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It' the agency for credit advice and debt management. American Express's decision: a consulting session on cartel risks As American Express recently stated, low share and vertically related business are not total obstacles to cartel risks. The United States District Court for the Eastern District of New York decided on 19 February 2015 that American Express' Anti-Steering rules violated Section 1 of the Sherman Act by unduly restricting trading in the general credit and debit card networking service markets.

It is a type of classical hierarchical restriction that prohibits a merchant-accepting American Express card from notifying a consumer that the card issuer may favour another card (Visa, MasterCard or Discover) and from "controlling" the consumer to use that card. Retailers may otherwise opt to do so because the charges they make to American Express are usually higher than those made to other credit card payment systems.

In general, American Express has championed these demands in its agreements with dealers - which it refers to as Non-Discrimination Provisions (NDPs) - to maintain its position as a premier manufacturer. For a long time, the practice of large credit card companies and their relationship with retailers has been an issue of interest to the United States Department of Justice (DOJ).

She successfully litigated against MasterCard and Visa in the late 90s and challenged regulations that prevent their member bankers from giving credit card through competitive network offerings such as Discover and American Express. In many cases, important privately owned cartel proceedings are also ongoing which have been questioning the credit card issuers' commercial practice for almost two centuries.

DOJ once again entered the credit card arena in 2010 and filed a lawsuit against Visa Inc. MasterCard International Inc. and American Express Company on their individual anti-steering dealer policies. The FOJ argues that the regulations'prevent traders from providing rebates, incentives and information on card charges to customers and lead to higher consumer prices for their purchases' because the'rules raise the cost of merchants' business'.

Shortly after the submission of the appeal, Visa and MasterCard have consulted with the government and agreed in a favourable decision to cease using the same. On the other side, American Express publically warranted not to be satisfied with the government by pointing to its relatively small size and the NDP' contribution to the maintenance of its capacity to competently compete with Visa, MasterCard and Discover.

Instead of arguing that American Express NDPs were presumed or per se illicit, the government alleged that they violated Section 1 of the so-called principle of reason test, the traditional test for evaluating the lawfulness of vertically related transactions, such as sales restrictions between a producer and a subsequent dealer.

In order to demonstrate that the NDPs were reasonably illegal, the Government therefore had to demonstrate that they affected effective effective competition in a given geographic area. In order to counter this pressure, the government had to demonstrate that American Express had a strong position on the markets by submitting a thorough sector alerts and evidence of a significant presence in the markets or, as an alternative, by demonstrating that the regulations actually had negative effects, such as higher pricing.

The American Express could refute this argument by demonstrating that the regulations had pro-competitive consequences which outweigh their negative ones. On the basis of evidences established during a seven-week unprotected lawsuit, the tribunal found that American Express had marketing authority even though it was only 26 per cent. 4% of the total universal credit and debit card sales in the United States in 2013.

Visas had a 45 per cent stake, MasterCard 23 per cent. 3%; and Discover had 5. 3%. However, the CFI dismissed the claim that a company must hold at least 30 per cent of the total before it can demonstrate that it has sufficient strength in the markets. Whilst the Court's judgment is based on the case's facts and the specificities of the credit card markets, it does raise important questions that may have repercussions far beyond the credit card world.

Kartellanwälte and corporate attorneys usually use benchmarking or screening techniques to evaluate behaviour in order to evaluate cartel risks. These are abbreviations that allow us to advise our customers efficiently. It is an elementary way of judging the importance of one-sided or co-ordinated behaviour for competition and a typical level of dominance below 30 % is considered to be pro-competitive.

The times are long gone when an rise in consumer concentrations was seen as likely to be detrimental to the consumer, irrespective of the overall or overall proportion. Similarly, over the last three centuries, commercial and regulatory trends have recognised that vertically related relations and the restrictions they entail are often pro-competitive. On the basis of the Sylvania ruling of the U.S. Supreme Court in 1977, which found that vertically restrained activities, such as excluding territory, are to be judged rationally and not necessarily judged, the powerful tendency was to allow greater scope for them.

The 2007 Supreme Tribunal in Leegin even went so far as to decide that the principle of common sense had to be applied to the continued existence of trade prices, once referred to as vertically priced. However, the meticulous and protracted study of the Court's basic rules in this case reminded us that these instruments of study are only abbreviations.

However, the swing of the clock has not yet reached the point where the low combined proportion of markets and vertically restrained effects should be legally addressed as such. Therefore, when evaluating the cartel risks, undertakings must always be willing to go beyond a mere analytical approach and ask whether the conduct may or may not have an effect on competition, despite the existence of prevailing commercial circumstances which may otherwise indicate that there are no competition concerns.

The American Express is expecting to file an appellate complaint against the court's verdict.

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