Corporate Court Lets Monopolists Bypass Antitrust Laws

Think you can rely on longstanding federal laws to protect your rights when they are violated by a giant corporation? Thanks to the Roberts Court, you should think again.

The five far-right Justices on the Roberts Court have once again made it easier for enormous corporations to violate laws designed to protect individuals and small businesses by using arbitration agreements. In an opinion authored by Justice Scalia and joined by Roberts, Kennedy, Thomas, and Alito, American Express v. Italian Colors Restaurant gives Big Business an instruction manual on how to use “arbitration agreements” to skirt federal laws specifically designed to give people particular rights and impose reasonable limits on powerful corporations.

Over the years, activists have fought to pass many such laws. In many cases, the laws allow victimized parties to go to court, often in class action lawsuits. You can also protect those federal rights through arbitration instead of a lawsuit, but (under a 1985 Supreme Court decision) only if arbitration still lets you vindicate your statutory rights. An arbitration agreement that makes you surrender your federally guaranteed rights is invalid. In other words, companies can't use arbitration to sabotage federal protections written into the law.

As Justice Kagan says in her dissent, that rule prevents a company from using its monopoly power to protect its monopoly power. But that rule went out the door today.

This case involved a restaurant in Oakland that claimed that American Express had illegally used its market power in charge cards to force the restaurant, as a condition of accepting the charge cards, to also accept Amex credit and debit cards with higher fees for the restaurant. They claim this violated the Sherman Act, a federal law passed to prevent large businesses from abusing their market power to restrain trade.

But it is prohibitively expensive for one lone restaurant to gather the expert evidence required to prove a complex antitrust claim and determine the extent of the damages. So Italian Colors joined with a large number of other similarly situated businesses in a class action lawsuit to addresses that problem.

But as a condition of doing business with the restaurant, Amex forced them to agree to resolve any differences through one-on-one arbitration – not a lawsuit, and not class action of any type – neither a class action lawsuit nor class arbitration. Amex also demanded that the restaurant sign away other rights that would have allowed it to reduce its costs (such as information sharing with other similarly situated merchants so they could share costs in preparing an expert economic analysis) or that would have required Amex to reimburse the merchant's costs if the arbitrator ruled in the merchant's favor.

That means the arbitration agreement prevents the restaurant from vindicating its federally protected rights. But that didn't bother the Roberts Court, which upheld the arbitration agreement.

Big companies may be subject to federal antitrust laws, but if their victims cannot vindicate their rights under the law, then those laws don't count for much.

Justice Kagan's dissent sums up the 5-3 majority opinion (from which Justice Sotomayor was recused):

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.

That answer is a betrayal of our precedents, and of federal statutes like the antitrust laws.

PFAW Foundation