Marketers See Low Impact from Credit Card Antitrust Case

Industry observers expect the impact of the federal antitrust trial against Visa and MasterCard on credit-card direct marketers to be insignificant.

Some of the nation's largest credit-card direct marketers, including MBNA Corp. and First USA, could expand their product offerings to include American Express and Discover cards if the Department of Justice wins its antitrust case against Visa and MasterCard. The government is accusing the two organizations of conspiring to reduce competition by preventing banks from issuing American Express and through other actions.

Several factors could work against an effort by credit-card marketers to offer American Express cards. American Express, New York, acts as its own bank and runs its operations much differently than MasterCard and Visa. It also competes directly in other lines of its business with the banks that would seek to offer its cards.

“If American Express cuts a deal with MBNA or with a bank, do they come up with a new product just for banks?” said Jeff Gray, credit-card marketing veteran and chairman of Gray & Graham Marketing Group, Stamford, CT. “And who would do the processing? Does American Express do the processing?”

He also said banks might devise some new offers or products that could be combined with American Express cards as a marketing package.

Even if banks begin issuing American Express cards, they probably wouldn't have much to gain because of the high level of credit-card saturation, he said.

Gray also said American Express might limit the number of banks that issue its brand. The company, which offers financial services such as investment planning and insurance, might not allow a rival financial conglomerate like Citicorp to market an American Express card.

Jennifer Scutti, senior financial services analyst at Prudential Securities, New York, said MBNA Corp., a Wilmington, DE-based company that specializes in the direct marketing of credit cards to affinity groups, would probably have little to gain by issuing American Express cards.

“If the DOJ wins and MBNA can now offer American Express through some sort of co-branded relationship, it would just be another small, incremental piece of the revenue stream,” she said. “I don't see it being a significant portion of their business.”

She said another Wilmington-based affinity direct marketer, First USA — which was reported in various accounts of the antitrust case to have been interested in offering American Express cards — appears to have more to gain from offering American Express than MBNA, which targets the high credit-quality consumers that American Express has as its customers.

A First USA spokesman declined to comment on the case. An MBNA spokesman did not return phone calls.

Several banks also refused to discuss the matter, stating it was against their policies to comment on pending litigation.

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