Nov 07
Visa to Settle American Express Antitrust Suit for Record $2.25 Billion
Nov 07, ‘07 — CNBC is reports, “Visa has tentatively agreed to pay American Express a record $2.25 billion to settle a three-year-old antitrust case, CNBC has learned.” The payment, which still needs to be approved by Visa’s members, is being described as the largest antitrust settlement in U.S. history.
American Express filed an antitrust suit against Visa and MasterCard three years ago, claiming that American Express had been shut out of offering credit cards through banks that were Visa or MasterCard members.
MasterCard hasn’t settled the suit and apparently will take the case to court. If it loses, it faces triple damages.
One reason why Visa settled is that the Justice Department and the courts had weighed in against both Visa and MasterCard and found that they engaged in anticompetitive practices, a ruling upheld on appeal by the Supreme Court. Also, Visa is preparing for an initial public offering soon.
The lawsuit came on the heels of the Supreme Court’s vindication of the DOJ and sought solely to establish monetary damages that American Express suffered because of its two competitors’ actions, given that the courts had already ruled in its favor. The suit also had named a number of banks that cooperated with Visa and MasterCard in shutting out American Express.
Though it did not attach an official dollar number to the suit, American Express said it lost billions because of the practices. The company said it was prevented from launching a planned new generation of products and for eight years could not compete on a level ground with Visa and MasterCard in providing network services to banks.
Visa plans to pay half of the $2.25 billion now and the other half over four years. The deal has been approved by Visa’s general counsel.
Visa’s settlement could be announced in coming days and is a big victory for famed antitrust lawyer David Boies. At the time the suit was filed, Boies alleged the defendants were operating as “a cartel to eliminate competition and ignore the American consumer.”" More at CNBC.