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Supreme Court frees up bank card competition

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NEW YORK — Visa USA Inc. and MasterCard International Inc. can no longer block their partner banks from issuing cards from other competitors after the Supreme Court on Monday let stand a lower court ruling that found the practice anticompetitive.

The decision opens up competition to Discover Financial Services Inc. and American Express Co. in both credit card and debit card issuance. Discover also sued the two top card issuers for damages allegedly incurred by their practices shortly after the high court decision was released.

In the Supreme Court case, the Bush administration argued in court filings that removing the restriction on banks issuing MasterCard and Visa cards would encourage competition and lead to more choices and, possibly, lower interest rates for consumers.

The administration had won in district court and the New York-based 2nd U.S. Circuit Court of Appeals, which found the restriction was anticompetitive.

About 20,000 banks issue cards only through Visa and MasterCard.

Both Discover and American Express offer their cards directly to consumers via direct mail, the Internet and a variety of marketing programs. American Express has partnered with overseas banks to issue cards, with limited success.

American Express has been trying to persuade banks to issue its cards. Under the contested rules, banks would have to give up Visa and MasterCard cards to do that, and no U.S. bank has agreed, the court was told.

American Express, which has built partnerships with card issuers outside the U.S., said it will now seek to forge similar agreements with U.S. banks for what American Express chairman and chief executive Ken Chenault called "high worth, high spending" customers.

"The reality is we've been waiting to have the opportunity to compete on an open playing field, and now we can," Chenault said in an interview with The Associated Press. "The analogy I would use is this is at the level of the phone company breakup with AT&T and the Baby Bells. This will create incredible competition, and will ultimately benefit the consumer."

Credit card issuer MBNA Corp. said it will move forward to become the first and only U.S. financial institution to issue American Express-branded cards. Other banks are expected to follow.

"We are proud to work with American Express to make greater consumer choice, flexibility and value a reality," said MBNA chief executive Bruce Hammonds in a statement.