YouTube video

A major Supreme Court ruling, Ohio vs American Express, was completely ignored by most media outlets, even though it will have potentially devastating repercussions for consumers in the so-called ‘platform economy’: Uber, Lyft, AirBnB, Facebook, etc. White collar criminologist Bill Black explains the consequences

Story Transcript

GREG WILPERT: It’s The Real News Network and I’m Greg Wilpert. The U.S. Supreme Court recently released a series of rulings that attracted a lot of attention because they represented important advances in the right wing agenda in the United States. For example, just this week, the court ruled that the Trump administration’s Muslim travel ban, as it has come to be known, is legal. Also on Wednesday, the court ruled that public sector unions can no longer collect union fees from non-union members who are in the same collective bargaining unit. Earlier this month, it ruled that voter registration purges, such as the ones that were conducted in the state of Ohio, are legal. One recent ruling, though, has failed to gain that much attention, even though it is at least as consequential.

That is, on Monday, the Supreme Court said again, with a five to four conservative majority, that American Express is allowed to prevent merchants from telling customers about American Express fees. This is no doubt an obscure ruling, but according to many analysts it means that the decision allows companies to engage in many types of anti-competitive behaviour, in other words, strengthening the power of large corporations. Joining me now to take a closer look at the Supreme Court’s Ohio v. American Express ruling is Bill Black. Bill is a white collar criminologist, former financial regulator and Associate Professor of Economics and Law at the University of Missouri, Kansas City. He is also the author of the book, The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.

BILL BLACK: Thank you.

GREG WILPERT: So, it would seem that the reason that this decision, by and large, was ignored in the media is that, as I said before, it is rather obscure. So, first of all, explain to us what this case is about.

BILL BLACK: So, a significant number of states attorney generals and pretty much everybody in antitrust was horrified by a ruling in the Second Circuit, which is basically Wall Street. The district court had done findings of fact in a challenge to American Express and originally to Visa and MasterCard, the way they set and limited competition in fees for credit cards.

As your viewers know, the interest rate you pay on credit cards is dramatically higher than, for example, what you would pay on home mortgages or what businesses would pay for a loan. MasterCard and Visa settled before the cases went to trial. American Express went to trial, lost, with a very good opinion by the district court, finding facts that showed that this was anti-competitive. You know, under absolutely traditional antitrust grounds the Second Circuit reversed a number of states, asked the Supreme Court to take the case. It’s called certiorari. They did, but they came out with a remarkable decision.

GREG WILPERT: So, what are the obligations then, of the of the Supreme Court’s ruling? Justice Clarence Thomas wrote a majority opinion, the majority opinion, and in it, he made reference to a relatively new economic idea it seems, which is this idea of a two-sided platforms. That is where a company basically brings buyers and sellers together and that’s considered to be some sort of two-sided platform. So, in this case, it was American Express. But what are the implications of saying that- I mean, basically Clarence Thomas said that as long as one of the sides is still treated fairly in a competitive way, it’s okay if the other side is treated in an anti-competitive way. At least, that’s more or less the way I read this ruling of the Supreme Court. But what other examples can we think of, of two-sided platforms, and what does this decision ultimately mean then, for other areas of economic life?

BILL BLACK: So, let me start with the last question. What American Express did was a naked violation of the antitrust laws as they have always been understood. It by contract, directly interfered with price competition. That is the heart of an antitrust liability that would typically be subject to what we call per se liability. In other words, you don’t have to prove harm because it is such an obvious interference. So, this should have been an easy case. Second, as you say, they invented a new doctrine, ignoring all the district court’s findings of fact. And the new doctrine said, “Oh, normal antitrust principles, competition, they don’t really apply to massive sectors of the economy.” Indeed, we are talking about the largest sectors of the economy that affect you as a regular human being, literally trillions of transactions.

And it said, “If it’s two sided, well then the normal antitrust rules don’t apply and you can directly interfere with competition and you can say that that’s fine because, after all, the markets are growing, so everything must be fine.” What’s a two-sided transaction market? It’s when you bring buyer and seller together, for example. Well, what does a regular farm market do? It brings the buyer and seller together, so none of this is new economically. But the implications of this are any time you have a two sided market, which is of course everything in the platform economy that the world is becoming, normal antitrust rules won’t apply. And it doesn’t matter how big you are, how powerful you are, how obviously in restraint of trade, in restraint of competition, the courts will allow this.

But notice, by the way, that this was also a direct infringement on what you could say. So by contract, your American Express and Visa and MasterCard, in light of this decision, can now force the merchant you deal with to be forbidden to tell you the truth about American Express fees and which one is cheaper. At the same time, notice that they had a Supreme Court decision on fake pregnancy crisis intervention outfits, where the state wanted them to tell the truth and the Supreme Court said, “No, no, no, you can’t require them to tell the truth but you can forbid entities from telling the truth under this American Express case.” It’s just staggering hypocrisy, a total lack of any legal consistency. It’s just pure, “What will help our patrons,” right? “Who will help the Republican Party? That’s How we’re going to decide it.”

GREG WILPERT: I mean, this idea of this two-sided platforms, I find it quite extraordinary because couldn’t one say that all companies and even all markets are in one sense or another, two-sided platforms? I mean, after all, most companies, unless they’re extracting mineral resources from the earth or rely on suppliers, that’s one side. And on the other side, they rely on our customers. So, that’s a two-sided platform. And as a matter of fact, any kind of market would be considered or should be considered, not just a farmer’s market but any kind of market, if they’re organized in the form of a company, such as the stock exchange or whatever, or the- we mentioned, of course, Google and Facebook and all of the social media would be also then, two-sided. So, in other words, doesn’t that mean in some sense that it’s a law, it’s okay to screw one side as long as you don’t screw the other side? Is that the consequence?

BILL BLACK: Well, no. You can screw everybody under this rule. But I think Thomas would say no. If a business buys say strawberries from somebody in one transaction and then processes the strawberries and then sells them in a place where the original seller of the strawberry has no role, that that wouldn’t be a two-sided transaction. But almost everything in the platform economy would be two-sided. So, you know, Uber, Lyft, all credit card transactions, which again are the most numerous transactions in the world and the largest transactions in the world, or at least the next-to-last largest after some financial derivatives. Certainly, the largest that any consumers engage in. So, most of the things we do economically as a consumer will no longer be protected by the antitrust laws. This is just nakedly pro-business, anti-consumer action.

GREG WILPERT: Can you can you just give us some quick examples of what the broader consequences would be? I mean, what kinds of things could- I mean, okay. We know now that American Express can prevent merchants from telling consumers what kinds of prices they charge, but what are the other consequences, that is, the more serious consequences, really, that this decision would imply or could possibly lead to? Just some concrete examples.

BILL BLACK: Well first, that is a really serious one. If if the merchants can’t tell you which transaction would actually be cheaper for you, then you will be routinely pushed into the transaction that creates the greatest profit for them, at your disadvantage. And that economic effect will be measured in the tens of billions of dollars lost to consumers. But beyond that, this is a really open-ended decision. If you can forbid the party, the merchant, from discussing which is a cheaper price, why shouldn’t you be able to fix prices as well? After all, it’s a two sided transaction. The normal rules don’t apply. In other words, we don’t know. This is the first major case of the Supreme Court adopting this new rule.

I can tell you, there’s a predecessor rule that has also been extraordinarily powerful in antitrust in the new economy. And that said, “Well, normally we’re concerned about market power, but we love networks.” In other words, it’s really good, for example, that we can all use some kind of visual link to get to The Real News site, and we can watch it. And the more people that can get to it, the more valuable the market. Okay, there’s truth to that. But then, the reaction of the Supreme Court was pretty much, “Well then, normal rules against a monopoly really shouldn’t apply because we want, essentially, a massive market.

And then of course, the next stage in that was, “Oh, and you the carrier, that’s the Internet channel, should be able to discriminate, should be able to charge some people more or less for using their services and not tell the public about that.” So, we we see that these doctrines that start in limited areas in antitrust have grown to include most of the new economy. Most of the new economy, the Supreme Court view, is the antitrust rules simply are no longer applicable to anything other than the most obvious cartel where people say magic words, “We are beating together to fix the price.”

GREG WILPERT: Well, we’re going to leave it there for now. I was speaking to Bill Black, Associate Professor of Economics and Law at the University of Missouri, Kansas City. Thanks Bill, for having joined us again.

BILL BLACK: Thank you.

GREG WILPERT: And thank you for joining The Real News Network. Also, keep in mind, we recently started our summer fundraiser and need your help to reach our goal of raising two hundred thousand dollars. Every dollar that you donate will be matched. Unlike practically all other news outlets, we do not accept support from governments or corporations. Please do what you can today.

Creative Commons License

Republish our articles for free, online or in print, under a Creative Commons license.

William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.