MasterCard to Pay American Express $1.8 Billion to Settle Antitrust Suit

American Express scored a major victory today, announcing that MasterCard Inc. will pay it as much as $1.8 billion to settle an antitrust lawsuit over competition in the payment card market. The announcement follows an agreement by Visa Inc. last year to pay AmEx $2.25 billion to settle a similar suit.

“The $4 billion settlement represents a very satisfactory resolution of our lawsuits against the country’s two major card associations,” AmEx Chairman and CEO Kenneth I. Chenault said in a statement.

AmEx (NYSE: AXP) said it would receive about $880 million a year for three years from the two settlements.

AmEx agreed to drop its suit against MasterCard (NYSE: MA) for limiting its ability to compete in the card marketplace due to MasterCard rules that forbid its member banks from issuing American Express cards. In return, MasterCard will make 12 quarterly payments of $150 million to AmEx. The payments will begin in the third quarter, and the exact amount depends on AmEx’s U.S. network service division meeting certain performance benchmarks.

MasterCard reported it will take a $1 billion charge on the settlement in its current fiscal quarter.

AmEx filed its suits against Visa and MasterCard in 2004. It followed a court ruling in an antitrust lawsuit brought by the U.S. Department of Justice against the two networks. The court ruled that the two networks violated antitrust statues by banning any deals between their member banks and other payment networks such as AmEx and Discover Financial Services.

Discover’s antitrust suits against Visa and MasterCard are still pending.

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