One consequence of the Supreme Court's refusal to hear an appeal of the antitrust suit against MasterCard International and Visa U.S.A. was predictable: more litigation.
Just moments after the decision was announced, Discover Financial Services Inc. filed suit against the two card associations, whose exclusionary rules have prevented their bank members from issuing cards that operate on outside payment networks. American Express Co. chairman and chief executive Kenneth Chenault said it is considering suing Visa and MasterCard.
Harder to gauge is how the market will change now that Amex and Discover are free to team up with banks.
MBNA Corp. says the first of its long-awaited Amex cards will be available in a matter of weeks ("not months," said an MBNA spokesman). And in an interview, Mr. Chenault predicted a "good level" of transaction volume in the coming quarters from "a number of partners, small, medium, and large, that will want to offer cards that will help them attract high-spending customers."
Discover, on the other hand, does not plan to issue bank cards until sometime next year.
"We have been preparing in terms of systems and hooking up processors, and we are far down the tracks," said David Nelms, the Morgan Stanley unit's chairman and CEO, in an interview Monday.
"Now that this cloud has been removed, we look forward to moving forward with new partners," Mr. Nelms said. "We are very close to having some live cards issued." He would not name any potential bank partners.
And while analysts called the court's decision good news for both Discover and American Express, Visa and MasterCard once again belittled the ambitions of rival payment system operators.
Visa spokesman Daniel Tarman called MBNA's plan to issue Amex cards an "experiment" that would not go anywhere.
MasterCard's general counsel, Noah J. Hanft, said in a press release that "American Express may, in the short run, be able to induce a small number of financial institutions to experiment with American Express issuance in the United States."
But most issuers, "just like those outside the U.S., will realize that these arrangements stand to benefit American Express more than … them or their cardholders," Mr. Hanft said.
Mr. Chenault countered that his company's international partners have issued 7.2 million Amex cards and enrolled 3 million merchants.
The court let stand a 2001 decision on the Justice Department lawsuit that forced Visa and MasterCard to drop exclusionary rules.
Discover, of Riverwoods, Ill., filed its suit in a federal court in New York. Mr. Nelms said it would pursue damages for both credit and debit cards. It has not determined a dollar amount.
"If you look at offline debit, Visa and MasterCard have 100%," Mr. Nelms said. "How do you quantify being locked out of debit and financial institutions for all these years?"
Mr. Chenault took aim at recent derogatory comments by Visa U.S.A. chief Carl Pascarella about American Express.
"He knew he would lose" the case, Mr. Chenault said. "That is why he went on that speaking binge." In recent weeks Mr. Pascarella has spoken about the antitrust case on cable television programs as well as at a conference for bank card issuers.
Of Mr. Pascarella's prediction that banks will partner with American Express but then drop the partnership when they find that transaction volume goes down, Mr. Chenault said the comments contradict Visa's tough stand against bank/Amex partnerships.
"The reality is they fought for years to retain exclusionary bylaws, and now he says it doesn't make a difference," Mr. Chenault said. "Why did you subject your members to this court case? It is absurd."
Bruce Hammonds, the chief executive of MBNA, said in a press release Monday that his company plans to market its Amex cards to "people from many walks of life - from doctors, lawyers, and teachers to college alumni and environmentalists" who "will be able for the first time to obtain an American Express card along with Visa or MasterCard from a single U.S. banking partner."
"Many affluent customers will prefer the American Express brand as being better positioned to reflect their affinity interest," Mr. Hammonds said.
Mr. Nelms said Discover has not held discussions with Visa or MasterCard over a potential settlement. He said he hopes the case will proceed quickly, because the testimony from the Justice Department lawsuit would limit the amount of discovery and "back and forth that is needed."
Discover filed immediately after the Supreme Court ruling so it could "move quickly and put that behind everyone," Mr. Nelms said. He said that Discover's damages might be higher than Amex's and that Discover had not talked with Amex about filing suits together.
"Consumers have been more directly adversely impacted by our exclusion," Mr. Nelms said. "It gives us a stronger case than American Express."
Discover was first to respond to the court ruling, but others involved in the dispute seemed to treat the issuer like an afterthought.
The statements put out by Visa and MasterCard did not even mention Discover as a competitor, though MasterCard issued a second statement a few hours later that addressed Discover's lawsuit.
Even MBNA seemed to dismiss Discover. The court's decision "gives us the opportunity to market three major brands of credit cards," said Jim Donahue, a spokesman for the Wilmington, Del., issuer.
Asked about the possibility of adding a fourth network, Discover, to its card brands, Mr. Donahue replied, "We are always open to new business opportunities."
Spokespeople from both Visa and MasterCard said their lawyers had only just received the Discover lawsuit and had not had enough time to review it.
In a research note Monday, Susquehanna Financial Group analyst Michael D. Cohen wrote that he met last week with MBNA managers and that they told him the company had "strong initial indications of interest for American Express-branded cards from its customer base."
The incremental transaction volume from partnerships could "present an attractive opportunity for capital-efficient revenues in the long term" for American Express, Mr. Cohen wrote.
