The Finch Formerly Known As Gold

13 October 2004

Don't leave court without it

Bylaw 210(e) is part of the agreement a bank signs with Visa to be able to issue Visa cards. MasterCard's "Competitive Programs Policy" is similar. Both these clauses say basically the same thing: you can offer Visa and/or MasterCard, but no other credit cards.

In 1998, American Express, having been rebuffed in an effort to sign up banks to issue Amex cards, managed to persuade the Department of Justice that these policies were anticompetitive, and the government duly sued.

Three years later, the government won its case: Southern District of New York Judge Barbara Jones ruled that the policies violated antitrust laws. Visa and MasterCard appealed the decision, MasterCard arguing that American Express was not being denied access to customers by these policies. The 2nd District Court of Appeals upheld Judge Jones earlier this year. And the Supreme Court has now declined to hear further appeals, meaning American Express and Discover are now free to contract with banks.

MBNA, the third-largest card issuer (the merged Chase/Bank One is first, followed by Citibank), had already negotiated a deal to issue American Express cards, pending resolution of the suits, and they're ready to go after new and presumably upscale customers.

Posted at 3:52 PM to Common Cents


Quite some time ago they (AMEX) dealt with it by simply creating their own bank ;) Ever hear of "American Express Centurion Bank"?

Also once upon a time when they offered lines of credit to Gold card members a bank administered it.

Perhaps that was different.

Posted by: ms7168 at 11:29 AM on 14 October 2004

Yay! More "Extremely Urgent Time Sensitive" junk mail!

Posted by: Dan at 11:41 AM on 14 October 2004

Discover started with the little Greenwood Trust Company bank in Delaware. (Which is still in existence, under the name Discover Bank; I drove by a branch last summer.)

The idea, though, was to get banks that were already issuing Visa/MasterCard to go along with Amex or Discover. I expect some more of the big boys will jump at the idea, but I don't see it happening at small neighborhood banks, even though they tend to issue cards that actually emanate from said big boys in the first place.

Posted by: CGHill at 12:24 PM on 14 October 2004