BY JONAS CULLEMARK — On June 20, 2013, the United States Supreme Court decided American Express v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013). The plaintiffs Italian Colors Restaurant et. al. had brought a class action suit against the card issuer American Express (AmEx) for alleged antitrust violations.
The allegations were that AmEx imposed a so-called illegal tying agreement in order to accept their credit card products. A tying arrangement is “an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.” Tying agreements are illegal under the Sherman Act if “the seller has appreciable economic power in the tying product market and if the arrangement affects a substantial volume of commerce in the tied market.”
The parties’ agreement contained an arbitration clause with a class action waiver; consequently, the district court dismissed the case. The US Second Circuit Court of Appeals reversed, and held that the class action waiver was unenforceable. The reason was that the plaintiffs had demonstrated that to bring an antitrust suit individually would be so excessively expensive that the class action waiver would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs. In fact, each individual plaintiff would have to incur discovery costs amounting to hundreds of thousands of dollars, despite seeking average damages of only $5000.
However, the US Supreme Court reversed, and never reached the substance matter of the allegations, as it upheld the class action waiver. Justice Kagan delivered a forceful dissent:
“If the arbitration clause is enforceable, Amex has insulated itself from antitrust liability — even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse. And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”
The decision ruled in favor of big business, on the expense of small business. In the end, any higher costs resulting from a big business abusing its monopoly power are likely to pour over to the end user, i.e. the consumer. Too darn bad.