide injunctive relief (see Amex
May 24, 2019 Letter (Dkt. 894)). The court will therefore
cite to the 2018 version of the CAA Amex has provided. All
members of the Amex Class are bound by this agreement.
(See SAC ¶¶ 47, 90.)
provides, inter alia:
You or we may elect to resolve any Claim by individual,
If arbitration is chosen by either party, neither you nor we
will have the right to litigate that Claim in court or have a
jury trial on that Claim. Further, you and we will not have
the right to participate in a representative capacity or as a
member of any class pertaining to any Claim subject to
arbitration. . . . The arbitrator's decisions are as
enforceable as any court order and are subject to very
limited review by a court. Except as set forth below, the
arbitrator's decision will be final and binding.
(2018 CAA (Dkt. 877-3) § 7.c.) The provision defines
[A]ny claim (including initial claims, counterclaims,
cross-claims, and third-party claims), dispute, or
controversy between you and us arising from or relating to
the Agreement or prior Card acceptance agreements, or the
relationship resulting therefrom, whether based in contract,
tort (including negligence, strict liability, fraud, or
otherwise), statutes, regulations, or any other theory,
including any question relating to the existence, validity,
performance, construction, interpretation, enforcement, or
termination of the Agreement or prior Card acceptance
agreements, or the relationship resulting thereform, except
for the validity, enforceability, or scope of section 7.c of
the General Provisions.
Id. § I.c.)
Anti-Steering Rules provide that merchants may not:
• indicate or imply that they prefer, directly or
indirectly, any Other Payment Products over [Amex] Card[s];
• try to dissuade cardholders from using [their Amex]
• criticize or mischaracterize [the Amex] Card or any of
[Amex's] services or programs;
• try to persuade or prompt cardholders to use any Other
Payment Products or any other method of payment ...