American Express Sues Visa, MasterCard for Anti-Competitive Practices
{{#rendered}} {{/rendered}}American Express Co. (AXP) Monday sued credit card associations Visa and MasterCard and eight banks for damages from what it called anti-competitive practices that prevented 20,000 U.S. banks from using its credit card products.
The suit comes one month after the Supreme Court (search) rejected appeals by Visa and MasterCard (search) of a ruling that the two credit card associations violated antitrust law by barring banks from issuing credit cards for rival networks.
American Express said it is seeking to recover damages from lost business that could total in the billions of dollars.
{{#rendered}} {{/rendered}}"Consumers have been damaged by the boycott by being deprived of competitive alternatives," said David Boies, who was hired by American Express to serve as its lead outside counsel. Boies served as special trial counsel for the Department of Justice in its antitrust suit against Microsoft (MSFT).
"This is a lawsuit that ought not to have been necessary. It deals with conduct that has been repeatedly found unlawful," Boise told reporters in a press conference.
American Express chief executive Kenneth Chenault (search) said in a statement, "The card associations functioned as a cartel. Banks who had expressed an interest in working with us were stopped before they could start."
{{#rendered}} {{/rendered}}Visa said in a statement it will vigorously fight the lawsuit "because American Express already got what it wanted from the court — the ability to issue its products through Visa members."
MasterCard, meanwhile, said it believes that the lawsuit is misguided, adding that "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."
Filed in Manhattan's U.S. district court, American Express' suit follows a similar one launched by Morgan Stanley's credit card unit last month.
{{#rendered}} {{/rendered}}American Express did not specify an amount of compensation. "There is not a specific number in mind. That is something to be decided at the trial. The only thing to say is the number is very large," Boies said.
The banks, which include JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), were named because they had been or currently are members of one or both credit card associations' boards of directors.
Bank of America could not immediately comment and JP Morgan declined to comment.
{{#rendered}} {{/rendered}}Last month's Supreme Court ruling stemmed from a 1998 Justice Department lawsuit challenging rules imposed by Visa and MasterCard, which operate payment systems on behalf of member banks.
Other banks named in Monday's suit include Capital One , U.S. Bancorp , Household Bank , Wells Fargo , Providian National Bank and USAA Federal Savings Bank.
A Wells Fargo representative said the firm does not comment on pending litigation, while Capital One declined to comment.