Discover Financial Services filed a lawsuit several months ago against Visa Inc. and MasterCard Inc. in which it was asking for $6 billion in damages. If the suit is successful, the damages can be tripled under the antitrust laws. It’s alleged that the giant credit-card companies “squashed competition” from smaller companies. Confidential filings were unsealed recently by the judge in the suit which was pending in federal court in the Southern District of New York. Discover, the fourth-largest credit card network, filed the lawsuit in October 2004 against Visa and MasterCard, claiming the two largest networks broke the law by barring member banks from offering rival cards. As you may recall, Visa agreed last year to pay $2.25 billion to American Express Co. in a settlement of a parallel suit. The big boss at Discover says that company settled way too cheaply!
The documents had been filed under protective order since the case began. The lawsuits by Discover and American Express followed a U.S. Supreme Court ruling that Visa and MasterCard violated antitrust laws in competing against smaller companies. Like New York-based American Express, Discover extends credit and runs a network that processes transactions for other lenders. Visa and MasterCard only operate networks and don’t make loans to consumers. While some of the more powerful in Corporate America are trying their best to shut down the courts to ordinary Americans, it appears some corporations still like the system.
Source: Bloomberg News
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