Associations and Antitrust: An Update After Osborn

Last December, the U.S. Supreme Court was set to hear a case that could have had significant implications for associations. But then the Court abruptly pulled the plug and dismissed the case before hearing oral argument, leaving associations to ponder what impact, if any, the case will have.

Visa, Inc. v. Osborn is one of the more recent in a long line of cases accusing Visa and MasterCard of antitrust violations. The Osborn plaintiffs alleged that Visa and MasterCard blocked competition from lower-cost ATM networks by imposing rules that kept ATM access fees at artificially high levels, in violation of Section 1 of the Sherman Act.

The key to any Section 1 case is proof of an agreement that unreasonably restrains competition. The Osborn plaintiffs alleged that Visa and MasterCard—when they were membership associations, before becoming publicly owned corporations—formed anticompetitive agreements with their member banks when they adopted access fee rules governing the use of ATM networks. The lower court dismissed the complaint, holding that “membership in an association—much less membership in a defunct association—is not enough to establish agreement or conspiracy.”

So far, so good. Yet the U.S. Court of Appeals for the District of Columbia Circuit reversed, holding that allegations that the member banks used the Visa and MasterCard associations to adopt rules that set anticompetitive pricing were enough to state a Section 1 claim.

Visa and MasterCard then asked the U.S. Supreme Court to review the case, and ASAE jumped in as well in an amicus brief, pointing out the risk that the court of appeals decision could facilitate antitrust allegations against associations that merely adopt rules and ask their members to follow them.

The Supreme Court agreed to hear the case to resolve “whether allegations that members of a business association agreed to adhere to the association’s rules and possess governance rights in the association” are enough to plead conspiracy under Section 1.

Ultimately, after Visa and MasterCard advanced a new argument in their merits brief, the Supreme Court dismissed the appeal because the argument was different from the one the Visa and MasterCard used to persuade the Court to take the case in the first place.

New Exposure?

While this journey may be too much inside baseball, associations could be left wondering whether the dismissal of the appeal exposes them to increased risk of antitrust litigation, which is often even more protracted and expensive than other litigation.

For now, there is reason to hope that the answer will be no, at least for most associations.

First, while many associations adopt codes of conduct and other business or professional rules, most of them concern quality, certification, and other standards for conducting business. These associations should still face far lower antitrust risk than the much smaller number of associations that set rules that more directly affect the prices their members charge or pay. In Osborn, the plaintiffs alleged specifically that the Visa and MasterCard rules led to higher ATM access fees.

Second, there is no indication that the Supreme Court’s dismissal of the Osborn appeal has led to an increase in antitrust exposure to associations in litigated cases. The court of appeals opinion in Osborn, which was issued on August 4, 2015, has been cited in just 14 subsequent cases. Only one involved an association defending antitrust claims, and in that case the lower court dismissed those claims, distinguishing Osborn.

While it does not appear that courts are permitting more antitrust cases to move forward against associations, whether plaintiffs are now bringing more antitrust cases against them is difficult to gauge. Associations can still argue that Osborn is an outlier—contrary to the holdings in other circuits—as Visa, MasterCard, ASAE, and other organizations that filed amicus briefs argued successfully when persuading the Supreme Court to take the Osborn appeal.

Steps to Minimize Risk

While Osborn’s impact is not clear, associations can and should understand their antitrust risk and take reasonable steps to minimize it, particularly if their members are competitors.

If an association promulgates rules and standards of conduct for its members, a process that is fair and inclusive and relies on objective expert judgments would reduce antitrust risk. Rules and standards should be voluntary, if at all possible; mandatory standards often increase antitrust risk, which is why they are more commonly imposed by government regulation. Under the Noerr-Pennington doctrine, associations that pursue government action, even anticompetitive standards, are in essence immune from antitrust liability.

Rules that have a direct impact on price, such as those at issue in Osborn, typically raise the greatest antitrust risk, as do rules that could be seen as allocating product or geographic markets among competing association members. Associations should carefully review any proposals to adopt these types of rules.

Associations that issue rules and standards often set up mechanisms to enforce them. To reduce antitrust risk, among other things, such mechanisms should be fair and impartial and provide to alleged violators notice and a reasonable opportunity to be heard.

Not all associations have made the sorts of rules at issue in Osborn, and most associations engage in a wide range of activities that pose little or no antitrust risk. While the Supreme Court’s dismissal of the Osborn appeal may have disappointed those hoping for a ruling that would protect associations from certain types of antitrust suits, this missed opportunity may have caused little practical harm.