American Express this morning filed a lawsuit against Visa, MasterCard and eight U.S. bank issuers for what it dubbed anti-competitive practices. Amex seeks monetary damages it said should amount to billions for lost business it attributed to Visa and MasterCard's exclusionary bylaws that prohibited bank issuers from working with closed-loop card networks.
In addition to Visa and MasterCard, American Express named J.P. Morgan Chase, Bank of America and U.S. Bancorp, among others, in the suit filed this morning in the U.S. District Court in Manhattan. American Express said bank issuers that are negotiating deals to issue its cards are not included in the suit. MBNA earlier this month became the first such issuer and Amex said other deals are in the pipeline.
Amex's move represents the latest blow to Visa and MasterCard, which last month failed to gain a Supreme Court review of a Department of Justice case that ultimately repealed the exclusionary bylaws.
"This is a lawsuit that ought not to have been necessary," said American Express lead outside counsel David Boies, founding partner of Boies, Schiller & Flexner. "It deals with conduct that is repeatedly found to be unlawful. It was found unlawful outside the United States, in Canada and Europe and South America. It was found unlawful by the United States Department of Justice. It was found unlawful by the district court that tried this case. It was found unlawful by a unanimous panel in the court of appeals."
While Amex contends prior legal decisions portend a favorable outcome for the company, MasterCard general counsel Noah J. Hanft today said in a statement that Amex as a "private plaintiff" 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."
Visa U.S.A. senior vice president Daniel Tarman today said in a statement that Visa will "vigorously fight this lawsuit because American Express already got what it wanted from the court-the ability to issue its products through Visa members."
Amex followed consumer card network Discover, which filed a similar suit early last month. American Express is not working explicitly with Discover in pursuing its case against Visa and MasterCard, but the cases should overlap in discovery and proceedings, Boies said.
Amex CEO Ken Chenault repeatedly has noted the viability of bringing legal action against Visa and MasterCard. Yet, some analysts noted the irony of suing the networks that are owned by the same banks American Express is courting to issue its cards
(BTN, Oct. 6, 2003).
Boies, however, this morning tempered such concerns and claimed a profitable relationship with Amex would be favorable for bank issuers. "This is an action that is designed to resolve damages for past conduct-conduct the courts have unanimously held was illegal and the courts unanimously held harmed American Express," Boies said. "The partnering activity is something that is going forward, and the banks freed from the conspiratorial rules in place would find it in their interest. If you take a look at some of the activities with MBNA, and perhaps other banks, you will see a viable business strategy that is beneficial not only to Amex, but to the banks themselves. It would be shortsighted and I have no reason to think the bank would engage in the shortsighted activity of saying, 'we're gong to preclude this profitable business going forward because we'll have to pay damages for what happened in the past.' "