American Express Co., the travel and financial services giant, said Monday it was suing Visa and MasterCard along with eight banks for damages stemming from anticompetitive practices that prevented American Express from issuing cards through U.S. banks.
The New York-based company did not say exactly how much it was seeking, but said it expected the total would be "in the billions of dollars."
The suit, to be filed in U.S. District Court in Manhattan, is the second against the two biggest card associations in America, Visa USA Inc. and MasterCard International Inc.
Last month, Discover Financial Services, a unit of New York-based Morgan Stanley, filed an antitrust suit against MasterCard and Visa in U.S. District Court seeking unspecified damages for alleged anticompetitive behavior that kept it out of the lucrative bank market.
The way for both lawsuits was cleared by the U.S. Supreme Court on Oct. 4, when it issued a final ruling in an antitrust case brought by the Justice Department, which accused Visa and MasterCard of restraining competition.
The high court's decision let stand a lower court ruling requiring Visa and MasterCard to allow their member banks to issue competing cards. That cleared the way for American Express and Discover to begin partnering with U.S. financial institutions.
Suits filed under antitrust law can seek triple damages.
In addition to Visa and MasterCard, the American Express suit names banks that have executives on the card associations' boards. They include JPMorgan Chase & Co., Bank of America Corp., Capital One Financial Corp., U.S. Bancorp, HSBC Card Services' Household Bank, Wells Fargo & Co., Providian Financial Corp.'s national bank and USAA's savings bank.
American Express chairman and chief executive Kenneth Chenault said in a statement that the suit was triggered by the Supreme Court ruling.
"The card associations functioned as a cartel," he said. "Banks who had expressed an interest in working with us were stopped before they could start."
He said that by restricting competition, the card associations and banks "blocked the development of a new generation of products" and "prevented American Express from competing to provide network services to banks in this country for over eight years."
Louis Parent, general counsel for American Express, told a news conference that the suit was being brought because of "the obligation to our shareholders to seek to recover our damages."
David Boies, a founding partner of Boies, Schiller & Flexner and lead attorney on the case, told reporters that the American Express and Discover cases might be combined during the initial "discovery" period in the court. But, he added, he expected they would be tried separately.
"The arguments each of us will make are particular to our approaches, and some defenses are particular either to Discover or to us," he said.
Boies declined to say how the eight banks were chosen as targets in the case, saying only that they "participated most directly in the conduct that is at issue in the complaint" or had been "the greatest beneficiaries" of the anticompetitive conduct.
Also Monday, Discover Financial Services announced that it was merging with PULSE EFT Association card processing network in a deal valued at $311 million.
The merger agreement, which is subject to regulatory and PULSE member approval, is expected to close in approximately 60 days.
"We believe the combination of the PULSE and Discover networks will create a leading electronic payments company offering a full range of products and services that will represent an attractive choice for financial institutions, merchants and consumers," said David W. Nelms, Discover's chairman and chief executive. "Together, we intend to be a robust competitor in the important and rapidly growing debit market." Discover hasn't yet announced any deals.
He said the combined companies would "join the forces of PULSE and its 4,100 member banks, credit unions and savings institutions with Discover network and its more than 4 million merchant and cash access locations."
In morning trading, shares of American Express were up 8 cents at $55.71 on the New York Stock Exchange. Morgan Stanley's shares were down 15 cents at $52.98, also on the Big Board.
Visa and MasterCard are nonprofit associations made up of thousands of banks.
Earlier this month, credit card issuer MBNA Corp. began rolling out its new American Express-branded cards in the first deal between American Express and a U.S. financial institution.