AAI Asks Supreme Court to Reject Expansion of Single-Entity Defense (Visa v. Osborn)

Today the American Antitrust Institute (AAI) filed an amicus brief asking the Supreme Court to reject a legal theory pursued by Visa and MasterCard and three of their largest member banks. If accepted, the credit card issuers' reasoning could immunize large swaths of anticompetitive conduct by joint ventures and other collaborations among competitors.

The case before the Court involves a challenge to Visa’s and MasterCard’s ATM network rules. The rules prohibit banks and other ATM operators that participate in the networks from charging discounted ATM access fees at “foreign” ATMs  when ATM transactions are routed through other, less expensive ATM networks. Foreign ATMs are those not belonging to the customer’s bank. The rules were adopted by the boards of Visa and MasterCard when they were controlled by member banks. 

The plaintiffs are classes of consumers and independent ATM operators. They argue that if the banks and other ATM operators were not bound by the rules at issue in the case, competition would be more vigorous on a number of dimensions. For example, ATM operators would compete to offer lower ATM fees to consumers with access to cheaper networks on their debit cards. Banks would also compete to issue debit cards giving consumers such access. And Visa and MasterCard would be forced by the competition to lower their network fees to ATM operators. 

Both the district court and the D.C. Circuit upheld the complaints as sufficient to state a claim under Section 1 of the Sherman Act, which requires both an agreement, or “concerted action,” and an unreasonable restraint of trade.

Defendants contend that the complaints are insufficient to allege an agreement among competing banks. They argue that it is at least as likely that the Visa and MasterCard boards adopted the rules to increase the profits of their respective ATM networks as it is that they did so to protect the banks from competition.

More broadly, defendants claim that there is no concerted action when competitors operating a joint venture restrict competition among themselves if they act in the interests of the venture as a whole, even if their purpose is to shield it from competition. If accepted, this reasoning would preclude claims of concerted action when, as in the case before the Court, a joint venture rule harms competition both in the markets in which the members compete and in which the joint venture competes as an entity. 

In its brief, the AAI argues that the defendants’ legal theory, if accepted, would overturn the Supreme Court’s recent decision in American Needle v. NFL. That decision limited the “single entity” defense. According to the AAI, to establish concerted action under American Needle it is sufficient if the conduct at issue is undertaken at the direction of competitors with independent interests.  Contrary to the contentions of Visa and MasterCard and the banks, the AAI maintains there is no additional requirement that a plaintiff prove the competitors acted on those independent interests, or acted exclusively on those interests.

The AAI also argues that defendants’ legal theory calls into question numerous cases in which courts have struck down restraints of joint ventures where the conduct was intended at least in part to benefit the venture or protect it from competition, including cases brought against Visa and MasterCard.

The brief was written by AAI Vice President and General Counsel Richard Brunell, with help from AAI Associate General Counsel Randy Stutz and AAI Research Fellows Michael Altebrando and Mark Angland.  The brief is available here.