Credit in Antitrust Rule


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Credit in Antitrust Rule

Updated: May 28, 2019

The content is accurate at the time of publication and is subject to change.
This content is not provided by Citi. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the Citi.

Credit card companies are fierce and merciless in their struggle for more customers. They resort to numerous legal tricks to cut the ground from under each others' feet and if there were no legislation to control their maneuvers, it would perhaps end up in a real fight on the credit card market field.

Sometimes, however, the legislation is violated with long and costly law suits following. The latest celebrated case involved such giant financial services companies as Visa and American Express, and as much as $2.1 billion to settle the suit.

Before going into details of the discord between American Express and Visa, let's say a few words of the legislation that gave the legal force to the suit. Have you heard of the Antitrust Rule? If you are ordinary cardholder without a financial or legal education, you must be incompetent in this question.

Ok, the Antitrust Rule covers any law that restricts business practices judged as monopolistic or unfair. So, how did Visa violate the rule so that it was assigned to pay American Express $2.1billion dollars?

The Supreme Court has fairly accused Visa and MasterCard of breaking the Antitrust rule by prohibiting its member banks from offering their customers credit card applications of their rivals.

American Express is not the only company outraged by such a self-profit policy on the part of Visa and MasterCard.

Such a move from these two credit giants is not quite comprehended and far not approved by most financial experts and analysts. The point is that the credit card industry has advanced significantly in the matter of antitrust legislation and such important institutions as Citibank and Bank of America are already offering their customers American Express-branded credit cards.

The Antitrust Rule is thus a most essential element in the competition between credit companies helping their mutual benefit.

So, Visa and MasterCard have in fact deprived Amex and Visa of billions of revenues from credit card fees and rates customers would have paid, had they got these cards.

So, what's the Supreme Court's settlement of the case? The agreement assigns Visa to pay the amount claimed in portions. First it pays $945 million and then makes an additional pay by the end of March. Then, American Express will regularly be paid $70 million each quarter until the settlement is fully paid and the agreement thus effected.

The money is planned to cover several significant expenses, such as investments in credit card rewards program and marketing operations as well as the cost of the legal process.

And what about MasterCard? Well, it is not quite clear yet whether MasterCard will also be subject to the revenue damages coverage, but its spokesman is firmly confident in their rightful position and thus legitimate protection.

Still, even without the MasterCard penalty payments, this settlement enforced by the Supreme Court is said to be the largest amount ever paid to resolve an antitrust issue.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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