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BSF to Spearhead Defense of American Express in DOJ Suit

Litigation Highlights

Firm Newsletter Spring 2011

Don Flexner

Higher costs for merchants. Less value for customers. Interference with free market competition. 

These are the potential outcomes that BSF client American Express seeks to prevent by defending, rather than settling, an antitrust action brought in October 2010 by the U.S. Department of Justice.  

The suit, which followed class and individual actions pending in New York federal courts, challenges the company’s contractual provisions with merchants that prohibit customer discrimination at the point of sale.  

“The Justice Department is supporting bad policy and disguising it with vague promises of consumer benefit,” wrote American Express’ Chairman and CEO Kenneth I. Chenault in an October 8 opinion piece published by The Washington Post. “We think their case is weak and we intend to fight it.”  

The government’s case fails to account for American Express’ lack of market power.  American Express has the smallest merchant acceptance of all of the networks.  Merchants choose whether they want to work with American Express and if there is value in American Express’ service and its high-spending customer base. Unlike Visa, American Express is not viewed by merchants as “must carry,” in particular because almost every American Express customer carries another card. 

The government’s remedy would allow merchants to steer from a company without market power to a dominant firm. 

Mr. Chenault also described the case as anti-competitive in The Washington Post. “Perversely,” he wrote, “the government’s remedy would allow merchants that sign a contract and post decals to show which credit cards they accept to then ignore the contract’s ban on discrimination by pressuring their customers to use a different card when they pay.” 

BSF managing partner Don Flexner leads the defense of American Express,  with the support of a legal team that includes partners Eric Brenner, Cynthia Christian, Robert Cooper, John Cove Jr., Philip Korologos, Damien Marshall, and Alanna Rutherford, associates John LaSalle, Sean Rodriguez, and Matthew Tripolitsiotis and counsel Marcy Norwood Lynch. That team is assisted extensively by associates Mary Adkins, Ashanti Decker, Angus Dwyer, Jason Krause, Joshua Libling, Shira Liu, Laura McKay, Teresa Monroe, and Joseph Slaughter. Cravath Swaine & Moore is co-counsel in this action.


Related Lawyers: Donald L. Flexner, Eric J. Brenner, Cynthia M. Christian, Robert Cooper, , Philip C. Korologos, Damien J. Marshall, Alanna C. Rutherford, John F. LaSalle, Sean Phillips Rodriguez, Matthew S. Tripolitsiotis, Marcy Norwood Lynch, , , , Joshua James Libling, Shira R. Liu, , Teresa A. Monroe

Related Practice: Antitrust