MasterCard Inc will pay American Express Co. up to $1.8 billion in a settlement that drops a lawsuit alleging that MasterCard had illegally blocked financial firms from providing American Express cards.

Purchase, New York-based MasterCard will pay quarterly installments over three years, according to a statement from American Express.

We are pleased to have reached a settlement with terms that will enable us to keep our strong balance sheet intact, so we can continue to build on our exceptional business results and vigorously pursue our strategy, said MasterCard President and Chief Executive Officer Robert Selander.

Eliminating the uncertainty, time commitment, and expense of a prolonged court case is in the best interest of our shareholders, our customers and our management team, he stated.

Officials indicated that the settlement will help offset a weak U.S. economy as well.

Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations, said Kenneth I. Chenault, American Express chairman and chief executive officer.

While it is too early to assess the impact of these indicators, the antitrust settlement we've reached with MasterCard provides us with a multi-year source of funds that should, among other things, help to lessen the impact of this weakening economic cycle and, when conditions improve, give us the ability to step up investments in the business, Chenault added.

Under the terms of the agreement, MasterCard will make 12 quarterly payments of $150 million to American Express.

The settlement comes after Visa Inc agreed to pay American Express up to $2.25 billion last year over similar charges. In 2004 American Express sued both firms to seek monetary damages from an alleged conspiracy to boycott American Express.

The $4 billion settlement represents a very satisfactory resolution of our lawsuits against the country's two major card associations, Chenault said.