Supreme Court Decisions: Business, Technology, and E-Commerce
On our blog posts this month, we have been focusing on recent Supreme Court cases that impact business, e-commerce, internet, and privacy.
In its most recent term, the Supreme Court decided a number of interesting cases involving large technology companies, many of which dealt with data privacy issues and new emerging trends. Our blog posts covered three of these: (1) the ability of states to legalize sports betting (e.g., online gambling); (2) The CLOUD Act, which addresses whether a US-based company can refuse a subpoena for user data when stored overseas; and (3) whether America Express's "anti-steering" provisions within its merchant agreements are an unreasonable restraint on competition.
For this newsletter, we will provide you with a brief overview of the decisions, and highlight any related changes that have come about since the beginning of the month.
In Murphy v. NCAA, the Supreme Court ruled in favor of states' ability to legalize sports betting. The ruling overturned the Professional and Amateur Sports Protection Act (PASPA) which previously prohibited all but a few states from legalizing sports gambling. An estimated 15 million Americans participate in illegal sports betting each year, generating up to $3 billion in offshore bookkeeping fees. Lawmakers hope that the new change will bring this money that is being sent overseas back into American businesses and states. The legalization of sports betting will also likely lower the amount of illegal gambling and bookkeeping, which is often conducted by criminal organizations. Because most gambling will take place on mobile devices and the internet, legislation addressing the online and e-commerce component will likely be enacted in the near future.
For our second post, we addressed United States v. Microsoft and the ramifications it will have on technology companies who store user information overseas. This case involved the FBI issuing Microsoft a warrant to obtain information regarding a customer's account who was thought to be involved in drug trafficking. Microsoft claimed that the user's information was stored in Ireland, and refused to comply with the warrant. While the case was pending, Congress enacted the Clarifying Lawful Overseas Use of Data (CLOUD) Act. The CLOUD Act requires service providers to disclose any contents, records, or other information pertaining to a user when such information is within the service provider's possession, custody, or control, regardless of whether it is located within or outside of the United States. Because of this new legislation, the Court deemed the case moot, and held that Microsoft must comply with the warrant.
Our third post addressed Ohio v. American Express, in which the Court examined the company's market power and ability to restrain competition in the credit card industry. In 2010, the government sued AmEx, Visa, and MasterCard for what are known as "anti-steering" provisions. Anti-steering provisions prevent merchants from encouraging, or "steering," customers to use credit cards with lower merchant transaction fees at the point of sale. Because AmEx had the highest merchant transaction fee, the fees were a major source of revenue for the company. AmEx claimed that the higher fees for merchants were justified, because AmEx attracts a higher-spending clientele, and brings wealthier clients to the merchants, who in turn generate more revenue from the cardholders. The court looked at the relevant market - credit card holders and merchants - to see if such anti-steering provisions in fact unreasonably restrained competition. Finding that the consumer side of the credit card market was completely unaffected, the Court held that competition in the relevant market was not unreasonably restrained by anti-steering provisions. In fact, Visa and MasterCard issued "premium" cards to compete with AmEx. The premium cards also charged higher merchant fees and could attract the same customers as AmEx. The Court therefore ruled in favor of AmEx, and held that anti-steering provisions do not violate antitrust law.
At our law firm, we guide clients in legal matters involving business, technology, and e-commerce by using our knowledge and skills to create innovative solutions. You may contact us today to set up a confidential consultation.