Why Tech Companies Are Worried about the Ohio v. Amex Case
A U.S. Supreme Court case over the legitimacy of a credit card issuer’s terms of business with its merchant establishments is reverberating far and wide. Among others, it is rattling technology companies — including Google, Facebook and Amazon — that have business models involving multiple customers.
The case prompting all those fears – Ohio v. American Express – which the Supreme Court heard on February 26, attempts to reverse a September 2016 ruling by the U.S. Court of Appeals for the Second Circuit that went in favor of American Express. At the core of the issue are so-called “anti-steering” restrictions that Amex imposes on merchant establishments, disallowing them to “steer” customers to using cards such as Visa, MasterCard or Discover that charge lower merchant fees than Amex. The merchants would typically do that by offering customers discounts on their purchases, or in essence, “sharing” what they would save in merchant fees if the customers use a lower-fee card such as a Visa or MasterCard.
Knowledge@Wharton discussed the larger implications of the case with Herbert Hovenkamp, a professor with a joint appointment at the University of Pennsylvania Law School and Wharton, and Geoffrey A. Manne, a founder and executive director of the International Center for Law and Economics (ICLE) in Portland, Ore. They shared their insights on the Knowledge@Wharton show on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
The full episode is embedded below.