15-1672 · BRANDS, INC., and SOUTHWEST AIRLINES CO. Movants. Case 15-1672, Document 455, 11 ... it...

15-1672

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

UNITED STATES OF AMERICA, et al.,

Plaintiffs-Appellees,

v.

AMERICAN EXPRESS CO., et al.,

Defendants-Appellants.

(Full caption commences on inside cover)

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NEW YORK (Honorable Nicholas G. Garaufis)

BRIEF OF MERCHANTS AS AMICI CURIAE IN SUPPORT OF THE UNITED STATES OF AMERICA’S

PETITION FOR PANEL REHEARING AND REHEARING EN BANC

John N. Thomas Crowell & Moring LLP 1001 Pennsylvania Avenue, N.W. Washington, DC 20004-2595 Telephone: 202.624.2500 Facsimile: 202.628.5116 Email: [email protected] Attorneys for Merchants As Amici Curiae

Christopher T. Leonardo Adams Holcomb LLP Suite 740-South 1001 Pennsylvania Ave. NW Washington, DC 20004 Telephone: 202.580.8803 Facsimile: 202.580.8821 Email: [email protected]

Case 15-1672, Document 455, 11/22/2016, 1912459, Page1 of 23

UNITED STATES OF AMERICA, STATE OF MARYLAND, STATE OF MISSOURI, STATE OF VERMONT, STATE OF UTAH, STATE OF ARIZONA,

STATE OF NEW HAMPSHIRE, STATE OF CONNECTICUT, STATE OF IOWA, STATE OF MICHIGAN, STATE OF OHIO, STATE OF TEXAS, STATE OF ILLINOIS, STATE OF TENNESSEE, STATE OF MONTANA, STATE OF

NEBRASKA, STATE OF IDAHO, and STATE OF RHODE ISLAND,

Plaintiffs-Appellees,

STATE OF HAWAII,

Plaintiff,

v.

AMERICAN EXPRESS COMPANY and AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.,

Defendants-Appellants,

MASTERCARD INTERNATIONAL INCORPORATED and

VISA INC.,

Defendants,

CVS HEALTH, INC., MEIJER, INC., PUBLIX SUPER MARKETS, INC., RALEY’S, SUPERVALU, INC., AHOLD U.S.A., INC., ALBERTSONS LLC, THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC., H.E. BUTT

GROCERY CO., HYVEE, INC., THE KROGER CO., SAFEWAY INC., WALGREEN CO., RITE-AID CORP., BI-LO LLC, HOME DEPOT USA, INC.,

7-ELEVEN, INC., ACADEMY, LTD., DBA ACADEMY SPORTS + OUTDOORS, ALIMENTATION COUCHE-TARD INC., AMAZON.COM, INC.,

AMERICAN EAGLE OUTFITTERS, INC., ASHLEY FURNITURE INDUSTRIES INC., BARNES & NOBLE, INC., BARNES & NOBLE COLLEGE

BOOKSELLERS, LLC, BEALL’S, INC., BEST BUY CO., INC., BOSCOVS, INC., BROOKSHIRE GROCERY COMPANY, BUC-EE’S LTD, THE BUCKLE, INC., THE CHILDRENS PLACE RETAIL STORES, INC.,

COBORNS INCORPORATED, CRACKER BARREL OLD COUNTRY STORE,


INC., D’AGOSTINO SUPERMARKETS, INC., DAVIDS BRIDAL, INC., DBD, INC., DAVIDS BRIDAL CANADA INC., DILLARD’S, INC., DRURY HOTELS

COMPANY, LLC, EXPRESS LLC, FLEET AND FARM OF GREEN BAY, FLEET WHOLESALE SUPPLY CO. INC., FOOT LOCKER, INC., THE GAP,

INC., HMSHOST CORPORATION, IKEA NORTH AMERICA SERVICES,LLC, KWIK TRIP, INC., LOWE’S COMPANIES, INC., MARATHON PETROLEUM COMPANY LP, MARTIN’S SUPER MARKETS, INC., MICHAELS STORES, INC., MILLS E-COMMERCE ENTERPRISES, INC., MILLS FLEET FARM,

INC., MILLS MOTOR, INC., MILLS AUTO ENTERPRISES, INC., WILLMAR MOTORS, LLC, MILLS AUTO ENTERPRISES, INC., MILLS AUTO CENTER,

INC., BRAINERD LIVELY AUTO, LLC, FLEET AND FARM OF MENOMONIE, INC., FLEET AND FARM OF MANITOWOC, INC., FLEET AND FARM OF PLYMOUTH, INC., FLEET AND FARM SUPPLY CO. OF

WEST BEND, INC., FLEET AND FARM OF WAUPACA, INC., FLEET WHOLESALE SUPPLY OF FERGUS FALLS, INC., FLEET AND FARM OF

ALEXANDRIA, INC., NATIONAL ASSOCIATION OF CONVENIENCE STORES, NATIONAL GROCERS ASSOCIATION, NATIONAL

RESTAURANT ASSOCIATION, OFFICIAL PAYMENTS CORPORATION, PACIFIC SUNWEAR OF CALIFORNIA, INC., P.C. RICHARD & SON, INC.,

PANDA RESTAURANT GROUP, INC., PETSMART, INC., RACETRAC PETROLEUM, INC., RECREATIONAL EQUIPMENT, INC., REPUBLIC

SERVICES, INC., RETAIL INDUSTRY LEADERS ASSOCIATION, SEARS HOLDINGS CORPORATION,

SPEEDWAY LLC, STEIN MART, INC., SWAROVSKI U.S. HOLDING LIMITED, WAL-MART STORES INC., WHOLE FOODS MARKET GROUP,

INC., WHOLE FOODS MARKET CALIFORNIA, INC., MRS. GOOCH’S NATURAL FOOD MARKETS, INC., WHOLE FOOD COMPANY, WHOLE FOODS MARKET PACIFIC NORTHWEST, INC., WFM-WO, INC., WFM NORTHERN NEVADA, INC., WFM HAWAII, INC., WFM SOUTHERN

NEVADA, INC., WHOLE FOODS MARKET, ROCKY MOUNTAIN/SOUTHWEST, L.P., THE WILLIAM CARTER COMPANY,

YUM! BRANDS, INC., and SOUTHWEST AIRLINES CO.

Movants.


The proposed amici include the following entities:

1. United Airlines, Inc. 2. Marriott International, Inc. 3. Target Corp. 4. Sears Holdings Management Corporation 5. Office Depot, Inc. 6. OfficeMax Incorporated 7. Staples, Inc. 8. The New York Times Company 9. The WP Company LLC (d/b/a The Washington Post) 10. Tesoro Companies, Inc. 11. Ferguson Enterprises, Inc. 12. Tiffany and Company 13. AutoNation, Inc. 14. Bridgestone Americas Inc.

15. Brookstone Company, Inc. 16. Caleres, Inc. 17. Lucky Brand LLC 18. Luxottica Retail North America, Inc. 19. Bally Total Fitness Corporation


20. Fitness International, LLC (d/b/a LA Fitness) 21. BJ’s Restaurants, Inc. 22. Darden Restaurants, Inc.

23. Fresh Enterprises, LLC 24. Jack in the Box Inc. 25. Innovative Dining Group, LLC 26. Nestlé Waters North America, Inc. 27. Nespresso USA, Inc. 28. Crestline Hotels & Resorts, LLC 29. Host Hotels & Resorts, Inc. 30. Festival Fun Parks, LLC (d/b/a Palace Entertainment) 31. Centric Group, LLC 32. CoreLogic, Inc. 33. Ingram Micro Inc. 34. MorphoTrust USA, LLC 35. Public Storage

36. Big Sur Waterbeds, Inc. 37. Denver Mattress Hospitality 38. Sofa Mart, LLC 39. The Regents of the University of California


Many of the proposed merchant amici filed a Motion to Intervene and an

accompanying Memorandum of Law in Support of the Merchant Intervenors’

Motion to Intervene in In re American Express Anti-Steering Rules Antitrust

Litigation II, 11-MD-2221 (MDL No. 2221) (E.D.N.Y.) on July 27, 2016. The

Merchant Intervenors moved to intervene for the limited purpose of modifying the

Protective Order entered by the United States District Court of the Eastern District

of New York in Rite Aid Corp. v. American Express Travel Related Services Co.,

Inc., No. 08-CV-2315 (E.D.N.Y.) to permit them access to and limited use of

certain record material produced by defendants American Express Company and

American Express Travel Related Services Company, Inc.


i

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rules 26.1 and 29(c)(1) of the Federal Rules of Appellate

Procedure:

Amicus United Airlines, Inc. is a wholly owned subsidiary of United

Continental Holdings, Inc., a publicly held company.

Amicus Marriott International, Inc. has no parent corporation and no publicly

held corporation owns 10% or more of its stock.

Amicus Target Corp. has no parent corporation and no publicly held corporation

owns 10% or more of its stock.

Amicus Sears Holdings Management Corporation has no parent corporation and

no publicly held corporation owns 10% or more of its stock.

Amicus Office Depot, Inc. has no parent corporation and no publicly held

corporation owns 10% or more of its stock.

Amicus OfficeMax Incorporated is a wholly owned subsidiary of Office Depot

Inc., a publicly held company.

Amicus Staples, Inc. has no parent corporation and no publicly held corporation


Amicus The New York Times Company has no parent corporation and no

publicly held corporation owns 10% or more of its stock.


ii

Amicus WP Company LLC (d/b/a The Washington Post) is a wholly owned

subsidiary of Nash Holdings LLC, a privately held company.

Amicus Tesoro Companies, Inc. is a wholly owned subsidiary of Tesoro

Corporation, a publicly held company.

Amicus Ferguson Enterprises, Inc. is a wholly owned subsidiary of Wolseley

plc, a publicly held company.

Amicus Tiffany and Company has no parent corporation and no publicly held


Amicus AutoNation, Inc. has no parent corporation and no publicly held


Amicus Bridgestone Americas Inc. is a wholly owned subsidiary of Bridgestone

Corporation, a publicly held company.

Amicus Brookstone Company, Inc. is a wholly owned subsidiary of Brookstone

Inc., a privately held company.

Amicus Caleres, Inc. has no parent corporation and no publicly held corporation


Amicus Lucky Brand LLC has no parent corporation and no publicly held


Amicus Luxottica Retail North America, Inc. is a wholly owned subsidiary of

Luxottica Group SpA, a publicly held company.


iii

Amicus Bally Total Fitness Corporation is a wholly owned subsidiary of Bally

Total Fitness Holding Corporation, a privately held company.

Amicus Fitness International, LLC (d/b/a LA Fitness) has no parent corporation

and no publicly held corporation owns 10% or more of its stock.

Amicus BJ’s Restaurants, Inc. has no parent corporation and no publicly held


Amicus Darden Restaurants, Inc. has no parent corporation and no publicly held


Amicus Fresh Enterprises, LLC is a wholly owned subsidiary of MTY

Franchising USA, a publicly held company.

Amicus Jack in the Box Inc. has no parent corporation and no publicly held


Amicus Innovative Dining Group, LLC has no parent corporation and no


Amicus Nestlé Waters North America, Inc. is a wholly owned subsidiary of

Nestle Waters S.A., a publicly held company.

Amicus Nespresso USA, Inc. is a wholly owned subsidiary of Nestle Holdings,

Inc., a privately held company.

Amicus Crestline Hotels & Resorts, LLC has no parent corporation and no



iv

Amicus Host Hotels & Resorts, Inc. has no parent corporation and no publicly

held corporation owns 10% or more of its stock.

Amicus Festival Fun Parks, LLC (d/b/a Palace Entertainment) is a wholly

owned subsidiary of Palace Entertainment Holdings, LLC, a privately held

company.

Amicus Centric Group, LLC has no parent corporation and no publicly held


Amicus CoreLogic, Inc. has no parent corporation and T. Rowe Price Group,

Inc. (NasdaqGS:TROW) owns 10.59% of its stock.

Amicus Ingram Micro Inc. has no parent corporation and no publicly held


Amicus MorphoTrust USA, LLC is a wholly owned subsidiary of Safran SF, a

publicly held company.

Amicus Public Storage has no parent corporation and no publicly held


Amicus Big Sur Waterbeds, Inc. is a wholly owned subsidiary of Furniture Row

BC, Inc., a privately held company.

Amicus Denver Mattress Hospitality is a wholly owned subsidiary of Furniture

Row LLC, a privately held company.


v

Amicus Sofa Mart, LLC is a wholly owned subsidiary of Furniture Row LLC, a

privately held company.

Amicus The Regents of the University of California is the governing board of

the University of California system; it has no parent corporation and does not offer

stock.


vi

TABLE OF CONTENTS

Page

I. Statement of Interest ........................................................................................ 1

II. The ASRs Destroyed Competition for Card Network Services, Harming Merchants and Consumers Alike. .................................................................... 1

The ASRs Prevent Competition Among Providers of Card Network A.Services and Thereby Harm Merchants. ............................................... 1

The ASRs Harm Consumers. ................................................................ 4 B.

Elimination of the ASRs Would Restore Competition to the Benefit of C.Merchants and Consumers. ................................................................... 4

III. The Panel Failed to Pay Due Deference to the District Court’s Findings and Misconstrued the Evidence Regarding the Harm Caused by the ASRs. ......... 6


vii

TABLE OF AUTHORITIES

Page(s)

Cases

Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (1984) ................................................................................................ 7

Nat’l Soc. of Prof’l Engineers v. United States, 435 U.S. 679 (1978) .............................................................................................. 7

Reiter v. Sonotone Corp., 442 U.S. 330 (1979) .............................................................................................. 7

United States v. Am. Express Co., 88 F. Supp. 3d 143 (E.D.N.Y 2015) ..................................................... 1, 3, 5, 6, 7

United States v. Apple Inc., 791 F.3d 290 (2d Cir. 2015) ............................................................................. 7, 8

Rules

Fed. R. App. P. 32(a)(7)(C) ....................................................................................... 9

Fed. R. App. P. 35(b)(2) ............................................................................................ 9


1

I. Statement of Interest

Amici1 are merchants that have been harmed for years by the anticompetitive

conduct of American Express Company (“Amex”) and its anti-steering rules

(“ASRs”).2 Amici have an interest in supporting the Government’s challenge to the

ASRs, which foreclose horizontal interbrand price competition for general purpose

credit and charge card (GPCC) network services offered by Amex and its

competitors: Visa, MasterCard, and Discover.

II. The ASRs Destroyed Competition for Card Network Services, Harming Merchants and Consumers Alike.

The ASRs Prevent Competition Among Providers of Card A.Network Services and Thereby Harm Merchants.

GPCC cards are a principal means by which U.S. consumers purchase goods

and services, including from merchant amici. See United States v. Am. Express

Co., 88 F. Supp. 3d 143, 153 (E.D.N.Y 2015) (Amex I); Trial Tr. 3581:10-12

(Silverman/Amex). As a cost of participating in each GPCC network, merchants

pay a fee for each credit card transaction—a percentage of the amount charged to

1 No party’s counsel authored any part of this brief. No party or party’s counsel contributed money that was intended to fund preparing or submitting this brief. No person, other than the amici, their members, and their counsel, contributed money that was intended to fund preparing or submitting this brief.

2 Amex uses the term “NDP” (non-discrimination provisions) instead of “anti-steering rules.” But the euphemism NDP tends to obscure the purpose and effect of these provisions. By prohibiting merchants from educating consumers about both the true costs of using Amex cards and the availability of lower cost alternatives, such provisions impede the normal functioning of the market and help Amex maintain its monopoly profits.


2

consumers—known as the “merchant discount fee.” Joint Statement of Facts, ECF

#447-1 (Jt. Stmt.) at ¶¶ 2-3, 6-7, 13-14. These fees represent a significant cost for

all merchants.3

Amici consist of some of the largest merchants in the United States.

Merchants that operate on this scale must accept Amex. Ninety-eight of the 100

largest merchants in the United States accept Amex at some or all of their locations

because customers insist on it. Id. at ¶¶ 8-12. For example, many of Enterprise’s

customers use corporate Amex cards and object to paying “with a different form of

payment.” Trial Tr. 489:15-20 (Satkowski/Enterprise). Many merchants across a

wide range of industries believe that they cannot afford to drop Amex.4 This is

3 E.g., Trial Tr. 480:7-13 (Satkowski/Enterprise) (Enterprise paid about $70

million in GPCC fees in fiscal year 2014); Trial Tr. 2318:24-2319:19 (Bruno/Crate & Barrel) (credit card fees are a “significant cost”).

4 See A2475, 2485 (Amex data presented to Hilton Hotels indicating that 14 percent of Amex cardholders only carry Amex, and 49% of Amex cardholders “agree that American Express is their card of choice”); PX0049 at -881-884 and PX0906 at -820 (Amex finding that cardholders switched to other gas stations when a group of Shell gas stations temporarily stopped accepting Amex in 2007, causing the Shell stations to lose money); Trial Tr. 246:11-247:13, 248:4-13 (Thiel/Alaska); 389:10-390:10 (Robinson/Ikea); 491:1-494:8 (Satkowski/Enterprise); 573:6-574:5 (Bouchard/Sears); 1529:6-1536:22 (O’Malley/Best Buy); 1262:19-1263:14 (Kimmet/Home Depot); 2159:18-2161:4 (Haslam/Office Max); 2322:21-2323:4 (Bruno/Crate & Barrel); 2414:4-13 (Priebe/Southwest Airlines); 1687:12-1690:12 (Dale/Sprint); 3146:2-3147:10 (Gibson/Sinclair); 5390:15-5393:12 (Miller/Delta); 5551:9-13, 5558:22-5560:20 (Landau/Drybar); 5898:4-6, 5905:1-17 (Flueck/Starwood Hotels); 2523:23- 2524:4, 2538:11-15 (Holtey/Solitude); 6126:6-19 (Mitchell/Official Payments); 1606:4-18, 1664:15-24 (Brennan/Hilton); 3194:15-3197:13 (Gibson/Sinclair). (Continued...)


3

particularly true in the travel and entertainment industry where Amex corporate

cards are predominant for business travel. Amex I, 88 F. Supp. 3d at 191-94.

Absent the ASRs, network service operators would compete to offer lower

merchant discount fees and merchants could negotiate lower merchant discount

fees by offering networks more charge volume through customer steering. See

Trial Tr. 2328:9-2329:7 (Bruno/Crate & Barrel); Trial Tr. 2170:25; 2172:18

(Haslam/Office Max); Trial Tr. 580:25-581:8 (Bouchard/Sears). But Amex’s

ASRs thwart price competition by precluding amici and others from educating

consumers about the true costs of using various cards, which might lead them to

choose lower-cost cards. When consumers are not so informed, networks have no

incentive to offer merchants lower fees. Amex has even admitted that it “do[esn’t]

compete on cost” and, if merchants were permitted to steer, it would have to

change its pricing model. Trial Tr. 2596:2-2597:5, 2667:23-2668:9, 2668:23-

2669:3 (Funda/Amex). As Southwest Airlines’ Director of Accounting Operations

________________________ The ASRs enabled Amex to implement the Value Recapture program. Trial

Tr. 709:20 – 711:2 (Quagliata); 3850:8-17 (Katz). The District Court found that between 2007 and 2010, under a program Amex called “Value Recapture,” Amex successfully and materially increased discount rates to airlines, and to 280,000 restaurants. 88 F. Supp. 3d at 196; see also Trial Tr. 717:22-23 (Quagliata/Amex). All told, the Value Recapture program increased prices for a “substantial portion” of Amex’s acceptance network, with merchants accounting for 65% of Amex’s annual charge volume paying higher prices. A1624, 1637; see also A1176, 1178. Despite these increases, no large merchants defected from accepting Amex. Trial Tr. 2079:6-2080:10 (Berry/Amex), 2675:23-3676:4 (Funda/Amex); 88 F. Supp. 3d at 197 (noting 100% retention among largest global merchants).


4

testified, “the market is broken” because card networks do not price compete for

his company’s business. Trial Tr. 2440:4-15 (Priebe/Southwest).5

The ASRs Harm Consumers. B.

As with any cost, merchants must consider merchant discount fees when

setting prices for the goods and services they sell. Although consumers who pay

with Amex may receive rewards that partially offset the higher prices, the vast

majority of consumers—including those who do not even use Amex—absorb the

price increase without any corresponding benefit.6 Those customers thereby

subsidize Amex cardholder benefits and Amex profits, and at significant cost, as

Amex’s acceptance cost is the highest in the industry. Trial Tr. 3978:25 – 3982:8

(Katz). One witness testified that Amex costs the company 20% more than the

next most expensive brand. Trial Tr. 2161:8 – 2162:9 (Haslam/OfficeMax).

Elimination of the ASRs Would Restore Competition to the C.Benefit of Merchants and Consumers.

5 At trial, the Government’s expert, Dr. Katz, testified that “the anti-steering

rules resulted in the charge volume or demand for [Amex’s] services being less responsive to merchant discount, and when demand is . . . less responsive to the price charged to the merchant, that results in the profit maximizing price being higher.” Trial Tr. 3846:1-9 (Katz); see also 3853:25-3854:17 (Katz).

6 The record below showed that the increased costs that merchants incur from GPCC fees serve to raise the prices charged to all customers. See Trial Tr. 1405:22-1407:11 (Rein/Walgreens); Trial Tr. 3854:18-3855:25 (Katz) (“prices are going to go up with the merchant for everybody, including people who are not using American Express cards”). And further, evidence credited by the Panel showed unequivocally that even Amex customers did not receive benefits equal to the higher costs. Slip op. at 57; Trial Tr. 5252:9-5254:5 (Gilbert).


5

Absent the ASRs there would be vigorous competition among GPCC

networks. Amex bolstered its ASRs in the 1990s as a strategic response to

successful campaigns by its competitors such as “We Prefer Visa,” which

contributed to a 25-45% shift in card volume from Amex to Visa. Amex I, 88 F.

Supp. 3d at 161; Trial Tr. 33217:18-3328:2, 3330:3-8 (Morgan/Visa). Amex

admitted that the current ASRs reflect in part Amex’s response to Visa’s campaign.

Trial Tr. 4492:16-4493:14, 4531:17-4532:11(Chenault/Amex). Absent the ASRs,

card networks could compete to enter into preference campaigns with merchants

that would increase interbrand competition. See Trial Tr. 2906:3-2908:15

(Pojero/Amex); id. at 3259:1-3259:14; 3298:5-11(Biornstad/MasterCard).

Merchants benefit from competition among GPCC networks because

competition drives down merchant discount fees. Amex does not dispute this

point. Indeed, Amex admitted that without ASRs, it might “reduc[e] its merchant

discount rate, provid[e] more merchant benefits, increas[e] its cardholder rewards,

or some combination of these possibilities.” Trial Tr. 2754:14-2755:6

(Funda/Amex). Finally, Amex agrees that removing the ASRs may lead to lower

merchant discount fees from all GPCC providers. Trial Tr. 2762:8-17. Discover

testified that it would “aggressively pursue” reducing its price and incentivizing

merchant steering absent ASRs. Trial Tr. 872:3-10 (Hochschild/Discover).


6

Consumers could also benefit from the elimination of the ASRs because the

attendant increased competition would likely lower merchant discount fees and

incentivize merchants to share those cost savings with their customers in the form

of lower prices. Trial Tr. 1276:4-8 (Kimmet/Home Depot). Multiple merchants

testified at trial that they share their cost savings with customers in the form of

price decreases. Amex I, 88 F. Supp. 3d at 221.

III. The Panel Failed to Pay Due Deference to the District Court’s Findings and Misconstrued the Evidence Regarding the Harm Caused by the ASRs.

After a seven-week trial, the District Court found that there was substantial

evidence connecting higher merchant discount fees—made possible by Amex’s

ASRs—with “increased prices for consumers.” Id. at 216. The court further found

that those supracompetitive prices “affect not only those customers who use Amex

cards, but also shoppers who instead prefer to pay using a lower-rewards GPCC

card, debit cards, check, or cash”—in other words, all customers. Id.

The Panel mostly ignored this finding, asserting in a footnote (with no

analysis or record support) that it was erroneous for failing to account for offsetting

“rewards” benefits reaped by Amex cardholders. 7 Slip op. at 55 n. 52. This

7 Nor could it be a defense that Amex may have passed some of its

overcharges to merchants on to consumers in the form of rewards. The Supreme Court has rejected various iterations of this argument, concluding time and again that improving the quality of an uncompetitive product is not a valid defense to an (Continued...)


7

reasoning misapprehends the District Court’s findings and misconstrues the

evidence of competitive harm. But even if Amex cardholders received additional

benefits, the District Court found that all consumers paid supracompetitive prices

as a result of the ASRs. Amex I, 88 F. Supp. 3d at 216. The Panel recognized that

Amex cardholders tend to be more “affluent,” but was silent on the trial court’s

finding that the effect of the ASRs was not limited to Amex customers: the ASRs

increased prices for all consumers, including less-affluent, non-Amex cardholders.

Slip op. at 56. In effect, the Panel placed the interests of Amex cardholders in

receiving better rewards above both (1) merchants (an entire side of the GPCC

platform), and (2) all consumers other than those paying with an Amex card. The

Sherman Act—a “consumer welfare prescription”—cannot have contemplated

such a result. Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979).

Finally, the Panel concluded that Amex’s ASRs increased output—and were

therefore procompetitive—because industry-wide transaction volume has increased

and credit card services have improved in quality. Slip op. at 58-59. This

conclusion is at odds with United States v. Apple Inc., 791 F.3d 290, 334 (2d Cir.

2015), which requires a connection between the two. There, Apple attempted to

argue that an industry-wide price decrease and various innovations evidenced

________________________ anticompetitive price or output restraint. Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 116-17 (1984) (NCAA); Nat’l Soc. of Prof’l Engineers v. United States, 435 U.S. 679, 692-96 (1978).


8

procompetitive conduct. The court held that “Apple failed to establish a

connection between these benefits and the conspiracy.” Id. Here, without any

record evidence establishing a connection between the two, the Panel incorrectly

concluded that Amex’s ASRs caused higher transaction volume and higher-quality

card services.

In summary, the Panel’s decision strays from long-settled principles of

antitrust law and fails to accord due deference to the District Court’s findings that

both merchants and consumers alike are harmed by the anticompetitive effects of

Amex’s ASRs. En banc review should be granted and the Panel’s errors corrected.

Dated: November 16, 2016 Respectfully submitted,

/s/ John N. Thomas John N. Thomas Crowell & Moring LLP 590 Madison Avenue, 20th Floor

New York, NY 10022-2544 Email: [email protected] Telephone: 212.895.4306 Facsimile: 212.223.4134

Counsel for Amici Curiae


9

CERTIFICATE OF COMPLIANCE

Pursuant to Federal Rule of Appellate Procedure 32(a)(7)(C), I hereby

certify that the foregoing brief was produced using 14-point Times New Roman

typeface and is less than 7 ½ pages, which is less than half the maximum length

authorized by Federal Rules of Appellate Procedure 35(b)(2) for a party’s petition

for panel rehearing and rehearing en banc and a response thereto.

/s/ John N. Thomas John N. Thomas


10

CERTIFICATE OF SERVICE

I certify that on November 16, 2016, the foregoing was electronically filed

through this Court’s CM/ECF system, which will send a notice of electronic filing

to all registered users.

/s/ John N. Thomas John N. Thomas


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