Internationally, AMEX and Visa/Mastercard do have to compete, and the latter have reacted by offering better prices and premium card options. Accordingly, the court finds no error in concluding that innovation has been stunted by harm to competition arising out of exclusionary provisions. arguments: Defendants’ Harm to competition is actually just harm to competitors: They argue that they have Right of refusal to deal: only shut off one network of distribution, the bank-as-issuer system, and they shouldn’t have to open up their distribution network to competitors because there’s no duty to deal. They analogize to Coke excluding Pepsi from using its trucking network to distribute. Court rejects this argument because it conceives of Visa and Mastercard as a single entity, when in reality both are joint ventures owned by consortiums of banks, effectively imposing a restrictive contract term on themselves, which they determine is in their mutual interest, providing disciplined adherence amongst otherwise competing banks, there’s amounting to a horizontal restraint between the banks. Procompetitive benefits: Necessary to in a way that promotes competition. “promote cohesion” Court rejects citing success of international alternative. 2. of Information Competitors’ Exchanges A mere instrument of AT harm: Exchanges of information between competitors are subject to antitrust scrutiny because they may indicate a cartel, may make a market ripe for cartelization, or otherwise facilitate parallel action, all of which can harm consumers. Because the exchange of information is not direct evidence of consumer harm, but requires inference of other circumstances, AT violations based on information exchange is very fact dependent. This is particularly true because exchange of information also facilitates healthier competition, presenting a strong pro-competitive counter-narrative. Parallel action: perfect pricing information in a highly concentrated market with high barriers to entry and relatively inelastic demand can empower those competitors to raises prices, without having to agree in a cartel sense, but with just as much freedom from the competitive forces. Rules of thumb – information exchanges are fine as long as: compiled and distributed through an independent third party; In aggregate form only, so competitors cannot deconstruct and identify specific competitor information; and information should be past information only if your industry is fragmented, and you meet the three prongs, then no there’s problem
Internationally, AMEX and Visa/Mastercard do have to compete, and the latter have reacted by offering better prices and premium card options. Accordingly, the court finds no error in concluding that innovation has been stunted by harm to competition arising out of exclusionary provisions. Defendants’ arguments: Harm to competition is actually just harm to competitors: Right of refusal to deal: They argue that they have only shut off one network of distribution, the bank-as-issuer system, and they shouldn’t have to open up their distribution network to competitors because there’s no duty to deal. They analogize to Coke excluding Pepsi from using its trucking network to distribute. Court rejects this argument because it conceives of Visa and Mastercard as a single entity, when in reality both are joint ventures owned by consortiums of banks, effectively imposing a restrictive contract term on themselves, which they determine is in their mutual interest, providing there’s disciplined adherence amongst otherwise competing banks, amounting to a horizontal restraint between the banks. Procompetitive benefits: Necessary to “promote cohesion” in a way that promotes competition. Court rejects citing success of international alternative. 2. Competitors’ Exchanges of Information A mere instrument of AT harm: Exchanges of information between competitors are subject to antitrust scrutiny because they may indicate a cartel, may make a market ripe for cartelization, or otherwise facilitate parallel action, all of which can harm consumers. Because the exchange of information is not direct evidence of consumer harm, but requires inference of other circumstances, AT violations based on information exchange is very fact dependent. This is particularly true because exchange of information also facilitates healthier competition, presenting a strong pro-competitive counter-narrative. Parallel action: perfect pricing information in a highly concentrated market with high barriers to entry and relatively inelastic demand can empower those competitors to raises prices, without having to agree in a cartel sense, but with just as much freedom from the competitive forces. Rules of thumb – information exchanges are fine as long as: compiled and distributed through an independent third party; In aggregate form only, so competitors cannot deconstruct and identify specific competitor information; and information should be past information only if your industry is fragmented, and you meet the three prongs, then there’s no problem
Fox__Spring_2012_Antitrust.docx