The lawsuit was originally brought by AmEx in 2004 to combat Visa and MasterCard rules that prohibited member banks from issuing AmEx-branded cards. Visa Inc. will pay American Express Co. $2.25 billion to settle an antitrust lawsuit, the two parties announced yesterday.
Visa will pay AmEx $1.13 billion this quarter, then make quarterly payments of $70 million over the next four years, according to the companies. The exact timing and value of the payments depend on AmEx hitting certain financial targets.
AmEx reported it would use the money in its reward program for its cardholders, for marketing, to pay legal expenses related to the suit, and for funding of its American Express Foundation. Visa in a statement denied any wrongdoing. Visaís 14,000 member banks will fund the settlement.
AmEx and the Discover network separately sued Visa and MasterCard Inc. and eight of their largest member banks in 2004 over the business lost from Visa and MasterCard under rules that banned member banks from issuing cards with AmEx and Discover.
The suit followed the decision by the U.S. Supreme Court that let stand a lower court ruling that the rule violated antitrust laws. The decision freed Visa and MasterCard member banks to issue cards with AmEx and Discover. Since then, several large card issuing banks have rolled out cards carrying the AmEx brand.
As part of the settlement AmEx dropped its suit against Capital One, JPMorgan Chase, US Bancorp, Providian (since bought by Washington Mutual), and Wells Fargo. AmEx had already dropped Bank of America, HSBC Holdings and USAA Federal Savings from the suit. AmEx Chairman and CEO Kenneth I. Chenault said in a statement the company will continue to pursue its suit against MasterCard scheduled to go to trial next September.
Much has changed since the suit was filed. MasterCard went public and quickly became an investorís darling. Visa has announced plans to go public with its initial public offering tentatively scheduled for the first quarter of 2008. Morgan Stanley spun off Discover last year. Neither MasterCard nor Discover had released statements on the announcement by insideARMís deadline.