I've got a "New Campaign Idea" for MasterCard... Here goes:
Screw with Wal Mart: $1.0 Billion
Screw with American Express: $1.8 Billion
Screw with Wal Mart: $1.0 Billion
Screw with American Express: $1.8 Billion
Screw with Discover: $3.0 Billion?
IPO to cover damages: Priceless!
"Under the terms of the agreement, MasterCard will pay American Express up to $1.8 billion. This follows an earlier agreement with Visa to settle similar claims for up to $2.25 billion. Subject to certain performance criteria, American Express would receive more than $4 billion for agreeing to drop its claims against the two credit card networks. The combined antitrust settlement is the largest in U.S. history."
From the Wall Street Journal:
American Express Co. has reached a $1.8 billion settlement with MasterCard Inc. over the card issuer's lawsuit with the payment processor over allegations MasterCard, Visa Inc. and some member banks prohibited financial firms from issuing credit cards through American Express.
Meanwhile, American Express Chairman and Chief Executive Ken Chenault said credit indicators have weakened "beyond our expectations" amid continued weakening in U.S. business conditions. He added it is "too early to assess the impact," but that the antitrust settlement should "help to lessen the impact of this weakening economic cycle."
Beginning in the third quarter, MasterCard will make 12 quarterly payments of $150 million, contingent upon the performance of American Express' U.S. Global Network Services Business. MasterCard will take a $1 billion charge in the second quarter.
"We are pleased to have reached a settlement with terms that will enable us to keep our strong balance sheet intact," said MasterCard President and Chief Executive Robert W. Selander. He added that "eliminating the uncertainty" of a prolonged court case is in the best interest of shareholders.
In 2004, American Express sued Visa, MasterCard and eight of their member banks for imposing rules that had prohibited financial institutions from issuing credit cards through American Express. The lawsuit was filed shortly after the U.S. Supreme Court let stand a lower-court ruling that forced Visa and MasterCard to allow their member banks to issue credit cards on rival networks.
Visa agreed to a $2.25 billion settlement in November. Coupled with the MasterCard payments, American Express will receive $880 million annually for the next three years.
# # #
If you’re reading with a sense of deja vu, that’s because Visa and MasterCard have spent lots of time in court defending themselves from antitrust allegations. Let’s review:
In 1996, merchants filed a class-action lawsuit against Visa and MasterCard alleging they were attempting to monopolize the debit card market. On the eve of trial in 2003, the parties agreed to a boffo $3.4 billion settlement, called the largest in an antitrust case. The lead counsel in that case was Lloyd Constantine of Constantine & Partners.
MasterCard's settlement with AmEx is only Part 1. As I posted in this blog a couple weeks back, Lloyd Constantine is heading up Discover's antitrust lawsuit and seeking $6 Billion in damages. (Visa said at the time the amount was ``dramatically overstated'' and MasterCard called the suit "baseless.'' Maybe MasterCard might want to look up the word "baseless" in a dictionary. They might also consider the savings derived from representing themselves in court since their attorneys aren't getting any better results. Here's a better idea... admit wrongdoing and just pay up. Then consider ceasing and desisting with these types of business practices. After all, Visa and MasterCard have demonstrated this behavior for many years now and their track record in court is dismal.
In 1998, the DOJ brought a successful antitrust lawsuit against Visa and MasterCard arguing that the companies colluded to fend off competiton. In 2004, the Supreme Court let stand a Second Circuit ruling that ruling that Visa and MasterCard violated antitrust laws when they barred banks that issued their cards from also issuing AmEx and Discover cards.
In 2004, on the heels of the Supreme Court’s ruling, AmEx filed this lawsuit against Visa, MasterCard and eight of their member banks for imposing rules that had prohibited financial institutions from issuing AmEx cards. Even though the DOJ’s lawsuit had forced Visa and MasterCard to drop their exclusionary rules, Boies explained to the WSJ yesterday that a private company that is hurt by an antitrust violation can sue for “historical damages plus future damages from the historical acts.”
As part of this settlement, AmEx dropped the member banks from the lawsuit but not Mastercard. “The size of this settlement, along with earlier court rulings, underscores the seriousness of the damage done by the illegal boycott,” said Ken Chenault, AmEx’s CEO. “We plan to move forward with the litigation to hold MasterCard accountable for the illegal actions that blocked banks from working with us for many years.” Yeah, to the tune of $1.8 Billion.
The question nobody's asked is "How much did Visa and MasterCard profit over and above the settlements by engaging in this type of corporate rogueness? They have been found guilty time after time against "major players" (Wal*Mart, AmEX, Discover, etc) in the industry. These major players are the ones laced with deep pockets, one's who can withstand the enormously expensive and time consuming process involved with taking these big boys on. Smaller players such as Pay By Touch, a company of which I was a founding member, aren't as fortunate.
Case in point...Visa and MasterCard "defined" a "more secure" biometric transaction as a "less secure" Card Not Present (CNP) transaction. In reality, a biometric transaction is inherently more secure than a "card present (CP) transaction, let alone a CNP transaction. There's not an analyst alive who would disagree. But Visa and MasterCard did. The end-result of Visa/MC defining biometrics as a CNP transaction was severe in terms of preventing retailer participation. After all, why would a retailer switch to biometrics in order to pay a higher fee than they were currently paying? That's why retailers like SuperValu only allowed biometrics to be ACH based. And it cost PBT (and me) big. There tactics were successful with Pay By Touch because of V/MC's stronghold in the payments industry.
A second case in point...Why did PIN Debit took so long to take hold in the bricks and mortar space when it's more secure and preferred by customers? The answer is simple. Visa and MasterCard (and the banks) make more money on signature debit. Who cares that it's less secure? Who cares that it's preferrred by consumers? That's why rewards programs are mostly attached to signature debit and why some banks charge consumers to use PIN Debit. It's nuts.
So don't expect this to end when Discover wins it's $6 Billion from these guys. Pay By Touch is gone, but companies like HomeATM aren't going to stand by idly IF Visa/MC try and starve them out, as they did Pay By Touch.
"Under the terms of the agreement, MasterCard will pay American Express up to $1.8 billion. This follows an earlier agreement with Visa to settle similar claims for up to $2.25 billion. Subject to certain performance criteria, American Express would receive more than $4 billion for agreeing to drop its claims against the two credit card networks. The combined antitrust settlement is the largest in U.S. history."
From the Wall Street Journal:
American Express Co. has reached a $1.8 billion settlement with MasterCard Inc. over the card issuer's lawsuit with the payment processor over allegations MasterCard, Visa Inc. and some member banks prohibited financial firms from issuing credit cards through American Express.
Meanwhile, American Express Chairman and Chief Executive Ken Chenault said credit indicators have weakened "beyond our expectations" amid continued weakening in U.S. business conditions. He added it is "too early to assess the impact," but that the antitrust settlement should "help to lessen the impact of this weakening economic cycle."
Beginning in the third quarter, MasterCard will make 12 quarterly payments of $150 million, contingent upon the performance of American Express' U.S. Global Network Services Business. MasterCard will take a $1 billion charge in the second quarter.
"We are pleased to have reached a settlement with terms that will enable us to keep our strong balance sheet intact," said MasterCard President and Chief Executive Robert W. Selander. He added that "eliminating the uncertainty" of a prolonged court case is in the best interest of shareholders.
In 2004, American Express sued Visa, MasterCard and eight of their member banks for imposing rules that had prohibited financial institutions from issuing credit cards through American Express. The lawsuit was filed shortly after the U.S. Supreme Court let stand a lower-court ruling that forced Visa and MasterCard to allow their member banks to issue credit cards on rival networks.
Visa agreed to a $2.25 billion settlement in November. Coupled with the MasterCard payments, American Express will receive $880 million annually for the next three years.
# # #
If you’re reading with a sense of deja vu, that’s because Visa and MasterCard have spent lots of time in court defending themselves from antitrust allegations. Let’s review:
In 1996, merchants filed a class-action lawsuit against Visa and MasterCard alleging they were attempting to monopolize the debit card market. On the eve of trial in 2003, the parties agreed to a boffo $3.4 billion settlement, called the largest in an antitrust case. The lead counsel in that case was Lloyd Constantine of Constantine & Partners.
MasterCard's settlement with AmEx is only Part 1. As I posted in this blog a couple weeks back, Lloyd Constantine is heading up Discover's antitrust lawsuit and seeking $6 Billion in damages. (Visa said at the time the amount was ``dramatically overstated'' and MasterCard called the suit "baseless.'' Maybe MasterCard might want to look up the word "baseless" in a dictionary. They might also consider the savings derived from representing themselves in court since their attorneys aren't getting any better results. Here's a better idea... admit wrongdoing and just pay up. Then consider ceasing and desisting with these types of business practices. After all, Visa and MasterCard have demonstrated this behavior for many years now and their track record in court is dismal.
In 1998, the DOJ brought a successful antitrust lawsuit against Visa and MasterCard arguing that the companies colluded to fend off competiton. In 2004, the Supreme Court let stand a Second Circuit ruling that ruling that Visa and MasterCard violated antitrust laws when they barred banks that issued their cards from also issuing AmEx and Discover cards.
In 2004, on the heels of the Supreme Court’s ruling, AmEx filed this lawsuit against Visa, MasterCard and eight of their member banks for imposing rules that had prohibited financial institutions from issuing AmEx cards. Even though the DOJ’s lawsuit had forced Visa and MasterCard to drop their exclusionary rules, Boies explained to the WSJ yesterday that a private company that is hurt by an antitrust violation can sue for “historical damages plus future damages from the historical acts.”
As part of this settlement, AmEx dropped the member banks from the lawsuit but not Mastercard. “The size of this settlement, along with earlier court rulings, underscores the seriousness of the damage done by the illegal boycott,” said Ken Chenault, AmEx’s CEO. “We plan to move forward with the litigation to hold MasterCard accountable for the illegal actions that blocked banks from working with us for many years.” Yeah, to the tune of $1.8 Billion.
The question nobody's asked is "How much did Visa and MasterCard profit over and above the settlements by engaging in this type of corporate rogueness? They have been found guilty time after time against "major players" (Wal*Mart, AmEX, Discover, etc) in the industry. These major players are the ones laced with deep pockets, one's who can withstand the enormously expensive and time consuming process involved with taking these big boys on. Smaller players such as Pay By Touch, a company of which I was a founding member, aren't as fortunate.Case in point...Visa and MasterCard "defined" a "more secure" biometric transaction as a "less secure" Card Not Present (CNP) transaction. In reality, a biometric transaction is inherently more secure than a "card present (CP) transaction, let alone a CNP transaction. There's not an analyst alive who would disagree. But Visa and MasterCard did. The end-result of Visa/MC defining biometrics as a CNP transaction was severe in terms of preventing retailer participation. After all, why would a retailer switch to biometrics in order to pay a higher fee than they were currently paying? That's why retailers like SuperValu only allowed biometrics to be ACH based. And it cost PBT (and me) big. There tactics were successful with Pay By Touch because of V/MC's stronghold in the payments industry.
A second case in point...Why did PIN Debit took so long to take hold in the bricks and mortar space when it's more secure and preferred by customers? The answer is simple. Visa and MasterCard (and the banks) make more money on signature debit. Who cares that it's less secure? Who cares that it's preferrred by consumers? That's why rewards programs are mostly attached to signature debit and why some banks charge consumers to use PIN Debit. It's nuts.
So don't expect this to end when Discover wins it's $6 Billion from these guys. Pay By Touch is gone, but companies like HomeATM aren't going to stand by idly IF Visa/MC try and starve them out, as they did Pay By Touch.
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