MasterCard settles lawsuit with American Express

By Dan Wilchins

NEW YORK (Reuters) - MasterCard Inc, the world's second-largest credit-card network, said on Wednesday it will pay American Express Co (AXP.N) up to $1.8 billion to settle a lawsuit that said MasterCard and Visa blocked banks from issuing cards from their rival.

American Express said that so far in June, credit conditions have weakened more than it expected, and the settlement will generate funds as the weakening economy cuts into its main business.

"You can't have a distressed real estate market, a consumer led slowdown, and maybe even a recession, with no impact on credit cards," said Michael Kon, analyst at Morningstar in Chicago.

"Credit costs are going up, and American Express is not an exception," Kon added.

MasterCard said it will take a $1 billion charge in the second quarter for the settlement. The size of the charge accounts for tax benefits and the fact that the settlement is paid out over time.

MasterCard's shares rose $12.33, or 4.4 percent, to $292.70 on Wednesday morning. The size of the settlement is in line with analysts' expectations, but the deal is positive for the company's shares because it removes an outstanding concern that the market had had about the credit card network, analysts said.

American Express' shares fell 40 cents, or 0.95 percent, to $41.70, amid concern about the credit environment.

The settlement stems from a 2004 suit American Express filed against MasterCard, (MA.N) Visa (V.N) and eight banks that claimed the card associations' "anti-competitive practices" prevented 20,000 U.S. banks from issuing its credit-cards.