The Supreme Court yesterday cleared the way for banks to begin issuing credit cards bearing logos such as American Express and Discover while continuing to offer Visas and MasterCards.
The high court let stand lower court rulings that Visa and MasterCard violated antitrust laws when they barred banks that issued their cards from also issuing cards bearing competing brands.
"This is a transformational event, [comparable to] the telephone company breakup," exulted Kenneth I. Chenault, American Express Co. chairman and chief executive. "What you are going to see is a tremendous increase in competition, which is going to lead to amazing innovation."
"This could change plastic as we know it," he said.
David W. Nelms, chairman and chief executive of Discover Financial Services Inc., a unit of Morgan Stanley, hailed the decision as "a victory for consumers, merchants and financial institutions."
Discover also announced that it has filed suit against Visa and MasterCard to recover damages it says it suffered as a result of the two associations' "anticompetitive business practices."
Discover did not specify the amount it plans to seek, but Nelms said it would be "substantial."
Visa has 323 million accounts, MasterCard has 264 million, Discover has 50 million, and American Express has 37.5 million, according to the companies.
American Express officials said the high court decision "reaffirmed the viability" of bringing such a suit, but they would not say whether the company plans to do so.
The high court's rejection of Visa and MasterCard's appeal ended a case originally brought by the Justice Department in 1998, following a two-year investigation. The department argued that Visa and MasterCard -- associations owned by their member banks -- do not compete with each other, but instead work together to fend off competitors.