MasterCard, American Express Settle

Source: Exec Digital USA

Date :6/25/2008 6:40:51 AM

MasterCard Inc has today, June 25, announced it will pay American Express Co as much as US$1.8billion to settle a complaint that MasterCard and Visa blocked banks from issuing its cards.

The agreement, which American Express said will generate funds as the weakening economy cuts into its main business, will cost MasterCard, the world's second-largest credit-card network, about US$1billion over three years after taxes.

New York-based American Express, the third-largest credit-card network, said the payments will act as a cushion against borrower defaults, which are likely to be more than expected.

The settlement stems from a 2004 lawsuit American Express filed against MasterCard, Visa and eight banks that claimed the card associations' “anti-competitive practices” prevented 20,000 US banks from issuing its credit-cards.

With the MasterCard settlement and a similar deal with Visa and other parties tied up late last year, American Express will be receiving as much as US$4billion through 2011. MasterCard agreed to make 12 quarterly payments of US$150million each.

In November, Visa settled with American Express for about US$2.1billion, in a deal that combined with payments from other parties could net it up to US$2.25billion.

MasterCard said that after taxes, and accounting for the fact that settlement payments will be made over time, the value of the deal is estimated to be about US$1billion.