American Express Sues Visa and MasterCard, Large Bank Card Issuers for Antitrust Violations

The suit, which was filed in the U.S. District Court in Manhattan, seeks monetary damages for the business lost as a result of the illegal, anti-competitive practices of the card associations. Those practices had effectively locked American Express out of the bank-issued card business in the United States. The suit does not specify an amount of monetary compensation, but American Express is expected to seek damages that could total in the billions of dollars. Individual banks named in the suit have been identified based, in part, on their being members of one or both of the associations Board of Directors at the time the illegal, restrictive rules were adopted and implemented. These include: J.P. Morgan Chase, Bank of America, Capital One, U.S. Bancorp, Household Bank, Wells Fargo, Providian National Bank and USAA Federal Savings Bank. The lawsuit follows last months U.S. Supreme Court decision not to hear an appeal from Visa and MasterCard. The two associations were seeking to overturn a lower court ruling that found them in violation of anti-trust laws. The Supreme Courts decision was a victory for the U.S. Department of Justice and for American consumers. It effectively ended restrictions that prevented American Express and others from competing for the card business of banks that wanted to offer their customers a broader range of products and rewards. Because of the court rulings, U.S. banks will be able to develop and offer card products that will be processed on any of the competing merchant networks. With the illegality of the associations restrictive rules already determined, the role of the District Court in the American Express lawsuit will be principally to determine the financial damages that the Company has incurred since the adoption of those illegal practices. David Boies, founding partner of Boies, Schiller & Flexner and one of the nations top litigators, will serve as American Express lead outside counsel in the suit. In anticipation of an end to the Visa and MasterCard restrictions, MBNA and American Express announced a landmark deal earlier this year for MBNA to issue credit cards that will be accepted and processed on the American Express global merchant network. The first cards resulting from this partnership were launched just this month. MBNA is not named as a defendant in the lawsuit and American Express will not seek damages from MBNA. Subject to certain conditions and limitations, American Express has agreed to reimburse MBNA for certain costs which may be imposed by MasterCard or Visa as a result of this lawsuit. Before the card associations adopted anti-competitive rules in the 1990s, American Express had been talking with a number of banks about similar partnerships. Outside the U.S., American Express has established 85 card-issuing arrangements with banks and financial institutions in more than 90 countries around the world. American Express is currently engaged in conversations with a number of other card issuers about possible network partnerships.