Visa set to back down on plan to ban banks from issuing Amex

Date: 22/02/1996

THE battle between American Express and Visa International to increase the range of credit cards on offer at European banks may be over almost as soon as it began.

Just a month after the US credit card company filed a complaint with the European Commission against London-based Visa for allegedly proposing that banks issuing Visa cards be prohibited from issuing American Express (Amex) cards, speculation is growing that Visa may be about to drop the whole idea.

At a board meeting early next month, the company may well decide to avoid a battle with Amex and a possible adverse Commission ruling by simply not raising the issue.

Amex filed the complaint with DGIV, the Directorate-General for competition, stating that the Visa board was considering a new by-law to its existing rules which would violate the Treaty of Rome by restricting competition within the EU.

The Commission has given Visa and some of its participating banks until the end of February to respond to the factual and legal arguments set out by Amex. While Visa intends to do this, it nevertheless disputes the very basis of Amex's grievance.

“There is not necessarily any such proposal on the table,” said a Visa spokesman this week. “It's premature for us to respond until such a proposal is put across and voted upon, if it is.”

The board of Visa, which is composed of representatives of the participating banks, will meet on 4-5 March and speculation is rife that the proposal will be quietly shelved.

“We are all looking at this meeting to see whether they withdraw it or present it in a different way,” said an Amex official.

Fighting Visa's move is important to Amex as it tries to gain increasing market share in Europe.

The credit card firm has long-standing marketing arrangements with Royal Bank of Scotland and Lloyds Bank, and franchise deals with Banco Comercial Português and Alpha Credit Bank, and has others in the pipeline.

Most of the banks where Amex wants to market its cards are also members of the major card associations, Visa, MasterCard or Europay. These are all associations which act on behalf of their member banks and the banks issue Visa-branded cards. Visa dominates the European market, with Barclaycard the largest credit card issuer followed by Crédit Agricole.

Amex wants to avoid a repetition of the situation in the United States, where it has been faced with a similar by-law for several years.

While Amex would welcome a decision by Visa not to pursue the alleged proposal, it would prefer a decision by the Commission in favour of opening up the market.

This would chime with the aggressive manner in which Amex announced the complaint, wrongfooting Visa with a prepared written statement and offering its European president for comment.

“It was certainly a stroke of marketing genius on Amex's part,” says Richard Martin of Credit Cards International.