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Justices Deny Visa, MasterCard

Compiled from Wire Service Dispatches
Monday, October 4, 2004; 2:28 PM

The court denied an appeal by Visa and MasterCard to block member banks from issuing rival cards from American Express and Discover.

The decision ends a legal battle that began in the late 1990s as the Department of Justice sought to prove credit card associations Visa and MasterCard had stymied attempts by members to issue other branded cards. The end of the antitrust case now opens the doors for banks to begin issuing those cards, and kicks off a new round of legal wrangling after Discover Financial Services said it will seek damages against Visa and MasterCard. American Express said it is considering similar action.

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A federal judge in New York ruled in 2001 that the exclusionary rules of Visa and MasterCard -- which operate as joint ventures -- restrain competition in the network market because they prevent companies such as Discover and American Express from offering services to consumers. In the ruling, U.S. District Judge Barbara S. Jones said the "exclusionary rules have deterred United States issuers from entering into issuing agreements."

Credit card issuer MBNA Corp. said it will move forward to become the first and only U.S. financial institution to issue American Express-branded cards. Other banks are expected to follow.

American Express, which has built a network though card issuers outside the U.S., said it will now seek to forge similar agreements with U.S. banks.

"We are proud to work with American Express to make greater consumer choice, flexibility and value a reality," said MBNA chief executive Bruce Hammonds in a statement.

Visa said in a statement that the Supreme Court ruling won't help rivals such as American Express from gaining more acceptance in the market.

"They have cultivated a reputation of higher prices and exclusivity that the broader consumer market and many merchants have not embraced," said Visa USA senior vice president Daniel Tarman. "If the question is which payment network best serves banks, and not competing interests, Visa is the clear choice."

American Express chairman and chief executive Kenneth Chenault said in a statement the "court has decided that these rules are illegal and must be abolished. The appeals are over. A new era of greater choice for U.S. consumers and financial institutions has begun." Chenault said American Express will seek partnerships with other U.S. banks.

The Ten Commandments

The court rejected an appeal from ousted Alabama Chief Justice Roy Moore, who lost his job after defying a federal order to dismantle a Ten Commandments monument.

Moore has become a high-profile crusader for Ten Commandment monuments as a result of the dispute over his own 2 1/2-ton granite display in the state courthouse.

A federal judge ruled that Moore violated the Constitution's ban on government promotion of religion when he placed the monument in the rotunda of the judicial building in the middle of the night in 2001.

The display was moved last year over Moore's objections, and a state court removed him from office.

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