Amex sues Visa and MasterCard over ‘cartel’

[emad]

The Times
From Abigail Rayner in New York

AMERICAN EXPRESS yesterday sued Visa and MasterCard, as well as eight banks, for damages expected to be in billions over what it described as illegal and anti-competitive practices that blocked 20,000 US banks from using its credit card services.

Amex is accusing the two major card associations of acting as a cartel to block its access to banks. The move follows a US Supreme Court ruling that the credit card associations had breached enforcement rules by barring so-called “member” banks from issuing rival cards.

Last month, Morgan Stanley’s Discover credit card unit launched a similar lawsuit against Visa and Mastercard, seeking unspecified damages. Until the Supreme Court ruling, Discover and American Express had been unable to issue cards through banks because Visa and MasterCard would not allow their member banks to do this.

Kenneth Chenault, American Express chief executive said the Visa and MasterCard system severely impeded business. The eight banks were named in the suit because they had been or are members of one or both credit card associations’ boards of directors.

http://www.timesonline.co.uk/newspaper/0,,171-1360543,00.html

[AllegroRondo]

1. Response from MasterCard

Statement By MasterCard General Counsel Noah J. Hanft on American Express Lawsuit
Editor's Note: American Express said today (Monday, November 15) that it was suing Visa and MasterCard along with eight other banks for damages stemming from anticompetitive practices that prevented American Express from issuing cards through U.S. banks. The statement MasterCard released to the press follows.

MasterCard believes that this lawsuit is misguided. American Express may have been successful in pressuring the Department of Justice to sue the bankcard payment networks on its behalf, but as a private plaintiff, it will face significant obstacles that the government did not face. This will be a very different case, as American Express will need to prove that it was injured and suffered damages as a result of MasterCard’s policy – claims that the reality of the marketplace demonstrate are entirely unfounded.

American Express can no longer hide in the shadow of the government. This lawsuit will showcase what American Express planned to do from the beginning – recruit the affluent, high-spend customers of select banks by enticing those banks with their higher cardholder and merchant fees, a cost which will be borne by consumers and merchants across the country. This is entirely contrary to the very purpose of the antitrust laws.

The real world evidence of American Express’ failed partnerships with banks in foreign markets, along with the competing interests American Express will face between its proprietary business and its network business, will undermine any attempt by American Express to establish that it was damaged by MasterCard’s policy. In fact, American Express has done nothing but prosper in the United States during the years when MasterCard’s policy was in effect, clearly demonstrating that Amex is not a company that has suffered any harm.

To the extent that American Express asks the court to rely on Judge Jones’ underlying decision in the government lawsuit as part of its case, it must acknowledge the core finding that the payments industry is one of the most competitive in existence, and has benefited consumers through extensive innovation, lower prices and an incredible number of cards with a broad range of features to choose from. In addition, if American Express issues more cards and continues to charge higher fees to consumers and merchants than MasterCard members do, American Express will benefit and consumers and merchants will pay the price.

In markets outside the United States, American Express has had difficulty forming meaningful partnerships with banks – few of its consumer programs are sizable, and their growth has not been steady. Issuers realize that doing business with American Express benefits American Express more than it benefits them or their cardholders, and a number of issuers who have entered into partnerships with American Express have found themselves in competition with American Express’ proprietary business for the same customers.

[newyawker99]

2. Hi AllegroRondo!!

Welcome to DU!! :toast: