Digital Transactions Authoritative, insightful and timely information for payments professionals
Within minutes of the U.S. Supreme Court's decision this morning to let stand a lower court's ruling forcing Visa and MasterCard to allow members to issue cards on the American Express Co. and Discover Financial Services Inc. networks, Discover filed suit against the bank card associations and AmEx announced it was moving forward with its first partner, MBNA Corp. And AmEx said it is also mulling litigation against Visa and MasterCard. The first cards in the MBNA-AmEx partnership would become available “within weeks,” AmEx said, adding, as it has in the past, that it is continuing to seek similar partnerships with other U.S. banks. Some 85 banks in 94 countries outside the U.S already issue AmEx cards. AmEx and MBNA announced their alliance in January, but said they would hold marketing and issuance in abeyance pending the resolution of the bank card networks' appeal to the Supreme Court (Digital Transactions News, Jan. 30). At the same time, Discover announced it is suing Visa and MasterCard in light of today's Supreme Court decision not to hear the bank card associations' appeal. Filed in federal court in New York immediately after the high court's decision, the lawsuit seeks compensation from the bank card companies “caused by anti-competitive business practices,” Discover said in a statement. The bank card networks' “exclusionary rules limited Discover's share of the general purpose credit card market and also barred Discover from entering the debit card market,” said David W. Nelms, chairman and chief executive of Discover, in the statement. “Now that Visa and MasterCard's anticompetitive bylaws have finally been struck down as unlawful, we are moving forward with our business plans and are seeking triple damages for the harm that those violations have caused us.” In its own statement today, AmEx said it too is considering legal action along the same lines. “The Supreme Court's ruling only reaffirms the viability of this course of action,” said Kenneth I. Chenault, chairman and chief executive of AmEx. MasterCard said this afternoon it had not yet read the lawsuit from Discover, but added: “We find it highly ironic that they would take this action, given the company's past statements. In previous court testimony, Discover Financial Services Chairman and CEO David Nelms maintained that the fundamental flaw in the government case was that the result would be less?not more?competition, if MasterCard's Competitive Programs Policy was revoked. Under cross examination, Nelms testified that if the government prevailed, Discover would be less competitive, that consumers could be hurt, and that only American Express would benefit.” The statement, released by Noah J. Hanft, MasterCard general counsel, goes on to say: “MasterCard believes this lawsuit is misguided, and will defend itself vigorously against any claims that Discover was injured or suffered damages as a result of MasterCard's policy.” A federal court in October 2001 struck down a longstanding rule at both bank card associations barring member banks from issuing cards with either AmEx or Discover. The ruling culminated a suit brought by the U.S. Department of Justice in 1998 challenging certain bank card rules. An appeals court upheld the ruling a year ago, and earlier this year Visa and MasterCard took their case to the Supreme Court, which this morning rejected without comment the bank card networks' separate appeals.
