Friday, September 5, 2008

American Express Settles Lawsuit Against MasterCard

Anyone that carries an American Express or a Discover credit card is well aware that it can sometimes be difficult to find a merchant that will take the card. While some merchants choose not to accept these cards because they don’t wan to pay the interchange fees associated with them, some also choose to carry only MasterCard or Visa because there are simply more banks doing business with these credit card companies. This fact, however, may soon be changing.

American Express just recently settled with MasterCard over a case that came before the Supreme Court in 2004. According to the lawsuit, both MasterCard and Visa were in violation of antitrust laws because they took steps to prevent member banks from doing business with American Express and Discover card. The two credit card companies promptly filed suit and sued for the damages resulting from the loss of revenue they suffered.

On June 25 of this year, American Express finally settled with MasterCard – to the tune of $1.8 billion. The amount of the settlement made this one of the largest antitrust suits to ever take place in the United States. American Express had already settled its suit against Visa last year, at which time the company received a settlement of $2.25 billion.

American Express won’t be getting a windfall from MasterCard all at one time. Rather, the company will pay American Express a total of $150 million per quarter over the next 12 quarters. Visa, on the other hand, had to pay $1.5 billion of its settlement upfront. Despite the quarterly payment system, MasterCard plans to book a $1 billion charge to its current fiscal quarter because of the lawsuit.

The extra money comes just in time for American Express, which has been experiencing some financial troubles as borrowers continue to be delinquent on their payments while simultaneously borrowing less.

MasterCard and Visa have not been affected by the economy in quite the same way, however, because the two companies do not actually collect payments from credit card users. Rather, they simply collect a fee every time a credit card with their logo is used. American Express, on the other hand, collects similar fees from every transaction but also extends credit to its cardholders. As a result, MasterCard and Visa are still doing quite well with the current economic conditions because consumers are still using their credit cards to make purchases.

Despite the lawsuit settlement, MasterCard also saw a rise its shares on the same day the settlement was announced. The rise, which was equivalent to 3.4%, put the value of the shares at $289.79. American Express, on the other hand, so a decline in the value of its shares with the current value being $40.94.

About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for . For more info and to order your credit report with FREE credit score please visit

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