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Will New York Become An AmEx Free Zone?

Posted  November 8, 2021
By Jeffrey I. Shinder

Many observers, this blog included, have commented on the potentially groundbreaking nature of New York’s proposed 21st Century Antitrust Act. Supporters of the bill emphasize the systematic dismantling of Section 2 of the Sherman Act, which is best evidenced by Justice Scalia’s “monopoly is good” diatribe in Verizon Communications, Inc. v. Trinko, 540 U.S. 398, 407.  Given the Supreme Court’s solicitude to monopoly power, New York’s proposed  “abuse of dominance” standard will provide a much needed legislative about-face that will resurrect serious antitrust scrutiny of dominant firms. While the focus on “abuse of dominance” is well placed, the potential import of New York’s proposed statute extends well beyond that core provision.  In fact, the statute also could redress another major deficiency of federal antitrust law—the requirement, in many cases, to prove up, and show harm to, a two-sided market per Ohio v. American Express, 138 S.Ct. 2274 (2018) (“AmEx”).  If the New York statute becomes law in its current form, it will give antitrust plaintiffs an effective means to avoid AmEx.

AmEx’s Two-Sided Transaction Market Definition

Under AmEx, networks that operate  platforms that link two sets of interdependent consumers who simultaneously purchase “separate but interrelated services” compete in a two-sided “transaction market.” Thus, a competitive effects analysis of the restraint in question must take into account effects on both sides of the market.  Applying this reasoning to credit cards, AmEx characterized credit card network services as a two-sided transaction market because the relevant consumers, merchants and cardholders, simultaneously complete credit card transactions when credit cards are used for payment at merchant locations.  According to the court, “[f]ocusing on merchant fees alone misses the mark because the product that credit-card companies sell is transactions, not services to merchants, and the competitive effects of a restraint on transactions cannot be judged by looking at merchants alone.”

The 5-4 majority opinion in AmEx was rendered over Justice Breyer’s vigorous and persuasive dissent, which argued that there is no compelling legal or economic reason to depart from traditional one-sided market definition principles and competitive effects analyses in platform or network industry cases.  As Justice Breyer explained, both sides in platform industries constitute distinct antitrust markets, and a comprehensive competitive effects analysis can and should take into account network effects involving both sides of the platform.  In other words, the two-sided market talisman adds nothing of substance to the analysis.

What AmEx Means for Platform Industries

While adding little substance to the mix, AmEx does make it harder to enforce federal antitrust laws against platform industries. To prove an antitrust violation in a two-sided transaction market post-AmEx, a plaintiff must demonstrate harm to competition that takes into account both sides of the market.  Moreover, as many predicted, AmEx has been embraced by defendants in numerous industries beyond payments, and courts routinely demand two-sided market proof even when the market in question cannot be properly characterized as a “transaction market.”[1]  Such overbroad applications of AmEx elevate the burden on antitrust plaintiffs, while giving defendants the ability to justify their infliction of harm to one side of the “market” by showing some procompetitive benefit on the other side.  It is no exaggeration to say that among the many death-by-a-thousand-cuts Supreme Court decisions that have chipped away at the antitrust laws in recent years, AmEx may prove to be the most significant cut of all.

AmEx Under New York’s 21st Century Antitrust Act

Enter New York.  The 21st Century Antitrust Act provides a roadmap to rendering AmEx obsolete, at least in cases that touch New York.  The proposed statute takes aim at AmEx by obviating the need to prove up a relevant market if direct evidence of harm to competition is shown.  Such direct evidence could include the unilateral power to set prices and the terms of trade, free of meaningful competitive constraints.  As a result, if the plaintiff can prove that the defendant has raised prices above a competitive level, or reduced output, or harmed innovation, without meaningful competitive constraint, the plaintiff need not offer the painstaking proof needed to show whether the relevant market is one-sided or two-sided.

The New York statute also bars defendants from offering procompetitive justifications, which means defendants will not be able to resort to the standard AmEx argument that harm to one side of the platform can be justified by procompetitive benefits on the other side.

For these reasons, the New York statute, if passed in its current form, will substantially improve a plaintiff’s chance of success in platform or network industry cases.  While defendants may argue that direct evidence of market power under the New York law requires proof of such effects on both sides of a two-sided platform, there is no basis in the legislative history or the text of the proposed statute to support that argument.  To the contrary, the entire thrust of the statute, including its embrace of the “abuse of dominance” standard and the elimination of a procompetitive justifications defense, suggests it was designed to make antitrust enforcement against platforms more effective.  AmEx has no place in that legislative agenda.

If New York does become the new epicenter of antitrust law under the 21st Century Antitrust Act, we can expect it to become the AmEx-free venue of choice for all platform industry cases.

Written by Jeffrey I. Shinder

Edited by Gary J. Malone


[1]   See, e.g.,, LLC v. Nat’l Assoc. of Realtors, 516 F. Supp. 3d 1047 (C.D. Cal. 2021) (granting motion to dismiss based on antitrust injury and application of AmEx to real estate markets), appeal filed, No. 21-55164 (9th Cir.) (oral argument scheduled for Jan. 14, 2022).

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