(Slip Opinion)              OCTOBER TERM, 2017                                       1

                                       Syllabus

         NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
       being done in connection with this case, at the time the opinion is issued.
       The syllabus constitutes no part of the opinion of the Court but has been
       prepared by the Reporter of Decisions for the convenience of the reader.
       See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.


SUPREME COURT OF THE UNITED STATES

                                       Syllabus

      OHIO ET AL. v. AMERICAN EXPRESS CO. ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
                 THE SECOND CIRCUIT

   No. 16–1454. Argued February 26, 2018—Decided June 25, 2018
Respondent credit-card companies American Express Company and
  American Express Travel Related Services Company (collectively,
  Amex) operate what economists call a “two-sided platform,” providing
  services to two different groups (cardholders and merchants) who de-
  pend on the platform to intermediate between them. Because the in-
  teraction between the two groups is a transaction, credit-card net-
  works are a special type of two-sided platform known as a
  “transaction” platform. The key feature of transaction platforms is
  that they cannot make a sale to one side of the platform without sim-
  ultaneously making a sale to the other. Unlike traditional markets,
  two-sided platforms exhibit “indirect network effects,” which exist
  where the value of the platform to one group depends on how many
  members of another group participate. Two-sided platforms must
  take these effects into account before making a change in price on ei-
  ther side, or they risk creating a feedback loop of declining demand.
  Thus, striking the optimal balance of the prices charged on each side
  of the platform is essential for two-sided platforms to maximize the
  value of their services and to compete with their rivals.
     Visa and MasterCard—two of the major players in the credit-card
  market—have significant structural advantages over Amex. Amex
  competes with them by using a different business model, which fo-
  cuses on cardholder spending rather than cardholder lending. To en-
  courage cardholder spending, Amex provides better rewards than the
  other credit-card companies. Amex must continually invest in its
  cardholder rewards program to maintain its cardholders’ loyalty. But
  to fund those investments, it must charge merchants higher fees than
  its rivals. Although this business model has stimulated competitive
  innovations in the credit-card market, it sometimes causes friction
2                  OHIO v. AMERICAN EXPRESS CO.

                                 Syllabus

    with merchants. To avoid higher fees, merchants sometimes attempt
    to dissuade cardholders from using Amex cards at the point of sale—
    a practice known as “steering.” Amex places antisteering provisions
    in its contracts with merchants to combat this.
       In this case, the United States and several States (collectively,
    plaintiffs) sued Amex, claiming that its antisteering provisions vio-
    late §1 of the Sherman Antitrust Act. The District Court agreed,
    finding that the credit-card market should be treated as two separate
    markets—one for merchants and one for cardholders—and that
    Amex’s antisteering provisions are anticompetitive because they re-
    sult in higher merchant fees. The Second Circuit reversed. It deter-
    mined that the credit-card market is one market, not two. And it
    concluded that Amex’s antisteering provisions did not violate §1.
Held: Amex’s antisteering provisions do not violate federal antitrust
 law. Pp. 8–20.
    (a) Section 1 of the Sherman Act prohibits “unreasonable re-
 straints” of trade. State Oil Co. v. Khan, 522 U. S. 3, 10. Restraints
 may be unreasonable in one of two ways—unreasonable per se or un-
 reasonable as judged under the “rule of reason.” Business Electronics
 Corp. v. Sharp Electronics Corp., 485 U. S. 717, 723. The parties
 agree that Amex’s antisteering provisions should be judged under the
 rule of reason using a three-step burden-shifting framework. They
 ask this Court to decide whether the plaintiffs have satisfied the first
 step in that framework—i.e., whether they have proved that Amex’s
 antisteering provisions have a substantial anticompetitive effect that
 harms consumers in the relevant market. Pp. 8–10.
    (b) Applying the rule of reason generally requires an accurate defi-
 nition of the relevant market. In this case, both sides of the two-
 sided credit-card market—cardholders and merchants—must be con-
 sidered. Only a company with both cardholders and merchants will-
 ing to use its network could sell transactions and compete in the cred-
 it-card market. And because credit-card networks cannot make a
 sale unless both sides of the platform simultaneously agree to use
 their services, they exhibit more pronounced indirect network effects
 and interconnected pricing and demand. Indeed, credit-card net-
 works are best understood as supplying only one product—the trans-
 action—that is jointly consumed by a cardholder and a merchant.
 Accordingly, the two-sided market for credit-card transactions should
 be analyzed as a whole. Pp. 10–15.
    (c) The plaintiffs have not carried their burden to show anticompet-
 itive effects. Their argument—that Amex’s antisteering provisions
 increase merchant fees—wrongly focuses on just one side of the mar-
 ket. Evidence of a price increase on one side of a two-sided transac-
 tion platform cannot, by itself, demonstrate an anticompetitive exer-
                     Cite as: 585 U. S. ____ (2018)                      3

                                Syllabus

  cise of market power. Instead, plaintiffs must prove that Amex’s an-
  tisteering provisions increased the cost of credit-card transactions
  above a competitive level, reduced the number of credit-card transac-
  tions, or otherwise stifled competition in the two-sided credit-card
  market. They failed to do so. Pp. 15–20.
       (1) The plaintiffs offered no evidence that the price of credit-card
  transactions was higher than the price one would expect to find in a
  competitive market. Amex’s increased merchant fees reflect increas-
  es in the value of its services and the cost of its transactions, not an
  ability to charge above a competitive price. It uses higher merchant
  fees to offer its cardholders a more robust rewards program, which is
  necessary to maintain cardholder loyalty and encourage the level of
  spending that makes it valuable to merchants. In addition, the evi-
  dence that does exist cuts against the plaintiffs’ view that Amex’s an-
  tisteering provisions are the cause of any increases in merchant fees:
  Visa and MasterCard’s merchant fees have continued to increase,
  even at merchant locations where Amex is not accepted. Pp. 16–17.
       (2) The plaintiffs’ evidence that Amex’s merchant-fee increases
  between 2005 and 2010 were not entirely spent on cardholder re-
  wards does not prove that Amex’s antisteering provisions gave it the
  power to charge anticompetitive prices. This Court will “not infer
  competitive injury from price and output data absent some evidence
  that tends to prove that output was restricted or prices were above a
  competitive level.” Brooke Group Ltd. v. Brown & Williamson Tobac-
  co Corp., 509 U. S. 209, 237. There is no such evidence here. Output
  of credit-card transactions increased during the relevant period, and
  the plaintiffs did not show that Amex charged more than its competi-
  tors. P. 17.
       (3) The plaintiffs also failed to prove that Amex’s antisteering
  provisions have stifled competition among credit-card companies. To
  the contrary, while they have been in place, the market experienced
  expanding output and improved quality. Nor have Amex’s antisteer-
  ing provisions ended competition between credit-card networks with
  respect to merchant fees. Amex’s competitors have exploited its
  higher merchant fees to their advantage. Lastly, there is nothing in-
  herently anticompetitive about the provisions. They actually stem
  negative externalities in the credit-card market and promote inter-
  brand competition. And they do not prevent competing credit-card
  networks from offering lower merchant fees or promoting their
  broader merchant acceptance. Pp. 18–20.
838 F. 3d 179, affirmed.

  THOMAS, J., delivered the opinion of the Court, in which ROBERTS,
C. J., and KENNEDY, ALITO, and GORSUCH, JJ., joined. BREYER, J., filed a
4              OHIO v. AMERICAN EXPRESS CO.

                            Syllabus

dissenting opinion, in which GINSBURG, SOTOMAYOR, and KAGAN, JJ.,
joined.
                       Cite as: 585 U. S. ____ (2018)                              1

                            Opinion of the Court

    NOTICE: This opinion is subject to formal revision before publication in the
    preliminary print of the United States Reports. Readers are requested to
    notify the Reporter of Decisions, Supreme Court of the United States, Wash-
    ington, D. C. 20543, of any typographical or other formal errors, in order
    that corrections may be made before the preliminary print goes to press.


SUPREME COURT OF THE UNITED STATES
                                  _________________

                                  No. 16–1454
                                  _________________


 OHIO, ET AL., PETITIONERS v. AMERICAN EXPRESS
                  COMPANY, ET AL.
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
           APPEALS FOR THE SECOND CIRCUIT
                                [June 25, 2018]

  JUSTICE THOMAS delivered the opinion of the Court.
  American Express Company and American Express
Travel Related Services Company (collectively, Amex)
provide credit-card services to both merchants and card-
holders. When a cardholder buys something from a mer-
chant who accepts Amex credit cards, Amex processes the
transaction through its network, promptly pays the mer-
chant, and subtracts a fee. If a merchant wants to accept
Amex credit cards—and attract Amex cardholders to its
business—Amex requires the merchant to agree to an
antisteering contractual provision. The antisteering pro-
vision prohibits merchants from discouraging customers
from using their Amex card after they have already en-
tered the store and are about to buy something, thereby
avoiding Amex’s fee. In this case, we must decide whether
Amex’s antisteering provisions violate federal antitrust
law. We conclude they do not.
                          I
                          A
  Credit cards have become a primary way that consum-
ers in the United States purchase goods and services.
2             OHIO v. AMERICAN EXPRESS CO.

                     Opinion of the Court

When a cardholder uses a credit card to buy something
from a merchant, the transaction is facilitated by a credit-
card network. The network provides separate but inter-
related services to both cardholders and merchants. For
cardholders, the network extends them credit, which
allows them to make purchases without cash and to defer
payment until later. Cardholders also can receive rewards
based on the amount of money they spend, such as airline
miles, points for travel, or cash back. For merchants, the
network allows them to avoid the cost of processing trans-
actions and offers them quick, guaranteed payment. This
saves merchants the trouble and risk of extending credit
to customers, and it increases the number and value of
sales that they can make.
  By providing these services to cardholders and mer-
chants, credit-card companies bring these parties together,
and therefore operate what economists call a “two-sided
platform.” As the name implies, a two-sided platform
offers different products or services to two different groups
who both depend on the platform to intermediate between
them. See Evans & Schmalensee, Markets With Two-
Sided Platforms, 1 Issues in Competition L. & Pol’y 667
(2008) (Evans & Schmalensee); Evans & Noel, Defining
Antitrust Markets When Firms Operate Two-Sided Plat-
forms, 2005 Colum. Bus. L. Rev. 667, 668 (Evans & Noel);
Filistrucchi, Geradin, Van Damme, & Affeldt, Market
Definition in Two-Sided Markets: Theory and Practice, 10
J. Competition L. & Econ. 293, 296 (2014) (Filistrucchi).
For credit cards, that interaction is a transaction. Thus,
credit-card networks are a special type of two-sided plat-
form known as a “transaction” platform. See id., at 301,
304, 307; Evans & Noel 676–678. The key feature of
transaction platforms is that they cannot make a sale to
one side of the platform without simultaneously making a
sale to the other. See Klein, Lerner, Murphy, & Plache,
Competition in Two-Sided Markets: The Antitrust Eco-
                 Cite as: 585 U. S. ____ (2018)           3

                     Opinion of the Court

nomics of Payment Card Interchange Fees, 73 Antitrust
L. J. 571, 580, 583 (2006) (Klein). For example, no credit-
card transaction can occur unless both the merchant and
the cardholder simultaneously agree to use the same
credit-card network. See Filistrucchi 301.
   Two-sided platforms differ from traditional markets in
important ways. Most relevant here, two-sided platforms
often exhibit what economists call “indirect network ef-
fects.” Evans & Schmalensee 667. Indirect network ef-
fects exist where the value of the two-sided platform to one
group of participants depends on how many members of a
different group participate. D. Evans & R. Schmalensee,
Matchmakers: The New Economics of Multisided Plat-
forms 25 (2016). In other words, the value of the services
that a two-sided platform provides increases as the num-
ber of participants on both sides of the platform increases.
A credit card, for example, is more valuable to cardholders
when more merchants accept it, and is more valuable to
merchants when more cardholders use it. See Evans &
Noel 686–687; Klein 580, 584. To ensure sufficient partic-
ipation, two-sided platforms must be sensitive to the
prices that they charge each side. See Evans & Schma-
lensee 675; Evans & Noel 680; Muris, Payment Card
Regulation and the (Mis)Application of the Economics of
Two-Sided Markets, 2005 Colum. Bus. L. Rev. 515, 532–
533 (Muris); Rochet & Tirole, Platform Competition in
Two-Sided Markets, 1 J. Eur. Econ. Assn. 990, 1013
(2003). Raising the price on side A risks losing participa-
tion on that side, which decreases the value of the plat-
form to side B. If participants on side B leave due to this
loss in value, then the platform has even less value to side
A—risking a feedback loop of declining demand. See
Evans & Schmalensee 675; Evans & Noel 680–681. Two-
sided platforms therefore must take these indirect net-
work effects into account before making a change in price
on either side. See Evans & Schmalensee 675; Evans &
4                OHIO v. AMERICAN EXPRESS CO.

                         Opinion of the Court

Noel 680–681.1
   Sometimes indirect network effects require two-sided
platforms to charge one side much more than the other.
See Evans & Schmalensee 667, 675, 681, 690–691; Evans
& Noel 668, 691; Klein 585; Filistrucchi 300. For two-
sided platforms, “ ‘the [relative] price structure matters,
and platforms must design it so as to bring both sides on
board.’ ” Evans & Schmalensee 669 (quoting Rochet &
Tirole, Two-Sided Markets: A Progress Report, 37 RAND
J. Econ. 645, 646 (2006)). The optimal price might require
charging the side with more elastic demand a below-cost
(or even negative) price. See Muris 519, 550; Klein 579;
Evans & Schmalensee 675; Evans & Noel 681. With credit
cards, for example, networks often charge cardholders a
lower fee than merchants because cardholders are more
price sensitive.2 See Muris 522; Klein 573–574, 585, 595.
In fact, the network might well lose money on the card-
holder side by offering rewards such as cash back, airline
miles, or gift cards. See Klein 587; Evans & Schmalensee
672. The network can do this because increasing the
number of cardholders increases the value of accepting the
card to merchants and, thus, increases the number of

——————
    1 Ina competitive market, indirect network effects also encourage
companies to take increased profits from a price increase on side A and
spend them on side B to ensure more robust participation on that side
and to stem the impact of indirect network effects. See Evans &
Schmalensee 688; Evans & Noel 670–671, 695. Indirect network effects
thus limit the platform’s ability to raise overall prices and impose a
check on its market power. See Evans & Schmalensee 688; Evans &
Noel 695.
  2 “Cardholders are more price-sensitive because many consumers

have multiple payment methods, including alternative payment cards.
Most merchants, by contrast, cannot accept just one major card because
they are likely to lose profitable incremental sales if they do not take
[all] the major payment cards. Because most consumers do not carry
all of the major payment cards, refusing to accept a major card may
cost the merchant substantial sales.” Muris 522.
                    Cite as: 585 U. S. ____ (2018)                  5

                        Opinion of the Court

merchants who accept it. Muris 522; Evans & Schma-
lensee 692. Networks can then charge those merchants a
fee for every transaction (typically a percentage of the
purchase price). Striking the optimal balance of the prices
charged on each side of the platform is essential for two-
sided platforms to maximize the value of their services
and to compete with their rivals.
                             B
   Amex, Visa, MasterCard, and Discover are the four
dominant participants in the credit-card market. Visa,
which is by far the largest, has 45% of the market as
measured by transaction volume.3 Amex and MasterCard
trail with 26.4% and 23.3%, respectively, while Discover
has just 5.3% of the market.
   Visa and MasterCard have significant structural ad-
vantages over Amex. Visa and MasterCard began as bank
cooperatives and thus almost every bank that offers credit
cards is in the Visa or MasterCard network. This makes it
very likely that the average consumer carries, and the
average merchant accepts, Visa or MasterCard. As a
result, the vast majority of Amex cardholders have a Visa
or MasterCard, but only a small number of Visa and Master-
Card cardholders have an Amex. Indeed, Visa and
MasterCard account for more than 432 million cards in
circulation in the United States, while Amex has only 53
million. And while 3.4 million merchants at 6.4 million
locations accept Amex, nearly three million more locations
accept Visa, MasterCard, and Discover.4
——————
  3 Allfigures are accurate as of 2013.
  4 Discover entered the credit-card market several years after Amex,
Visa, and MasterCard. It nonetheless managed to gain a foothold
because Sears marketed Discover to its already significant base of
private-label cardholders. Discover’s business model shares certain
features with Amex, Visa, and MasterCard. Like Amex, Discover
interacts directly with its cardholders. But like Visa and MasterCard,
6               OHIO v. AMERICAN EXPRESS CO.

                        Opinion of the Court

   Amex competes with Visa and MasterCard by using a
different business model. While Visa and MasterCard
earn half of their revenue by collecting interest from their
cardholders, Amex does not. Amex instead earns most of
its revenue from merchant fees. Amex’s business model
thus focuses on cardholder spending rather than card-
holder lending. To encourage cardholder spending, Amex
provides better rewards than other networks. Due to its
superior rewards, Amex tends to attract cardholders who
are wealthier and spend more money. Merchants place a
higher value on these cardholders, and Amex uses this
advantage to recruit merchants.
   Amex’s business model has significantly influenced the
credit-card market. To compete for the valuable cardhold-
ers that Amex attracts, both Visa and MasterCard have
introduced premium cards that, like Amex, charge mer-
chants higher fees and offer cardholders better rewards.
To maintain their lower merchant fees, Visa and Master-
Card have created a sliding scale for their various cards—
charging merchants less for low-reward cards and more
for high-reward cards. This differs from Amex’s strategy,
which is to charge merchants the same fee no matter the
rewards that its card offers. Another way that Amex has
influenced the credit-card market is by making banking
and card-payment services available to low-income indi-
viduals, who otherwise could not qualify for a credit card
and could not afford the fees that traditional banks
charge. See 2 Record 3835–3837, 4527–4529. In sum,
Amex’s business model has stimulated competitive inno-
vations in the credit-card market, increasing the volume of
transactions and improving the quality of the services.
   Despite these improvements, Amex’s business model
sometimes causes friction with merchants. To maintain
—————— 

Discover uses banks that cooperate with its network to interact with 

merchants. 

                    Cite as: 585 U. S. ____ (2018)                   7

                         Opinion of the Court

the loyalty of its cardholders, Amex must continually
invest in its rewards program. But, to fund those invest-
ments, Amex must charge merchants higher fees than its
rivals. Even though Amex’s investments benefit mer-
chants by encouraging cardholders to spend more money,
merchants would prefer not to pay the higher fees. One
way that merchants try to avoid them, while still enticing
Amex’s cardholders to shop at their stores, is by dissuad-
ing cardholders from using Amex at the point of sale. This
practice is known as “steering.”
  Amex has prohibited steering since the 1950s by placing
antisteering provisions in its contracts with merchants.
These antisteering provisions prohibit merchants from
implying a preference for non-Amex cards; dissuading
customers from using Amex cards; persuading customers
to use other cards; imposing any special restrictions,
conditions, disadvantages, or fees on Amex cards; or pro-
moting other cards more than Amex. The antisteering
provisions do not, however, prevent merchants from steer-
ing customers toward debit cards, checks, or cash.
                               C
   In October 2010, the United States and several States
(collectively, plaintiffs) sued Amex, claiming that its an-
tisteering provisions violate §1 of the Sherman Act, 26
Stat. 209, as amended, 15 U. S. C. §1.5 After a 7-week
trial, the District Court agreed that Amex’s antisteering
provisions violate §1. United States v. American Express
Co., 88 F. Supp. 3d 143, 151–152 (EDNY 2015). It found
that the credit-card market should be treated as two
separate markets—one for merchants and one for card-
holders. See id., at 171–175. Evaluating the effects on the
——————
  5 Plaintiffs
             also sued Visa and MasterCard, claiming that their anti-
steering provisions violated §1. But Visa and MasterCard voluntarily
revoked their antisteering provisions and are no longer parties to this
case.
8             OHIO v. AMERICAN EXPRESS CO.

                     Opinion of the Court

merchant side of the market, the District Court found
that Amex’s antisteering provisions are anticompetitive
because they result in higher merchant fees. See id., at
195–224.
  The Court of Appeals for the Second Circuit reversed.
United States v. American Express Co., 838 F. 3d 179, 184
(2016). It concluded that the credit-card market is one
market, not two. Id., at 196–200. Evaluating the credit-
card market as a whole, the Second Circuit concluded that
Amex’s antisteering provisions were not anticompetitive
and did not violate §1. See id., at 200–206.
  We granted certiorari, 583 U. S. ___ (2017), and now
affirm.
                               II
   Section 1 of the Sherman Act prohibits “[e]very contract,
combination in the form of trust or otherwise, or conspir-
acy, in restraint of trade or commerce among the several
States.” 15 U. S. C. §1. This Court has long recognized
that, “[i]n view of the common law and the law in this
country” when the Sherman Act was passed, the phrase
“restraint of trade” is best read to mean “undue restraint.”
Standard Oil Co. of N. J. v. United States, 221 U. S. 1, 59–
60 (1911). This Court’s precedents have thus understood
§1 “to outlaw only unreasonable restraints.” State Oil Co.
v. Khan, 522 U. S. 3, 10 (1997) (emphasis added).
   Restraints can be unreasonable in one of two ways. A
small group of restraints are unreasonable per se because
they “ ‘ “always or almost always tend to restrict competi-
tion and decrease output.” ’ ” Business Electronics Corp. v.
Sharp Electronics Corp., 485 U. S. 717, 723 (1988). Typi-
cally only “horizontal” restraints—restraints “imposed by
agreement between competitors”—qualify as unreasonable
per se. Id., at 730. Restraints that are not unreasonable
per se are judged under the “rule of reason.” Id., at 723.
The rule of reason requires courts to conduct a fact-specific
                 Cite as: 585 U. S. ____ (2018)           9

                     Opinion of the Court

assessment of “market power and market structure . . . to
assess the [restraint]’s actual effect” on competition.
Copperweld Corp. v. Independence Tube Corp., 467 U. S.
752, 768 (1984). The goal is to “distinguis[h] between
restraints with anticompetitive effect that are harmful to
the consumer and restraints stimulating competition that
are in the consumer’s best interest.” Leegin Creative
Leather Products, Inc. v. PSKS, Inc., 551 U. S. 877, 886
(2007).
   In this case, both sides correctly acknowledge that
Amex’s antisteering provisions are vertical restraints—
i.e., restraints “imposed by agreement between firms at
different levels of distribution.” Business Electronics,
supra, at 730. The parties also correctly acknowledge
that, like nearly every other vertical restraint, the anti-
steering provisions should be assessed under the rule of
reason. See Leegin, supra, at 882; State Oil, supra, at 19;
Business Electronics, supra, at 726; Continental T. V., Inc.
v. GTE Sylvania Inc., 433 U. S. 36, 57 (1977).
   To determine whether a restraint violates the rule of
reason, the parties agree that a three-step, burden-
shifting framework applies. Under this framework, the
plaintiff has the initial burden to prove that the chal-
lenged restraint has a substantial anticompetitive effect
that harms consumers in the relevant market. See 1 J.
Kalinowski, Antitrust Laws and Trade Regulation
§12.02[1] (2d ed. 2017) (Kalinowski); P. Areeda & H.
Hovenkamp, Fundamentals of Antitrust Law §15.02[B]
(4th ed. 2017) (Areeda & Hovenkamp); Capital Imaging
Assoc., P. C. v. Mohawk Valley Medical Associates, Inc.,
996 F. 2d 537, 543 (CA2 1993). If the plaintiff carries its
burden, then the burden shifts to the defendant to show a
procompetitive rationale for the restraint. See 1 Kalinow-
ski §12.02[1]; Areeda & Hovenkamp §15.02[B]; Capital
Imaging Assoc., supra, at 543. If the defendant makes
this showing, then the burden shifts back to the plaintiff
10               OHIO v. AMERICAN EXPRESS CO.

                         Opinion of the Court

to demonstrate that the procompetitive efficiencies could
be reasonably achieved through less anticompetitive
means. See 1 Kalinowski §12.02[1]; Capital Imaging
Assoc., supra, at 543.
   Here, the parties ask us to decide whether the plaintiffs
have carried their initial burden of proving that Amex’s
antisteering provisions have an anticompetitive effect.
The plaintiffs can make this showing directly or indirectly.
Direct evidence of anticompetitive effects would be “ ‘proof
of actual detrimental effects [on competition],’ ” FTC v.
Indiana Federation of Dentists, 476 U. S. 447, 460 (1986),
such as reduced output, increased prices, or decreased
quality in the relevant market, see 1 Kalinowski §12.02[2];
Craftsman Limousine, Inc. v. Ford Motor Co., 491 F. 3d
381, 390 (CA8 2007); Virginia Atlantic Airways Ltd. v.
British Airways PLC, 257 F. 3d 256, 264 (CA2 2001).
Indirect evidence would be proof of market power plus
some evidence that the challenged restraint harms compe-
tition. See 1 Kalinowski §12.02[2]; Tops Markets, Inc. v.
Quality Markets, Inc., 142 F. 3d 90, 97 (CA2 1998); Span-
ish Broadcasting System of Fla. v. Clear Channel Commu-
nications, Inc., 376 F. 3d 1065, 1073 (CA11 2004).
   Here, the plaintiffs rely exclusively on direct evidence to
prove that Amex’s antisteering provisions have caused
anticompetitive effects in the credit-card market.6 To
assess this evidence, we must first define the relevant
market. Once defined, it becomes clear that the plaintiffs’
evidence is insufficient to carry their burden.
                             A
  Because “[l]egal presumptions that rest on formalistic
distinctions rather than actual market realities are gener-
ally disfavored in antitrust law,” Eastman Kodak Co. v.
——————
  6 Although the plaintiffs relied on indirect evidence below, they have

abandoned that argument in this Court. See Brief for United States 23,
n. 4 (citing Pet. for Cert. i, 18–25).
                     Cite as: 585 U. S. ____ (2018)                    11

                          Opinion of the Court

Image Technical Services, Inc., 504 U. S. 451, 466–467
(1992), courts usually cannot properly apply the rule of
reason without an accurate definition of the relevant
market.7 “Without a definition of [the] market there is no
way to measure [the defendant’s] ability to lessen or de-
stroy competition.” Walker Process Equipment, Inc. v.
Food Machinery & Chemical Corp., 382 U. S. 172, 177
(1965); accord, 2 Kalinowski §24.01[4][a]. Thus, the rele-
vant market is defined as “the area of effective competi-
tion.” Ibid. Typically this is the “arena within which
significant substitution in consumption or production
occurs.” Areeda & Hovenkamp §5.02; accord, 2 Kalinow-
ski §24.02[1]; United States v. Grinnell Corp., 384 U. S.
——————
   7 The plaintiffs argue that we need not define the relevant market in

this case because they have offered actual evidence of adverse effects on
competition—namely, increased merchant fees. See Brief for United
States 40–41 (citing FTC v. Indiana Federation of Dentists, 476 U. S.
447 (1986), and Catalano, Inc. v. Target Sales, Inc., 446 U. S. 643
(1980) (per curiam)). We disagree. The cases that the plaintiffs cite for
this proposition evaluated whether horizontal restraints had an ad-
verse effect on competition. See Indiana Federation of Dentists, supra,
at 450–451, 459 (agreement between competing dentists not to share X
rays with insurance companies); Catalano, supra, at 644–645, 650
(agreement among competing wholesalers not to compete on extending
credit to retailers). Given that horizontal restraints involve agree-
ments between competitors not to compete in some way, this Court
concluded that it did not need to precisely define the relevant market to
conclude that these agreements were anticompetitive. See Indiana
Federation of Dentists, supra, at 460–461; Catalano, supra, at 648–649.
But vertical restraints are different. See Arizona v. Maricopa County
Medical Soc., 457 U. S. 332, 348, n. 18 (1982); Leegin Creative Leather
Products, Inc. v. PSKS, Inc., 551 U. S. 877, 888 (2007). Vertical re-
straints often pose no risk to competition unless the entity imposing
them has market power, which cannot be evaluated unless the Court
first defines the relevant market. See id., at 898 (noting that a vertical
restraint “may not be a serious concern unless the relevant entity has
market power”); Easterbrook, Vertical Arrangements and the Rule of
Reason, 53 Antitrust L. J. 135, 160 (1984) (“[T]he possibly anticompeti-
tive manifestations of vertical arrangements can occur only if there is
market power”).
12             OHIO v. AMERICAN EXPRESS CO.

                      Opinion of the Court

563, 571 (1966). But courts should “combin[e]” different
products or services into “a single market” when “that
combination reflects commercial realities.” Id., at 572; see
also Brown Shoe Co. v. United States, 370 U. S. 294, 336–
337 (1962) (pointing out that “the definition of the relevant
market” must “ ‘correspond to the commercial realities’ of
the industry”).
   As explained, credit-card networks are two-sided plat-
forms. Due to indirect network effects, two-sided plat-
forms cannot raise prices on one side without risking a
feedback loop of declining demand. See Evans & Schma-
lensee 674–675; Evans & Noel 680–681. And the fact that
two-sided platforms charge one side a price that is below
or above cost reflects differences in the two sides’ demand
elasticity, not market power or anticompetitive pricing.
See Klein 574, 595, 598, 626. Price increases on one side
of the platform likewise do not suggest anticompetitive
effects without some evidence that they have increased the
overall cost of the platform’s services. See id., at 575, 594,
626. Thus, courts must include both sides of the plat-
form—merchants and cardholders—when defining the
credit-card market.
   To be sure, it is not always necessary to consider both
sides of a two-sided platform. A market should be treated
as one sided when the impacts of indirect network effects
and relative pricing in that market are minor. See Fil-
istrucchi 321–322. Newspapers that sell advertisements,
for example, arguably operate a two-sided platform be-
cause the value of an advertisement increases as more
people read the newspaper. Id., at 297, 315; Klein 579.
But in the newspaper-advertisement market, the indirect
networks effects operate in only one direction; newspaper
readers are largely indifferent to the amount of advertis-
ing that a newspaper contains. See Filistrucchi 321, 323,
and n. 99; Klein 583. Because of these weak indirect
network effects, the market for newspaper advertising
                    Cite as: 585 U. S. ____ (2018)                 13

                        Opinion of the Court

behaves much like a one-sided market and should be
analyzed as such. See Filistrucchi 321; Times-Picayune
Publishing Co. v. United States, 345 U. S. 594, 610 (1953).
   But two-sided transaction platforms, like the credit-card
market, are different. These platforms facilitate a single,
simultaneous transaction between participants. For credit
cards, the network can sell its services only if a mer-
chant and cardholder both simultaneously choose to use
the network. Thus, whenever a credit-card network sells
one transaction’s worth of card-acceptance services to a
merchant it also must sell one transaction’s worth of card-
payment services to a cardholder. It cannot sell transac-
tion services to either cardholders or merchants individu-
ally. See Klein 583 (“Because cardholders and merchants
jointly consume a single product, payment card transac-
tions, their consumption of payment card transactions
must be directly proportional”). To optimize sales, the
network must find the balance of pricing that encourages
the greatest number of matches between cardholders and
merchants.
   Because they cannot make a sale unless both sides of
the platform simultaneously agree to use their services,
two-sided transaction platforms exhibit more pronounced
indirect network effects and interconnected pricing and
demand. Transaction platforms are thus better under-
stood as “suppl[ying] only one product”—transactions.
Klein 580. In the credit-card market, these transactions
“are jointly consumed by a cardholder, who uses the pay-
ment card to make a transaction, and a merchant, who
accepts the payment card as a method of payment.” Ibid.
Tellingly, credit cards determine their market share by
measuring the volume of transactions they have sold.8
——————
  8 Contrary to the dissent’s assertion, post, at 11–12, merchant ser-

vices and cardholder services are not complements. See Filistrucchi
297 (“[A] two-sided market [is] different from markets for complemen-
14               OHIO v. AMERICAN EXPRESS CO.

                         Opinion of the Court

    Evaluating both sides of a two-sided transaction plat-
form is also necessary to accurately assess competition.
Only other two-sided platforms can compete with a two-
sided platform for transactions. See Filistrucchi 301. A
credit-card company that processed transactions for mer-
chants, but that had no cardholders willing to use its card,
could not compete with Amex. See ibid. Only a company
that had both cardholders and merchants willing to use its
network could sell transactions and compete in the credit-
card market. Similarly, if a merchant accepts the four
major credit cards, but a cardholder only uses Visa or
Amex, only those two cards can compete for the particular
transaction.     Thus, competition cannot be accurately
assessed by looking at only one side of the platform in
isolation.9
    For all these reasons, “[i]n two-sided transaction mar-
kets, only one market should be defined.” Id., at 302; see
also Evans & Noel 671 (“[F]ocusing on one dimension of
. . . competition tends to distort the competition that actu-
ally exists among [two-sided platforms]”). Any other
analysis would lead to “ ‘ “mistaken inferences” ’ ” of the
kind that could “ ‘ “chill the very conduct the antitrust laws
are designed to protect.” ’ ” Brooke Group Ltd. v. Brown &
Williamson Tobacco Corp., 509 U. S. 209, 226 (1993); see
also Matsushita Elec. Industrial Co. v. Zenith Radio Corp.,
——————
tary products, in which both products are bought by the same buyers,
who, in their buying decisions, can therefore be expected to take into
account both prices”). As already explained, credit-card companies are
best understood as supplying only one product—transactions—which is
jointly consumed by a cardholder and a merchant. See Klein 580.
Merchant services and cardholder services are both inputs to this single
product. See ibid.
   9 Nontransaction platforms, by contrast, often do compete with com-

panies that do not operate on both sides of their platform. A newspaper
that sells advertising, for example, might have to compete with a
television network, even though the two do not meaningfully compete
for viewers. See Filistrucchi 301.
                 Cite as: 585 U. S. ____ (2018)           15

                     Opinion of the Court

475 U. S. 574, 594 (1986) (“ ‘[W]e must be concerned lest a
rule or precedent that authorizes a search for a particular
type of undesirable pricing behavior end up by discourag-
ing legitimate price competition’ ”); Leegin, 551 U. S., at
895 (noting that courts should avoid “increas[ing] the total
cost of the antitrust system by prohibiting procompetitive
conduct the antitrust laws should encourage”). Accordingly,
we will analyze the two-sided market for credit-card
transactions as a whole to determine whether the plain-
tiffs have shown that Amex’s antisteering provisions have
anticompetitive effects.
                                B
   The plaintiffs have not carried their burden to prove
anticompetitive effects in the relevant market. The plain-
tiffs stake their entire case on proving that Amex’s agree-
ments increase merchant fees. We find this argument
unpersuasive.
   As an initial matter, the plaintiffs’ argument about
merchant fees wrongly focuses on only one side of the two-
sided credit-card market. As explained, the credit-card
market must be defined to include both merchants and
cardholders. Focusing on merchant fees alone misses the
mark because the product that credit-card companies sell
is transactions, not services to merchants, and the compet-
itive effects of a restraint on transactions cannot be judged
by looking at merchants alone. Evidence of a price in-
crease on one side of a two-sided transaction platform
cannot by itself demonstrate an anticompetitive exercise of
market power. To demonstrate anticompetitive effects on
the two-sided credit-card market as a whole, the plaintiffs
must prove that Amex’s antisteering provisions increased
the cost of credit-card transactions above a competitive
level, reduced the number of credit-card transactions, or
otherwise stifled competition in the credit-card market.
See 1 Kalinowski §12.02[2]; Craftsman Limousine, Inc.,
16             OHIO v. AMERICAN EXPRESS CO.

                      Opinion of the Court

491 F. 3d, at 390; Virginia Atlantic Airways Ltd., 257
F. 3d, at 264. They failed to do so.
                              1
  The plaintiffs did not offer any evidence that the price of
credit-card transactions was higher than the price one
would expect to find in a competitive market. As the
District Court found, the plaintiffs failed to offer any
reliable measure of Amex’s transaction price or profit
margins. 88 F. Supp. 3d, at 198, 215. And the evidence
about whether Amex charges more than its competitors
was ultimately inconclusive. Id., at 199, 202, 215.
  Amex’s increased merchant fees reflect increases in the
value of its services and the cost of its transactions, not an
ability to charge above a competitive price. Amex began
raising its merchant fees in 2005 after Visa and Master-
Card raised their fees in the early 2000s. Id., at 195, 199–
200. As explained, Amex has historically charged higher
merchant fees than these competitors because it delivers
wealthier cardholders who spend more money. Id., at
200–201. Amex’s higher merchant fees are based on a
careful study of how much additional value its cardholders
offer merchants. See id., at 192–193. On the other side of
the market, Amex uses its higher merchant fees to offer its
cardholders a more robust rewards program, which is
necessary to maintain cardholder loyalty and encourage
the level of spending that makes Amex valuable to mer-
chants. Id., at 160, 191–195. That Amex allocates prices
between merchants and cardholders differently from Visa
and MasterCard is simply not evidence that it wields
market power to achieve anticompetitive ends. See Evans
& Noel 670–671; Klein 574–575, 594–595, 598, 626.
  In addition, the evidence that does exist cuts against the
plaintiffs’ view that Amex’s antisteering provisions are the
cause of any increases in merchant fees. Visa and Master-
Card’s merchant fees have continued to increase, even
                 Cite as: 585 U. S. ____ (2018)           17

                     Opinion of the Court

at merchant locations where Amex is not accepted and,
thus, Amex’s antisteering provisions do not apply. See 88
F. Supp. 3d, at 222. This suggests that the cause of in-
creased merchant fees is not Amex’s antisteering provi-
sions, but rather increased competition for cardholders
and a corresponding marketwide adjustment in the rela-
tive price charged to merchants. See Klein 575, 609.
                              2
   The plaintiffs did offer evidence that Amex increased
the percentage of the purchase price that it charges mer-
chants by an average of 0.09% between 2005 and 2010 and
that this increase was not entirely spent on cardholder
rewards. See 88 F. Supp. 3d, at 195–197, 215. The plain-
tiffs believe that this evidence shows that the price of
Amex’s transactions increased.
   Even assuming the plaintiffs are correct, this evidence
does not prove that Amex’s antisteering provisions gave it
the power to charge anticompetitive prices. “Market
power is the ability to raise price profitably by restricting
output.” Areeda & Hovenkamp §5.01 (emphasis added);
accord, Kodak, 504 U. S., at 464; Business Electronics, 485
U. S., at 723. This Court will “not infer competitive injury
from price and output data absent some evidence that
tends to prove that output was restricted or prices were
above a competitive level.” Brooke Group Ltd., 509 U. S.,
at 237. There is no such evidence in this case. The output
of credit-card transactions grew dramatically from 2008 to
2013, increasing 30%. See 838 F. 3d, at 206. “Where . . .
output is expanding at the same time prices are increas-
ing, rising prices are equally consistent with growing
product demand.” Brooke Group Ltd., supra, at 237. And,
as previously explained, the plaintiffs did not show that
Amex charged more than its competitors.
18            OHIO v. AMERICAN EXPRESS CO.

                     Opinion of the Court

                               3
   The plaintiffs also failed to prove that Amex’s antisteer-
ing provisions have stifled competition among credit-card
companies. To the contrary, while these agreements have
been in place, the credit-card market experienced expand-
ing output and improved quality. Amex’s business model
spurred Visa and MasterCard to offer new premium card
categories with higher rewards. And it has increased the
availability of card services, including free banking and
card-payment services for low-income customers who
otherwise would not be served. Indeed, between 1970 and
2001, the percentage of households with credit cards more
than quadrupled, and the proportion of households in the
bottom-income quintile with credit cards grew from just
2% to over 38%. See D. Evans & R. Schmalensee, Paying
With Plastic: The Digital Revolution in Buying and Bor-
rowing 88–89 (2d ed. 2005) (Paying With Plastic).
   Nor have Amex’s antisteering provisions ended competi-
tion between credit-card networks with respect to mer-
chant fees. Instead, fierce competition between networks
has constrained Amex’s ability to raise these fees and has,
at times, forced Amex to lower them. For instance, when
Amex raised its merchant prices between 2005 and 2010,
some merchants chose to leave its network. 88 F. Supp.
3d, at 197. And when its remaining merchants com-
plained, Amex stopped raising its merchant prices. Id., at
198. In another instance in the late 1980s and early
1990s, competition forced Amex to offer lower merchant
fees to “everyday spend” merchants—supermarkets, gas
stations, pharmacies, and the like—to persuade them to
accept Amex. See id., at 160–161, 202.
   In addition, Amex’s competitors have exploited its
higher merchant fees to their advantage. By charging
lower merchant fees, Visa, MasterCard, and Discover have
achieved broader merchant acceptance—approximately 3
million more locations than Amex. Id., at 204. This
                 Cite as: 585 U. S. ____ (2018)          19

                     Opinion of the Court

broader merchant acceptance is a major advantage for
these networks and a significant challenge for Amex, since
consumers prefer cards that will be accepted everywhere.
Ibid. And to compete even further with Amex, Visa and
MasterCard charge different merchant fees for different
types of cards to maintain their comparatively lower mer-
chant fees and broader acceptance. Over the long run,
this competition has created a trend of declining merchant
fees in the credit-card market. In fact, since the first
credit card was introduced in the 1950s, merchant fees—
including Amex’s merchant fees—have decreased by more
than half. See id., at 202–203; Paying With Plastic 54,
126, 152.
   Lastly, there is nothing inherently anticompetitive
about Amex’s antisteering provisions. These agreements
actually stem negative externalities in the credit-card
market and promote interbrand competition. When mer-
chants steer cardholders away from Amex at the point of
sale, it undermines the cardholder’s expectation of “wel-
come acceptance”—the promise of a frictionless transac-
tion. 88 F. Supp. 3d, at 156. A lack of welcome acceptance
at one merchant makes a cardholder less likely to use
Amex at all other merchants. This externality endangers
the viability of the entire Amex network. And it under-
mines the investments that Amex has made to encourage
increased cardholder spending, which discourages invest-
ments in rewards and ultimately harms both cardholders
and merchants. Cf. Leegin, 551 U. S., at 890–891 (recog-
nizing that vertical restraints can prevent retailers from
free riding and thus increase the availability of “tangible
or intangible services or promotional efforts” that enhance
competition and consumer welfare). Perhaps most im-
portantly, antisteering provisions do not prevent Visa,
MasterCard, or Discover from competing against Amex by
offering lower merchant fees or promoting their broader
20               OHIO v. AMERICAN EXPRESS CO.

                         Opinion of the Court

merchant acceptance.10
   In sum, the plaintiffs have not satisfied the first step of
the rule of reason. They have not carried their burden of
proving that Amex’s antisteering provisions have anti-
competitive effects. Amex’s business model has spurred
robust interbrand competition and has increased the
quality and quantity of credit-card transactions. And it is
“[t]he promotion of interbrand competition,” after all,
that “is . . . ‘the primary purpose of the antitrust laws.’” Id.,
at 890.
                      *   *     *
  Because Amex’s antisteering provisions do not unrea-
sonably restrain trade, we affirm the judgment of the
Court of Appeals.
                                        It is so ordered.




——————
   10 The plaintiffs argue that United States v. Topco Associates, Inc.,

405 U. S. 596, 610 (1972), forbids any restraint that would restrict
competition in part of the market—here, for example, merchant steer-
ing. See Brief for Petitioners and Respondents Nebraska, Tennessee,
and Texas 30, 42. Topco does not stand for such a broad proposition.
Topco concluded that a horizontal agreement between competitors was
unreasonable per se, even though the agreement did not extend to every
competitor in the market. See 405 U. S., at 599, 608. A horizontal
agreement between competitors is markedly different from a vertical
agreement that incidentally affects one particular method of competi-
tion. See Leegin, 551 U. S., at 888; Maricopa County Medical Soc., 457
U. S., at 348, n. 18.
                 Cite as: 585 U. S. ____ (2018)          1

                    BREYER, J., dissenting

SUPREME COURT OF THE UNITED STATES
                         _________________

                         No. 16–1454
                         _________________


 OHIO, ET AL., PETITIONERS v. AMERICAN EXPRESS
                  COMPANY, ET AL.
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
           APPEALS FOR THE SECOND CIRCUIT
                        [June 25, 2018]

   JUSTICE BREYER, with whom JUSTICE GINSBURG,
JUSTICE SOTOMAYOR, and JUSTICE KAGAN join, dissenting.
   For more than 120 years, the American economy has
prospered by charting a middle path between pure lassez-
faire and state capitalism, governed by an antitrust law
“dedicated to the principle that markets, not individual
firms and certainly not political power, produce the opti­
mal mixture of goods and services.” 1 P. Areeda & H.
Hovenkamp, Antitrust Law ¶100b, p. 4 (4th ed. 2013)
(Areeda & Hovenkamp). By means of a strong antitrust
law, the United States has sought to avoid the danger of
monopoly capitalism. Long gone, we hope, are the days
when the great trusts presided unfettered by competition
over the American economy.
   This lawsuit is emblematic of the American approach.
Many governments around the world have responded to
concerns about the high fees that credit-card companies
often charge merchants by regulating such fees directly.
See GAO, Credit and Debit Cards: Federal Entities Are
Taking Actions to Limit Their Interchange Fees, but
Additional Revenue Collection Cost Savings May Exist
31–35 (GAO–08–558, 2008). The United States has not
followed that approach. The Government instead filed
this lawsuit, which seeks to restore market competition
over credit-card merchant fees by eliminating a contract­
2             OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

ual barrier with anticompetitive effects. The majority
rejects that effort. But because the challenged contractual
term clearly has serious anticompetitive effects, I dissent.
                              I
   I agree with the majority and the parties that this case
is properly evaluated under the three-step “rule of reason”
that governs many antitrust lawsuits. Ante, at 9–10.
Under that approach, a court looks first at the agreement
or restraint at issue to assess whether it has had, or is
likely to have, anticompetitive effects. FTC v. Indiana
Federation of Dentists, 476 U. S. 447, 459 (1986). In doing
so, the court normally asks whether the restraint may
tend to impede competition and, if so, whether those who
have entered into that restraint have sufficient economic
or commercial power for the agreement to make a negative
difference. See id., at 459–461. Sometimes, but not al­
ways, a court will try to determine the appropriate market
(the market that the agreement affects) and determine
whether those entering into that agreement have the
power to raise prices above the competitive level in that
market. See ibid.
   It is important here to understand that in cases under
§1 of the Sherman Act (unlike in cases challenging a mer­
ger under §7 of the Clayton Act, 15 U. S. C. §18), it may
well be unnecessary to undertake a sometimes complex,
market power inquiry:
    “Since the purpose [in a Sherman Act §1 case] of the
    inquiries into . . . market power is [simply] to deter­
    mine whether an arrangement has the potential for
    genuine adverse effects on competition, ‘proof of actual
    detrimental effects, such as a reduction in output,’ can
    obviate the need for an inquiry into market power,
    which is but a ‘surrogate for detrimental effects.’ ”
    Indiana Federation of Dentists, supra, at 460–461
    (quoting 7 P. Areeda, Antitrust Law ¶1511, p. 429 (3d
                  Cite as: 585 U. S. ____ (2018)          3

                     BREYER, J., dissenting

    ed. 1986)).
   Second (as treatise writers summarize the case law), if
an antitrust plaintiff meets the initial burden of showing
that an agreement will likely have anticompetitive effects,
normally the “burden shifts to the defendant to show that
the restraint in fact serves a legitimate objective.” 7
Areeda & Hovenkamp ¶1504b, at 415; see California
Dental Assn. v. FTC, 526 U. S. 756, 771 (1999); id., at 788
(BREYER, J., dissenting).
   Third, if the defendant successfully bears this burden,
the antitrust plaintiff may still carry the day by showing
that it is possible to meet the legitimate objective in less
restrictive ways, or, perhaps by showing that the legiti­
mate objective does not outweigh the harm that competi­
tion will suffer, i.e., that the agreement “on balance” re­
mains unreasonable. 7 Areeda & Hovenkamp ¶1507a,
at 442.
   Like the Court of Appeals and the parties, the majority
addresses only the first step of that three-step framework.
Ante, at 10.
                             II

                             A

  This case concerns the credit-card business. As the
majority explains, ante, at 2, that business involves the
selling of two different but related card services. First,
when a shopper uses a credit card to buy something from a
participating merchant, the credit-card company pays the
merchant the amount of money that the merchant’s cus­
tomer has charged to his card and charges the merchant a
fee, say 5%, for that speedy-payment service. I shall refer
to that kind of transaction as a merchant-related card
service. Second, the credit-card company then sends a bill
to the merchant’s customer, the shopper who holds the
card; and the shopper pays the card company the sum that
merchant charged the shopper for the goods or services he
4             OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

or she bought. The cardholder also often pays the card
company a fee, such as an annual fee for the card or an
interest charge for delayed payment. I shall call that kind
of transaction a shopper-related card service. The credit-
card company can earn revenue from the sale (directly or
indirectly) of each of these services: (1) speedy payment for
merchants, and (2) credit for shoppers. (I say “indirectly”
to reflect the fact that card companies often create or use
networks of banks as part of the process—but I have found
nothing here suggesting that that fact makes a significant
difference to my analysis.)
  Sales of the two basic card services are related. A shop­
per can pay for a purchase with a particular credit card
only if the merchant has signed up for merchant-related
card services with the company that issued the credit card
that the shopper wishes to use. A firm in the credit-card
business is therefore unlikely to make money unless quite
a few merchants agree to accept that firm’s card and quite
a few shoppers agree to carry and use it. In general, the
more merchants that sign up with a particular card com­
pany, the more useful that card is likely to prove to shop­
pers and so the more shoppers will sign up; so too, the
more shoppers that carry a particular card, the more
useful that card is likely to prove to merchants (as it
obviously helps them obtain the shoppers’ business) and so
the more merchants will sign up. Moreover, as a rough
rule of thumb (and assuming constant charges), the larger
the networks of paying merchants and paying shoppers
that a card firm maintains, the larger the revenues that
the firm will likely receive, since more payments will be
processed using its cards. Thus, it is not surprising that a
card company may offer shoppers incentives (say, points
redeemable for merchandise or travel) for using its card
or that a firm might want merchants to accept its card
exclusively.
                 Cite as: 585 U. S. ____ (2018)            5

                     BREYER, J., dissenting 


                               B

   This case focuses upon a practice called “steering.”
American Express has historically charged higher mer­
chant fees than its competitors. App. to Pet. for Cert.
173a–176a. Hence, fewer merchants accept American
Express’ cards than its competitors’. Id., at 184a–187a.
But, perhaps because American Express cardholders are,
on average, wealthier, higher-spending, or more loyal to
American Express than other cardholders, vast numbers
of merchants still accept American Express cards. See id.,
at 156a, 176a–177a, 184a–187a. Those who do, however,
would (in order to avoid the higher American Express fee)
often prefer that their customers use a different card to
charge a purchase. Thus, the merchant has a monetary
incentive to “steer” the customer towards the use of a
different card. A merchant might tell the customer, for
example, “American Express costs us more,” or “please use
Visa if you can,” or “free shipping if you use Discover.” See
id., at 100a–102a.
   Steering makes a difference, because without it, the
shopper does not care whether the merchant pays more to
American Express than it would pay to a different card
company—the shopper pays the same price either way.
But if steering works, then American Express will find it
more difficult to charge more than its competitors for
merchant-related services, because merchants will re­
spond by steering their customers, encouraging them to
use other cards. Thus, American Express dislikes steer­
ing; the merchants like it; and the shoppers may benefit
from it, whether because merchants will offer them incen­
tives to use less expensive cards or in the form of lower
retail prices overall. See id., at 92a, 97a–104a.
   In response to its competitors’ efforts to convince mer­
chants to steer shoppers to use less expensive cards,
American Express tried to stop, or at least to limit, steer­
ing by placing antisteering provisions in most of its con­
6             OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

tracts with merchants. It called those provisions “nondis­
crimination provisions.” They prohibited steering of the
forms I have described above (and others as well). See id.,
at 95a–96a, 100a–101a. After placing them in its agree­
ments, American Express found it could maintain, or even
raise, its higher merchant prices without losing too many
transactions to other firms. Id., at 195a–198a. These
agreements—the “nondiscrimination provisions”—led to
this lawsuit.
                              C
  In 2010 the United States and 17 States brought this
antitrust case against American Express. They claimed
that the “nondiscrimination provisions” in its contracts
with merchants created an unreasonable restraint of
trade. (Initially Visa and MasterCard were also defend­
ants, but they entered into consent judgments, dropping
similar provisions from their contracts with merchants).
After a 7-week bench trial, the District Court entered
judgment for the Government, setting forth its findings of
fact and conclusions of law in a 97-page opinion.
88 F. Supp. 3d 143 (EDNY 2015).
  Because the majority devotes little attention to the
District Court’s detailed factual findings, I will summarize
some of the more significant ones here. Among other
things, the District Court found that beginning in 2005
and during the next five years, American Express raised
the prices it charged merchants on 20 separate occasions.
See id., at 195–196. In doing so, American Express did
not take account of the possibility that large merchants
would respond to the price increases by encouraging shop­
pers to use a different credit card because the nondiscrim­
ination provisions prohibited any such steering. Id., at
215. The District Court pointed to merchants’ testimony
stating that, had it not been for those provisions, the large
merchants would have responded to the price increases by
                 Cite as: 585 U. S. ____ (2018)           7

                    BREYER, J., dissenting

encouraging customers to use other, less-expensive cards.
Ibid.
   The District Court also found that even though Ameri­
can Express raised its merchant prices 20 times in this 5­
year period, it did not lose the business of any large mer­
chant. Id., at 197. Nor did American Express increase
benefits (or cut credit-card prices) to American Express
cardholders in tandem with the merchant price increases.
Id., at 196. Even had there been no direct evidence of
injury to competition, American Express’ ability to raise
merchant prices without losing any meaningful market
share, in the District Court’s view, showed that American
Express possessed power in the relevant market. See id.,
at 195.
   The District Court also found that, in the absence of the
provisions, prices to merchants would likely have been
lower. Ibid. It wrote that in the late 1990’s, Discover, one
of American Express’ competitors, had tried to develop a
business model that involved charging lower prices to
merchants than the other companies charged. Id., at 213.
Discover then invited each “merchant to save money by
shifting volume to Discover,” while simultaneously offer­
ing merchants additional discounts “if they would steer
customers to Discover.” Ibid. The court determined that
these efforts failed because of American Express’ (and the
other card companies’) “nondiscrimination provisions.”
These provisions, the court found, “denied merchants the
ability to express a preference for Discover or to employ
any other tool by which they might steer share to Discov­
er’s lower-priced network.” Id., at 214. Because the provi­
sions eliminated any advantage that lower prices might
produce, Discover “abandoned its low-price business model”
and raised its merchant fees to match those of its
competitors. Ibid. This series of events, the court con­
cluded was “emblematic of the harm done to the competi­
tive process” by the “nondiscrimination provisions.” Ibid.
8             OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

   The District Court added that it found no offsetting pro-
competitive benefit to shoppers. Id., at 225–238. Indeed,
it found no offsetting benefit of any kind. See ibid.
   American Express appealed, and the U. S. Court of
Appeals for the Second Circuit held in its favor. 838 F. 3d
179 (2016). The Court of Appeals did not reject any fact
found by the District Court as “clearly erroneous.” See
Fed. Rule Civ. Proc. 52(a)(6). Rather, it concluded that the
District Court had erred in step 1 of its rule-of-reason
analysis by failing to account for what the Second Circuit
called the credit-card business’s “two-sided market” (or
“two-sided platform”). 838 F. 3d, at 185–186, 196–200.
                            III
   The majority, like the Court of Appeals, reaches only
step 1 in its “rule of reason” analysis. Ante, at 10. To
repeat, that step consists of determining whether the
challenged “nondiscrimination provisions” have had, or
are likely to have, anticompetitive effects. See Indiana
Federation of Dentists, 476 U. S., at 459. Do those provi­
sions tend to impede competition? And if so, does Ameri­
can Express, which imposed that restraint as a condition
of doing business with its merchant customers, have suffi­
cient economic or commercial power for the provision to
make a negative difference? See id., at 460–461.
                             A
  Here the District Court found that the challenged provi­
sions have had significant anticompetitive effects. In
particular, it found that the provisions have limited or
prevented price competition among credit-card firms for
the business of merchants. 88 F. Supp. 3d, at 209. That
conclusion makes sense: In the provisions, American
Express required the merchants to agree not to encourage
customers to use American Express’ competitors’ credit
cards, even cards from those competitors, such as Discover,
                 Cite as: 585 U. S. ____ (2018)            9

                     BREYER, J., dissenting

that intended to charge the merchants lower prices.
See id., at 214. By doing so, American Express has “dis­
rupt[ed] the normal price-setting mechanism” in the mar­
ket. Id., at 209. As a result of the provisions, the District
Court found, American Express was able to raise mer­
chant prices repeatedly without any significant loss of
business, because merchants were unable to respond to
such price increases by encouraging shoppers to pay with
other cards. Id., at 215. The provisions also meant that
competitors like Discover had little incentive to lower their
merchant prices, because doing so did not lead to any
additional market share. Id., at 214. The provisions
thereby “suppress[ed] [American Express’] . . . competitors’
incentives to offer lower prices . . . resulting in higher
profit-maximizing prices across the network services
market.” Id., at 209. Consumers throughout the economy
paid higher retail prices as a result, and they were denied
the opportunity to accept incentives that merchants might
otherwise have offered to use less-expensive cards. Id., at
216, 220. I should think that, considering step 1 alone,
there is little more that need be said.
  The majority, like the Court of Appeals, says that the
District Court should have looked not only at the market
for the card companies’ merchant-related services but also
at the market for the card companies’ shopper-related
services, and that it should have combined them, treating
them as a single market. Ante, at 14–15; 838 F. 3d, at
197. But I am not aware of any support for that view in
antitrust law. 	Indeed, this Court has held to the contrary.
  In Times-Picayune Publishing Co. v. United States, 345
U. S. 594, 610 (1953), the Court held that an antitrust
court should begin its definition of a relevant market by
focusing narrowly on the good or service directly affected
by a challenged restraint. The Government in that case
claimed that a newspaper’s advertising policy violated the
Sherman Act’s “rule of reason.” See ibid. In support of
10             OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

that argument, the Government pointed out, and the
District Court had held, that the newspaper dominated
the market for the sales of newspapers to readers in New
Orleans, where it was the sole morning daily newspaper.
Ibid. But this Court reversed. We explained that “every
newspaper is a dual trader in separate though interde­
pendent markets; it sells the paper’s news and advertising
content to its readers; in effect that readership is in turn
sold to the buyers of advertising space.” Ibid. We then
added:
     “This case concerns solely one of those markets. The
     Publishing Company stands accused not of tying sales
     to its readers but only to buyers of general and classi­
     fied space in its papers. For this reason, dominance in
     the advertising market, not in readership, must be de­
     cisive in gauging the legality of the Company’s unit
     plan.” Ibid.
Here, American Express stands accused not of limiting or
harming competition for shopper-related card services, but
only of merchant-related card services, because the chal­
lenged contract provisions appear only in American Ex­
press’ contracts with merchants. That is why the District
Court was correct in considering, at step 1, simply
whether the agreement had diminished competition in
merchant-related services.
                            B
  The District Court did refer to market definition, and
the majority does the same. Ante, at 11–15. And I recog­
nize that properly defining a market is often a complex
business. Once a court has identified the good or service
directly restrained, as Times-Picayune Publishing Co.
requires, it will sometimes add to the relevant market
what economists call “substitutes”: other goods or services
that are reasonably substitutable for that good or service.
                 Cite as: 585 U. S. ____ (2018)           11

                     BREYER, J., dissenting

See, e.g., United States v. E. I. du Pont de Nemours & Co.,
351 U. S. 377, 395–396 (1956) (explaining that cellophane
market includes other, substitutable flexible wrapping
materials as well). The reason that substitutes are in­
cluded in the relevant market is that they restrain a firm’s
ability to profitably raise prices, because customers will
switch to the substitutes rather than pay the higher prices.
See 2B Areeda & Hovenkamp ¶561, at 378.
   But while the market includes substitutes, it does not
include what economists call complements: goods or ser­
vices that are used together with the restrained product,
but that cannot be substituted for that product. See id.,
¶565a, at 429; Eastman Kodak Co. v. Image Technical
Services, Inc., 504 U. S. 451, 463 (1992). An example of
complements is gasoline and tires. A driver needs both
gasoline and tires to drive, but they are not substitutes for
each other, and so the sale price of tires does not check the
ability of a gasoline firm (say a gasoline monopolist) to
raise the price of gasoline above competitive levels. As a
treatise on the subject states: “Grouping complementary
goods into the same market” is “economic nonsense,” and
would “undermin[e] the rationale for the policy against
monopolization or collusion in the first place.” 2B Areeda
& Hovenkamp ¶565a, at 431.
   Here, the relationship between merchant-related card
services and shopper-related card services is primarily
that of complements, not substitutes. Like gasoline and
tires, both must be purchased for either to have value.
Merchants upset about a price increase for merchant-
related services cannot avoid that price increase by becom­
ing cardholders, in the way that, say, a buyer of newspa­
per advertising can switch to television advertising or
direct mail in response to a newspaper’s advertising price
increase. The two categories of services serve fundamen­
tally different purposes. And so, also like gasoline and
tires, it is difficult to see any way in which the price of
12            OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

shopper-related services could act as a check on the card
firm’s sale price of merchant-related services. If anything,
a lower price of shopper-related card services is likely to
cause more shoppers to use the card, and increased shop­
per popularity should make it easier for a card firm to
raise prices to merchants, not harder, as would be the case
if the services were substitutes. Thus, unless there is
something unusual about this case—a possibility I discuss
below, see infra, at 13–20—there is no justification for
treating shopper-related services and merchant-related
services as if they were part of a single market, at least
not at step 1 of the “rule of reason.”
                              C
   Regardless, a discussion of market definition was legally
unnecessary at step 1. That is because the District Court
found strong direct evidence of anticompetitive effects
flowing from the challenged restraint. 88 F. Supp. 3d, at
207–224. As I said, supra, at 7, this evidence included
Discover’s efforts to break into the credit-card business by
charging lower prices for merchant-related services, only
to find that the “nondiscrimination provisions,” by pre­
venting merchants from encouraging shoppers to use
Discover cards, meant that lower merchant prices did not
result in any additional transactions using Discover credit
cards. 88 F. Supp. 3d, at 213–214. The direct evidence
also included the fact that American Express raised its
merchant prices 20 times in five years without losing any
appreciable market share. Id., at 195–198, 208–212. It
also included the testimony of numerous merchants that
they would have steered shoppers away from American
Express cards in response to merchant price increases
(thereby checking the ability of American Express to raise
prices) had it not been for the nondiscrimination provi­
sions. See id., at 221–222. It included the factual finding
that American Express “did not even account for the pos­
                  Cite as: 585 U. S. ____ (2018)            13

                     BREYER, J., dissenting

sibility that [large] merchants would respond to its price
increases by attempting to shift share to a competitor’s
network” because the nondiscrimination provisions pro­
hibited steering. Id., at 215. It included the District
Court’s ultimate finding of fact, not overturned by the
Court of Appeals, that the challenged provisions “were
integral to” American Express’ “[price] increases and
thereby caused merchants to pay higher prices.” Ibid.
   As I explained above, this Court has stated that “[s]ince
the purpose of the inquiries into market definition and
market power is to determine whether an arrangement
has the potential for genuine adverse effects on competi­
tion, proof of actual detrimental effects . . . can obviate the
need for” those inquiries. Indiana Federation of Dentists,
476 U. S., at 460–461 (internal quotation marks omitted).
That statement is fully applicable here. Doubts about the
District Court’s market-definition analysis are beside the
point in the face of the District Court’s findings of actual
anticompetitive harm.
   The majority disagrees that market definition is irrele­
vant. See ante, at 11–12, and n. 7. The majority explains
that market definition is necessary because the nondis­
crimination provisions are “vertical restraints” and
“[v]ertical restraints often pose no risk to competition
unless the entity imposing them has market power, which
cannot be evaluated unless the Court first determines the
relevant market.” Ante, at 11, n. 7. The majority thus, in
a footnote, seems categorically to exempt vertical re­
straints from the ordinary “rule of reason” analysis that
has applied to them since the Sherman Act’s enactment in
1890. The majority’s only support for this novel exemption
is Leegin Creative Leather Products, Inc. v. PSKS, Inc.,
551 U. S. 877 (2007). But Leegin held that the “rule of
reason” applied to the vertical restraint at issue in that
case. See id., at 898–899. It said nothing to suggest that
vertical restraints are not subject to the usual “rule of
14            OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

reason” analysis. See also infra, at 24.
   One critical point that the majority’s argument ignores
is that proof of actual adverse effects on competition is,
a fortiori, proof of market power. Without such power, the
restraints could not have brought about the anticompeti­
tive effects that the plaintiff proved. See Indiana Federa-
tion of Dentists, supra, at 460 (“[T]he purpose of the in­
quiries into market definition and market power is
to determine whether an arrangement has the potential
for genuine adverse effects on competition” (emphasis
added)). The District Court’s findings of actual anticom­
petitive harm from the nondiscrimination provisions thus
showed that, whatever the relevant market might be,
American Express had enough power in that market to
cause that harm. There is no reason to require a separate
showing of market definition and market power under
such circumstances. And so the majority’s extensive
discussion of market definition is legally unnecessary.
                             D
  The majority’s discussion of market definition is also
wrong. Without raising any objection in general with the
longstanding approach I describe above, supra, at 10–11,
the majority agrees with the Court of Appeals that the
market for American Express’ card services is special
because it is a “two-sided transaction platform.” Ante, at
2–5, 12–15. The majority explains that credit-card firms
connect two distinct groups of customers: First, merchants
who accept credit cards, and second, shoppers who use the
cards. Ante, at 2; accord, 838 F. 3d, at 186. The majority
adds that “no credit-card transaction can occur unless both
the merchant and the cardholder simultaneously agree to
use to the same credit-card network.” Ante, at 3. And it
explains that the credit-card market involves “indirect
network effects,” by which it means that shoppers want a
card that many merchants will accept and merchants
                  Cite as: 585 U. S. ____ (2018)           15

                     BREYER, J., dissenting

want to accept those cards that many customers have and
use. Ibid. From this, the majority concludes that “courts
must include both sides of the platform—merchants and
cardholders—when defining the credit-card market.”
Ante, at 12; accord, 838 F. 3d, at 197.
                               1
   Missing from the majority’s analysis is any explanation
as to why, given the purposes that market definition
serves in antitrust law, the fact that a credit-card firm can
be said to operate a “two-sided transaction platform”
means that its merchant-related and shopper-related
services should be combined into a single market. The
phrase “two-sided transaction platform” is not one of
antitrust art—I can find no case from this Court using
those words. The majority defines the phrase as covering
a business that “offers different products or services to two
different groups who both depend on the platform to in­
termediate between them,” where the business “cannot
make a sale to one side of the platform without simultane­
ously making a sale to the other” side of the platform.
Ante, at 2. I take from that definition that there are four
relevant features of such businesses on the majority’s
account: they (1) offer different products or services, (2) to
different groups of customers, (3) whom the “platform”
connects, (4) in simultaneous transactions. See ibid.
   What is it about businesses with those four features
that the majority thinks justifies a special market-
definition approach for them? It cannot be the first two
features—that the company sells different products to
different groups of customers. Companies that sell multi­
ple products to multiple types of customers are common­
place. A firm might mine for gold, which it refines and
sells both to dentists in the form of fillings and to inves­
tors in the form of ingots. Or, a firm might drill for both
oil and natural gas. Or a firm might make both ignition
16            OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

switches inserted into auto bodies and tires used for cars.
I have already explained that, ordinarily, antitrust law
will not group the two nonsubstitutable products together
for step 1 purposes. Supra, at 10–11.
  Neither should it normally matter whether a company
sells related, or complementary, products, i.e., products
which must both be purchased to have any function, such
as ignition switches and tires, or cameras and film. It is
well established that an antitrust court in such cases looks
at the product where the attacked restraint has an anti­
competitive effect. Supra, at 9; see Eastman Kodak, 504
U. S., at 463. The court does not combine the customers
for the separate, nonsubstitutable goods and see if “over­
all” the restraint has a negative effect. See ibid.; 2B
Areeda & Hovenkamp ¶565a. That is because, as I have
explained, the complementary relationship between the
products is irrelevant to the purposes of market-definition.
See supra, at 10–11.
  The majority disputes my characterization of merchant-
related and shopper-related services as “complements.”
See ante, at 14, n. 8. The majority relies on an academic
article which devotes one sentence to the question, saying
that “a two-sided market [is] different from markets for
complementary products [e.g., tires and gas], in which
both products are bought by the same buyers, who, in
their buying decisions, can therefore be expected to take
into account both prices.” Filistrucchi, Geradin, Van
Damme, & Affeldt, Market Definition in Two-Sided Mar­
kets: Theory and Practice, 10 J. Competition L. & Econ.
293, 297 (2014) (Filistrucchi). I agree that two-sided
platforms—at least as some academics define them, but
see infra, at 19–20—may be distinct from some types of
complements in the respect the majority mentions (even
though the services resemble complements because they
must be used together for either to have value). But the
distinction the majority mentions has nothing to do with
                  Cite as: 585 U. S. ____ (2018)           17

                     BREYER, J., dissenting

the relevant question. The relevant question is whether
merchant-related and shopper-related services are substi-
tutes, one for the other, so that customers can respond to a
price increase for one service by switching to the other
service. As I have explained, the two types of services are
not substitutes in this way. Supra, at 11–12. And so the
question remains, just as before: What is it about the
economic relationship between merchant-related and
shopper-related services that would justify the majority’s
novel approach to market definition?
   What about the last two features—that the company
connects the two groups of customers to each other, in
simultaneous transactions? That, too, is commonplace.
Consider a farmers’ market. It brings local farmers and
local shoppers together, and transactions will occur only if
a farmer and a shopper simultaneously agree to engage in
one. Should courts abandon their ordinary step 1 inquiry
if several competing farmers’ markets in a city agree that
only certain kinds of farmers can participate, or if a farm­
ers’ market charges a higher fee than its competitors do
and prohibits participating farmers from raising their
prices to cover it? Why? If farmers’ markets are special,
what about travel agents that connect airlines and pas­
sengers? What about internet retailers, who, in addition
to selling their own goods, allow (for a fee) other goods-
producers to sell over their networks? Each of those busi­
nesses seems to meet the majority’s four-prong definition.
   Apparently as its justification for applying a special
market-definition rule to “two-sided transaction plat­
forms,” the majority explains that such platforms “often
exhibit” what it calls “indirect network effects.” Ante, at 3.
By this, the majority means that sales of merchant-related
card services and (different) shopper-related card services
are interconnected, in that increased merchant-buyers
mean increased shopper-buyers (the more stores in the
card’s network, the more customers likely to use the card),
18            OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

and vice versa. See ibid. But this, too, is commonplace.
Consider, again, a farmers’ market. The more farmers
that participate (within physical and esthetic limits), the
more customers the market will likely attract, and vice
versa. So too with travel agents: the more airlines whose
tickets a travel agent sells, the more potential passengers
will likely use that travel agent, and the more potential
passengers that use the travel agent, the easier it will
likely be to convince airlines to sell through the travel
agent. And so forth. Nothing in antitrust law, to my
knowledge, suggests that a court, when presented with an
agreement that restricts competition in any one of the
markets my examples suggest, should abandon traditional
market-definition approaches and include in the relevant
market services that are complements, not substitutes, of
the restrained good. See supra, at 10–11.
                               2
   To justify special treatment for “two-sided transaction
platforms,” the majority relies on the Court’s decision in
United States v. Grinnell Corp., 384 U. S. 563, 571–572
(1966). In Grinnell, the Court treated as a single market
several different “central station services,” including
burglar alarm services and fire alarm services. Id., at 571.
It did so even though, for consumers, “burglar alarm ser­
vices are not interchangeable with fire alarm services.”
Id., at 572. But that is because, for producers, the services
were indeed interchangeable: A company that offered one
could easily offer the other, because they all involve “a
single basic service—the protection of property through
use of a central service station.” Ibid. Thus, the “commer­
cial realit[y]” that the Grinnell Court relied on, ibid., was
that the services being grouped were what economists call
“producer substitutes.” See 2B Areeda & Hovenkamp
¶561, at 378. And the law is clear that “two products
produced interchangeably from the same production facili­
                 Cite as: 585 U. S. ____ (2018)          19

                    BREYER, J., dissenting

ties are presumptively in the same market,” even if they
are not “close substitutes for each other on the demand
side.” Ibid. That is because a firm that produces one such
product can, in response to a price increase in the other,
easily shift its production and thereby limit its compet-
itor’s power to impose the higher price. See id., ¶561a,
at 379.
   Unlike the various types of central station services at
issue in Grinnell Corp., however, the shopper-related and
merchant-related services that American Express provides
are not “producer substitutes” any more than they are
traditional substitutes. For producers as for consumers,
the services are instead complements. Credit card compa­
nies must sell them together for them to be useful. As a
result, the credit-card companies cannot respond to, say,
merchant-related price increases by shifting production
away from shopper-related services to merchant-related
services. The relevant “commercial realities” in this case
are thus completely different from those in Grinnell Corp.
(The majority also cites Brown Shoe Co. v. United States,
370 U. S. 294, 336–337 (1962), for this point, but the
“commercial realities” considered in that case were that
“shoe stores in the outskirts of cities compete effectively
with stores in central downtown areas,” and thus are
part of the same market.         Id., at 338–339.    Here,
merchant-related services do not, as I have said, compete
with shopper-related services, and so Brown Shoe Co. does
not support the majority’s position.) Thus, our precedent
provides no support for the majority’s special approach
to defining markets involving “two-sided transaction
platforms.”
                             3
  What about the academic articles the majority cites?
The first thing to note is that the majority defines “two-
sided transaction platforms” much more broadly than the
20            OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

economists do. As the economists who coined the term
explain, if a “two-sided market” meant simply that a firm
connects two different groups of customers via a platform,
then “pretty much any market would be two-sided, since
buyers and sellers need to be brought together for markets
to exist and gains from trade to be realized.” Rochet &
Tirole, Two-Sided Markets: A Progress Report, 37 RAND
J. Econ. 645, 646 (2006). The defining feature of a “two-
sided market,” according to these economists, is that “the
platform can affect the volume of transactions by charging
more to one side of the market and reducing the price paid
by the other side by an equal amount.” Id., at 664–665;
accord, Filistrucchi 299. That requirement appears no­
where in the majority’s definition. By failing to limit its
definition to platforms that economists would recognize
as “two sided” in the relevant respect, the majority carves
out a much broader exception to the ordinary antitrust
rules than the academic articles it relies on could possibly
support.
   Even as limited to the narrower definition that econo­
mists use, however, the academic articles the majority
cites do not support the majority’s flat rule that firms
operating “two-sided transaction platforms” should always
be treated as part of a single market for all antitrust
purposes. Ante, at 13–15. Rather, the academics explain
that for market-definition purposes, “[i]n some cases, the
fact that a business can be thought of as two-sided may be
irrelevant,” including because “nothing in the analysis of
the practices [at issue] really hinges on the linkages be­
tween the demands of participating groups.” Evans &
Schmalensee, Markets With Two-Sided Platforms, 1 Is­
sues in Competition L. & Pol’y 667, 689 (2008). “In other
cases, the fact that a business is two-sided will prove
important both by identifying the real dimensions of com­
petition and focusing on sources of constraints.” Ibid.
That flexible approach, however, is precisely the one the
                  Cite as: 585 U. S. ____ (2018)           21

                     BREYER, J., dissenting

District Court followed in this case, by considering the
effects of “[t]he two-sided nature of the . . . card industry”
throughout its analysis. 88 F. Supp. 3d, at 155.
    Neither the majority nor the academic articles it cites
offer any explanation for why the features of a “two-sided
transaction platform” justify always treating it as a single
antitrust market, rather than accounting for its economic
features in other ways, as the District Court did. The
article that the majority repeatedly quotes as saying that
“ ‘[i]n two-sided transaction markets, only one market
should be defined,’ ” ante, at 14–15 (quoting Filistrucchi
302), justifies that conclusion only for purposes of as­
sessing the effects of a merger. In such a case, the article
explains, “[e]veryone would probably agree that a payment
card company such as American Express is either in the
relevant market on both sides or on neither side . . . . The
analysis of a merger between two payment card platforms
should thus consider . . . both sides of the market.” Id., at
301. In a merger case this makes sense, but is also mean­
ingless, because, whether there is one market or two, a
reviewing court will consider both sides, because it must
examine the effects of the merger in each affected market
and submarket. See Brown Shoe Co., 370 U. S., at 325.
As for a nonmerger case, the article offers only United
States v. Grinnell as a justification, see Filistrucchi 303,
and as I have already explained, supra, at 16–18, Grinnell
does not support this proposition.
                              E
  Put all of those substantial problems with the majority’s
reasoning aside, though. Even if the majority were right
to say that market definition was relevant, and even if the
majority were right to further say that the District Court
should have defined the market in this case to include
shopper-related services as well as merchant-related
services, that still would not justify the majority in affirm­
22            OHIO v. AMERICAN EXPRESS CO.

                    BREYER, J., dissenting

ing the Court of Appeals. That is because, as the majority
is forced to admit, the plaintiffs made the factual showing
that the majority thinks is required. See ante, at 17.
   Recall why it is that the majority says that market
definition matters: because if the relevant market includes
both merchant-related services and card-related services,
then the plaintiffs had the burden to show that as a result
of the nondiscrimination provisions, “the price of credit-
card transactions”—considering both fees charged to
merchants and rewards paid to cardholders—“was higher
than the price one would expect to find in a competitive
market.” Ante, at 16. This mirrors the Court of Appeals’
holding that the Government had to show that the “non­
discrimination provisions” had “made all [American Ex­
press] customers on both sides of the platform—i.e., both
merchants and cardholders—worse off overall.” 838 F. 3d,
at 205.
   The problem with this reasoning, aside from it being
wrong, is that the majority admits that the plaintiffs did
show this: they “offer[ed] evidence” that American Express
“increased the percentage of the purchase price that it
charges merchants . . . and that this increase was not
entirely spent on cardholder rewards.” Ante, 17 (citing 88
F. Supp. 3d, at 195–197, 215). Indeed, the plaintiffs did
not merely “offer evidence” of this—they persuaded the
District Court, which made an unchallenged factual find­
ing that the merchant price increases that resulted from
the nondiscrimination provisions “were not wholly offset
by additional rewards expenditures or otherwise passed
through to cardholders, and resulted in a higher net price.”
Id., at 215 (emphasis added).
   In the face of this problem, the majority retreats to
saying that even net price increases do not matter after
all, absent a showing of lower output, because if output is
increasing, “ ‘rising prices are equally consistent with
growing product demand.’ ” Ante, at 18 (quoting Brooke
                  Cite as: 585 U. S. ____ (2018)           23

                     BREYER, J., dissenting

Group Ltd. v. Brown & Williamson Tobacco Corp., 509
U. S. 209, 237 (1993)). This argument, unlike the price
argument, has nothing to do with the credit-card market
being a “two-sided transaction platform,” so if this is the
basis for the majority’s holding, then nearly all of the
opinion is dicta. The argument is also wrong. It is true as
an economic matter that a firm exercises market power by
restricting output in order to raise prices. But the rele­
vant restriction of output is as compared with a hypothet­
ical world in which the restraint was not present and
prices were lower. The fact that credit-card use in general
has grown over the last decade, as the majority says, see
ante, at 17–18, says nothing about whether such use
would have grown more or less without the nondiscrimina­
tion provisions. And because the relevant question is a
comparison between reality and a hypothetical state of
affairs, to require actual proof of reduced output is often to
require the impossible—tantamount to saying that the
Sherman Act does not apply at all.
   In any event, there are features of the credit-card mar­
ket that may tend to limit the usual relationship between
price and output. In particular, merchants generally
spread the costs of credit-card acceptance across all their
customers (whatever payment method they may use),
while the benefits of card use go only to the cardholders.
See, e.g., 88 F. Supp. 3d, at 216; Brief for John M. Connor
et al. as Amici Curiae 34–35. Thus, higher credit-card
merchant fees may have only a limited effect on credit-
card transaction volume, even as they disrupt the market­
place by extracting anticompetitive profits.
                            IV 

                             A

  For the reasons I have stated, the Second Circuit was
wrong to lump together the two different services sold, at
step 1. But I recognize that the Court of Appeals has not
24             OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

yet considered whether the relationship between the two
services might make a difference at steps 2 and 3. That is
to say, American Express might wish to argue that the
nondiscrimination provisions, while anticompetitive in
respect to merchant-related services, nonetheless have an
adequate offsetting procompetitive benefit in respect to its
shopper-related services. I believe that American Express
should have an opportunity to ask the Court of Appeals to
consider that matter.
  American Express might face an uphill battle. A Sher­
man Act §1 defendant can rarely, if ever, show that a pro-
competitive benefit in the market for one product offsets
an anticompetitive harm in the market for another. In
United States v. Topco Associates, Inc., 405 U. S. 596, 611
(1972), this Court wrote:
     “If a decision is to be made to sacrifice competition in
     one portion of the economy for greater competition in
     another portion, this . . . is a decision that must be
     made by Congress and not by private forces or by the
     courts. Private forces are too keenly aware of their
     own interests in making such decisions and courts are
     ill-equipped and ill-situated for such decisionmaking.”
American Express, pointing to vertical price-fixing
cases like our decision in Leegin, argues that comparing
competition-related pros and cons is more common than I
have just suggested. See 551 U. S., at 889–892. But
Leegin held only that vertical price fixing is subject to the
“rule of reason” instead of being per se unlawful; the “rule
of reason” still applies to vertical agreements just as it
applies to horizontal agreements. See id., at 898–899.
  Moreover, the procompetitive justifications for vertical
price-fixing agreements are not apparently applicable to
the distinct types of restraints at issue in this case. A
vertically imposed price-fixing agreement typically in­
volves a manufacturer controlling the terms of sale for its
                 Cite as: 585 U. S. ____ (2018)           25

                     BREYER, J., dissenting

own product. A television-set manufacturer, for example,
will insist that its dealers not cut prices for the manufac­
turer’s own televisions below a particular level. Why
might a manufacturer want its dealers to refrain from
price competition in the manufacturer’s own products?
Perhaps because, for example, the manufacturer wants to
encourage the dealers to develop the market for the manu­
facturer’s brand, thereby increasing interbrand competi­
tion for the same ultimate product, namely a television
set. This type of reasoning does not appear to apply to
American Express’ nondiscrimination provisions, which
seek to control the terms on which merchants accept other
brands’ cards, not merely American Express’ own.
   Regardless, I would not now hold that an agreement
such as the one before us can never be justified by pro-
competitive benefits of some kind. But the Court of Ap­
peals would properly consider procompetitive justifications
not at step 1, but at steps 2 and 3 of the “rule of reason”
inquiry. American Express would need to show just how
this particular anticompetitive merchant-related agree­
ment has procompetitive benefits in the shopper-related
market. In doing so, American Express would need to
overcome the District Court’s factual findings that the
agreement had no such effects. See 88 F. Supp. 3d, at
224–238.
                              B
   The majority charts a different path. Notwithstanding
its purported acceptance of the three-step, burden-shifting
framework I have described, ante, at 9–10, the majority
addresses American Express’ procompetitive justifications
now, at step 1 of the analysis, see ante, at 18–20. And in
doing so, the majority inexplicably ignores the District
Court’s factual findings on the subject.
   The majority reasons that the challenged nondiscrimi­
nation provisions “stem negative externalities in the credit­
26            OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

card market and promote interbrand competition.” Ante,
at 19. The “negative externality” the majority has in mind
is this: If one merchant persuades a shopper not to use his
American Express card at that merchant’s store, that
shopper becomes less likely to use his American Express
card at other merchants’ stores. Ibid. The majority wor­
ries that this “endangers the viability of the entire [Ameri­
can Express] network,” ibid., but if so that is simply a
consequence of American Express’ merchant fees being
higher than a competitive market will support. “The
antitrust laws were enacted for ‘the protection of competi-
tion, not competitors.’ ” Atlantic Richfield Co. v. USA
Petroleum Co., 495 U. S. 328, 338 (1990). If American
Express’ merchant fees are so high that merchants suc­
cessfully induce their customers to use other cards, Ameri­
can Express can remedy that problem by lowering those
fees or by spending more on cardholder rewards so that
cardholders decline such requests. What it may not do is
demand contractual protection from price competition.
   In any event, the majority ignores the fact that the
District Court, in addition to saying what I have just said,
also rejected this argument on independent factual
grounds. It explained that American Express “presented
no expert testimony, financial analysis, or other direct
evidence establishing that without its [nondiscrimination
provisions] it will, in fact, be unable to adapt its business
to a more competitive market.” 88 F. Supp. 3d, at 231. It
further explained that the testimony that was provided on
the topic “was notably inconsistent,” with some of Ameri­
can Express’ witnesses saying only that invalidation of the
provisions “would require American Express to adapt its
current business model.” Ibid. After an extensive discus­
sion of the record, the District Court found that “American
Express possesses the flexibility and expertise necessary
to adapt its business model to suit a market in which it is
required to compete on both the cardholder and merchant
                 Cite as: 585 U. S. ____ (2018)           27

                     BREYER, J., dissenting

sides of the [credit-card] platform.” Id., at 231–232. The
majority evidently rejects these factual findings, even
though no one has challenged them as clearly erroneous.
   Similarly, the majority refers to the nondiscrimination
provisions as preventing “free riding” on American Ex­
press’ “investments in rewards” for cardholders. Ante, at
19–20; see also ante, at 7 (describing steering in terms
suggestive of free riding). But as the District Court ex­
plained, “[p]lainly . . . investments tied to card use (such
as Membership Rewards points, purchase protection, and
the like) are not subject to free-riding, since the network
does not incur any cost if the cardholder is successfully
steered away from using his or her American Express
card.” 88 F. Supp. 3d, at 237. This, I should think, is an
unassailable conclusion: American Express pays rewards
to cardholders only for transactions in which cardholders
use their American Express cards, so if a steering effort
succeeds, no rewards are paid. As for concerns about free
riding on American Express’ fixed expenses, including its
investments in its brand, the District Court acknowledged
that free-riding was in theory possible, but explained that
American Express “ma[de] no effort to identify the fixed
expenses to which its experts referred or to explain how
they are subject to free riding.” Ibid.; see also id., at 238
(American Express’ own data showed “that the network’s
ability to confer a credentialing benefit trails that of its
competitors, casting doubt on whether there is in fact any
particular benefit associated with accepting [American
Express] that is subject to free riding”). The majority does
not even acknowledge, much less reject, these factual
findings, despite coming to the contrary conclusion.
   Finally, the majority reasons that the nondiscrimination
provisions “do not prevent Visa, MasterCard, or Discover
from competing against [American Express] by offering
lower merchant fees or promoting their broader merchant
acceptance.” Ante, at 20. But again, the District Court’s
28             OHIO v. AMERICAN EXPRESS CO.

                     BREYER, J., dissenting

factual findings were to the contrary. As I laid out above,
the District Court found that the nondiscrimination provi­
sions in fact did prevent Discover from pursuing a low­
merchant-fee business model, by “den[ying] merchants the
ability to express a preference for Discover or to employ
any other tool by which they might steer share to Discov­
er’s lower-priced network.” 88 F. Supp. 3d, at 214; see
supra, at 7. The majority’s statements that the nondis­
crimination provisions are procompetitive are directly
contradicted by this and other factual findings.
                         *    *     *
  For the reasons I have explained, the majority’s decision
in this case is contrary to basic principles of antitrust law,
and it ignores and contradicts the District Court’s detailed
factual findings, which were based on an extensive trial
record. I respectfully dissent.
