lawsuit
Financial services group American Express (Amex) has scored a major
victory three years after filing a lawsuit against MasterCard, Visa
and their member banks in which it alleged that they had illegally
blocked Amex from the bank-issued card business in the US. In
settlement of the allegations, Visa, though not conceding
liability, agreed to pay a maximum of $2.25 billion to Amex, which
in turn will drop Visa and individual banks named in the lawsuit as
defendants. The banks were US Bank, Wells Fargo, Washington Mutual,
JPMorgan Chase and Capital One. MasterCard remains the sole
defendant in the Amex case.
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Commenting on the settlement, Amex’s chairman and CEO, Kenneth
Chenault, said: “The size of this settlement, along with earlier
court rulings, underscores the seriousness of the damage done by
the illegal boycott. We plan to move forward with the litigation to
hold MasterCard accountable for the illegal actions that blocked
banks from working with us for many years and to seek full
compensation for the value that would have been generated for our
shareholders.”
Amex is expected to seek damages in the billions of dollars.
Visa USA members to fund payment
Amex will receive an initial payment of $1.13 billion and the
balance in instalments of up to $70 million per quarter over the
next four years. The total of $2.25 billion is subject to Amex
achieving certain quarterly performance criteria within its US
network services business. The settlement will be funded by members
of Visa USA.
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By GlobalDataExpressing confidence that the goals set are achievable, Chenault
said: “At a time when weakness in parts of the economy is affecting
many financial services companies, the settlement will give us
greater flexibility and confidence to meet our financial goals
while continuing to fund business building initiatives and support
future acquisitions.”
Indicating the potential for an aggressive expansion drive, Amex
noted that it is likely to incur a number of significant additional
fourth-quarter expenses, including investments in marketing,
promotion, rewards, cardmember services and other business building
initiatives.
These, said Amex, are designed to “capitalise on competitive
opportunities in the payments industry at a time when some
competitors are pulling back”.
