ollowing the Supreme Court's Oct. 4, 2004 decision to not hear an appeal by Visa U.S.A. and MasterCard International in a long-standing anti-trust suit, American Express Co. (AmEx) made good on its threat to sue the card Associations.

AmEx also named eight of the largest issuing banks that are members of the Associations, including Bank of America, JPMorgan Chase & Co., U.S. Bancorp and Wells Fargo & Co., in its complaint.

On Nov. 15, 2004, AmEx filed suit in U.S. District Court in Manhattan seeking monetary damages for business it claims it lost as a result of the illegal, anti-competitive practices of the card Associations and issuers. The suit does not specify an amount for compensation, but AmEx said it expects to seek damages totaling in the billions of dollars. Anti-trust law could triple the damages awarded.

Discover Financial Services filed a similar suit immediately following the court's October decision.

The Supreme Court's decision to let an appellate court's ruling stand effectively ended restrictions that prevented AmEx and others, including Discover Financial Services, from competing for credit card business. Visa and MasterCard have long prohibited their member banks from issuing rival brands.

The U.S. Justice Department began the proceedings in 1998, suing Visa and MasterCard for anti-trust violations. The agency won its suit in 2001, but the case went into appeals until this past October.

In a statement regarding the latest lawsuit in the card Association battle, AmEx Chairman and Chief Executive Officer Kenneth I. Chenault said in a statement, "Visa, MasterCard and their member banks restricted competition for years.

"The federal courts have already found that Visa and MasterCard broke the law. The card Associations functioned as a cartel. Banks who had expressed an interest in working with us were stopped before they could start.

"We intend to hold the Associations and their member banks accountable for their illegal actions and seek compensation for the value that would have been generated for our shareholders."

Visa and MasterCard have both vowed to fight the lawsuit.

Daniel Tarman, Visa U.S.A.'s Senior Vice President, said in a statement, "Visa will vigorously fight this lawsuit because American Express already got what it wanted from the court, [which is] the ability to issue its products through Visa members. It's time for American Express to stop looking to the courts to solve its problems and compete in the marketplace instead."

MasterCard General Counsel Noah J. Hanft said, "MasterCard believes that this lawsuit is misguided. American Express may have been successful in pressuring the Department of Justice to sue the bankcard payment networks on its behalf, but as a private plaintiff, it will face significant obstacles that the government did not face.

"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.

"American Express can no longer hide in the shadow of the government."

Earlier this year, AmEx announced a partnership with MBNA Bank to begin issuing AmEx-branded cards, which will be processed over the AmEx global network; the first of those cards were issued in November.

MBNA was not named in the lawsuit and AmEx has agreed to reimburse the issuer for certain costs that Visa and MasterCard might impose as a result of the lawsuit. Citigroup Inc., one of the nation's largest card issuers, was also not named.

Associations Under Fire Internationally

Anti-competition fever seems to be spreading around the world, too. In early November, The Office of Fair Trading (OFT), a watchdog group in the United Kingdom, announced it has undertaken an investigation into what it said are excessive interchange fees that Visa member banks charge retailers there. The group said that Visa has agreements in place with British card issuers that restrict competition.

A government study in the UK in 2000 found that interchange fees amount to about 1.1% of transaction totals. Independent research also in 2000 showed that retailers were being overcharged between œ500 million and œ1 billion as a result of the high interchange fees, according to the British Retail Consortium.

The OFT also announced it confirmed its preliminary findings on MasterCard UK, which the group has been investigating since 2000. The OFT reported that its probes showed that interchange agreements between MasterCard UK and its member banks breach European and British anti-competition rules.

As credit card spending in Britain increases, so does scrutiny of credit card issuers. Last year, credit card spending reached an all-time high at œ120 billion (US$223 billion), up from œ30 billion in 1993, according to Bank of England figures. Credit card debt has also increased, jumping from œ10 billion to œ52 billion in the same 10-year period.

In addition, Russia's Federal Anti-trust Service (FAS) is investigating Visa International's violation of market share laws. FAS will gather information from Visa's Russian member banks to substantiate charges the Association has more than the 40% of the market share allowed.