Amex chairman calls on banks to disobey Visa rule

Date: 30/05/1996

By Fiona McHugh

AMERICAN Express chairman Harvey Golub has hit back at his company's main competitor, Visa International, by urging banks not to submit to its 'bullying' tactics.

In the latest round of a bloody battle over market share, Golub is asking banks to disobey a by-law currently being considered by Visa which would, if adopted, forbid financial institutions which issue Visa cards from offering American Express (Amex) cards too.

At the moment, Amex markets its cards directly to its customers, but it is hoping to use the banking system to do so in the future.

The company has lodged a complaint with the European Commission's competition authority, DGIV, stating that the proposed change to Visa's rules would violate the Treaty of Rome by restricting competition.

So far, the Commission has not reacted to the complaint, but it is likely to do so should Visa decide to press ahead with its plans at a board meeting due to be held next week.

Diners Club has also stepped into the ring, recently submitting a separate complaint to DGIV about Visa's planned action.

Not willing to await the Commission' verdict passively, however, Golub is asking Europe's banking sector to cut deals with his company in defiance of Visa's wishes.

“The heart of the issue is freedom of choice. Only Visa's restrictive by-law stands between banks and their freedom to choose. If you want the freedom to make your own choices, I suggest you let the Visa management know that,” he has told bank card issuers.

Golub has also sought to “set the record straight” on a number of key issues, countering Visa's claim that American Express wanted to hitch a free ride on the back of its hard work. He insisted banks would not restrict competition between rival card systems if they chose to offer Amex cards, and denied Visa's claim that American Express was trying to steal banks' customers.

Golub's high-profile sales pitch marks yet another episode in the media battle for business.

Countering Visa' move is vital to the success of Amex's growth plans in Europe. It has long-standing card marketing arrangements with the Royal Bank of Scotland and Lloyds Bank, and franchise deals with Banco Comercial Português and Alpha Credit Bank.

But it needs more partners.

American Express wants to avoid a repetition of the situation in the US where Visa has imposed a ban on the supply of competitors' cards for several years.

While Amex would welcome a decision by Visa to drop similar plans for Europe, it would probably prefer a decision by the Commission to open the market once and for all.