Morgan Stanley Sues Visa Over U.K. Access

Morgan Stanley Dean Witter & Co. sued Visa International in London Thursday, charging that the card association’s bylaws illegally prevent the Discover card’s owner from issuing cobranded Visa cards in the United Kingdom.

Visa’s bylaws prohibit its competitors from gaining access to Visa’s transaction network. The suit argues that, because Morgan Stanley, the parent of Discover Financial Services, does not have its own card network abroad, it should not be considered a competitor of Visa in Europe.

Morgan Stanley entered the U.K. credit card market last year when it introduced a MasterCard product bearing the Morgan Stanley name. MasterCard licensed its brand name to a bank chartered by Morgan Stanley.

The suit alleges that Visa breached both U.K. and European Union rules on competition. It also claims Visa thwarted Morgan Stanley’s attempt to buy Bank One Corp.’s credit card business in Canada and the United Kingdom because one condition of the deal was Morgan Stanley’s acceptance as a Visa member.

Morgan Stanley is claiming damages associated with the aborted Bank One portfolio acquisition. It is also asking the court to order Visa to admit Morgan Stanley as a member of the association.

In a press release, Morgan Stanley said Visa’s exclusionary bylaw constitutes “a course of conduct designed to prevent MSDW from issuing Visa cards.”

The Discover Card unit’s frustration over its inability to work with MasterCard and Visa banks in the United States is one issue at the center of the Justice Department’s antitrust suit against Visa and MasterCard, which is being heard in U.S. District Court for the Southern District of New York.

Anita Boomstein, a partner in the New York law firm of Hughes, Hubbard & Reed who specializes in credit card law, said Morgan Stanley “is interested in issuing a card and is willing to challenge Visa rules in order to do so.”

The two parties “have been at odds with each other for years,” she said, referring to Dean Witter, Discover & Co.’s failed suit against Visa U.S.A. Inc. in 1992 after a thrift in Utah was denied renewal of its Visa membership because it had been bought by Dean Witter. The latter merged with Morgan Stanley & Co. in 1997.

In the Utah thrift case, a jury found in favor of Dean Witter, but the decision was overturned on appeal.

Visa declined to comment.