Beggars can't be choosers. In this environment, financial companies will take revenue any way they can get it.
In 2004, the Supreme Court ruled that MasterCard and Visa
AmEx received a huge settlement of as much as $2.25 billion from Visa in a similar suit last year. In this settlement, MasterCard agreed to make payments of $150 million per quarter for 12 quarters.
AmEx has been feeling the pinch of weaker business conditions, as borrowers grow increasingly delinquent on their payments and overall borrowing activity lessens. The company warned that credit conditions in this weak economy have deteriorated beyond previous expectations. According to AmEx CEO Kenneth Chenault, the revenue from the two settlements will provide a much-needed source of funds in a tough environment, helping to stabilize the company's balance sheet.
MasterCard and Visa have a different business model than American Express, Discover Financial, Capital One
The lawsuit revenue will definitely help American Express. Although AmEx has a great business, it tends to be more cyclical than that of MasterCard and Visa. A great company finds a way to get things done. Fortunately, the credit-card lender has lawyers to help it through the rough spots. If you can't beat them, sue them.
One can argue, as I imagine the lawyers did, that the settlement revenue compensates for actual business revenue AmEx would have earned, had MasterCard and Visa competed fairly. But it's ironic that the source of the badly needed revenue isn't a superior business plan or an ability to execute better than the competition -- just a lawsuit. How very 21st-century.
Further Foolishness has its privileges: