|
MasterCard to pay $1.8 billion to settle AmEx suit
2008-06-25
NEW YORK - American Express said Wednesday MasterCard will pay it as much as $1.8 billion to settle an antitrust lawsuit, as it warned credit losses may increase as business conditions deteriorate. American Express had accused the Purchase, N.Y.-based credit and debit card processor of conspiring to stifle some banks from issuing its credit cards. Last year, the company reached a $2.7 billion settlement with Visa Inc. in a similar suit. MasterCard confirmed that it agreed to make 12 quarterly payments of $150 million to American Express. The company plans to book a $1 billion charge related to the settlement in the current fiscal quarter. "We are pleased to have reached a settlement that will enable us to keep our strong balance sheet intact," MasterCard Chief Executive Robert Selander said in a statement. He said the settlement was in the best interest of shareholders because it removed "the uncertainty, time commitment and expense of a prolonged court case." American Express said it will receive about $800 million a year for three years from the two settlements, which total more than $4 billion. Meanwhile, the lender warned that consumer credit is worsening faster than it had expected in June as the U.S. economy continues to weaken. On Tuesday, the Conference Board reported that consumer confidence had fallen to its lowest level since 1992, as high energy prices and a worsening job market begin changing attitudes toward discretionary spending. There are also indicators that more people are falling behind on credit card payments, even as the number of mortgages in some stage of foreclosure reach record levels. "While it is too early to assess the impact of these indicators, the antitrust settlement we've reached with MasterCard provides us with a multiyear source of funds that should, among other things, help to lessen the impact of this weakening economic cycle," AmEx Chief Executive Kenneth Chenault said in a statement. American Express shares fell 1.4 percent to $41.51 in premarket trading, while MasterCard shares rose 3.8 percent to $290.95.
| 
