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NEW YORK : MasterCard agreed to pay American Express up to 1.8 billion dollars to settle an antitrust lawsuit, the companies said on Wednesday.
American Express said it had reached an agreement with MasterCard to drop the lawsuit alleging it had illegally blocked Amex from the bank-issued credit card business in the US market.
Under the terms of the agreement, MasterCard will pay American Express up to 1.8 billion dollars in 12 quarterly instalments, beginning with the third quarter of 2008.
Amex pointed out that the settlement with MasterCard followed an earlier agreement with Visa to settle similar claims for up to 2.25 billion dollars.
Calling the combined antitrust settlement "the largest in US history," American Express said it would receive more than four billion dollars for agreeing to drop its claims against the two credit card networks.
The case, filed in US federal court in November 2004, centres around allegations that the two major credit-card issuers, Visa and MasterCard, illegally colluded to keep their member banks from issuing cards branded by American Express or other issuers.
Following its settlement with Visa in November 2007 and the dismissal of all the bank defendants, MasterCard was the sole remaining defendant in the antitrust lawsuit, which will now be dismissed.
Kenneth Chenault, American Express chairman and chief executive, said the multi-year payments will help cushion deteriorating conditions in the world's largest economy.
"Business conditions continue to weaken in the US and so far this month we have seen credit indicators deteriorate beyond our expectations," Chenault said.
"While it is too early to assess the impact of these indicators, the antitrust settlement we've reached with MasterCard provides us with a multi-year source of funds that should, among other things, help to lessen the impact of this weakening economic cycle and, when conditions improve, give us the ability to step up investments in the business."
MasterCard said it would take an after-tax charge of approximately one billion dollars for the settlement in the current quarter, citing a maximum nominal amount of 1.8 billion dollars.
The payments from both MasterCard and Visa are subject to American Express achieving certain quarterly performance criteria in its US Network services business. - AFP/de
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