Visa USA could soon face a regulatory showdown over its ban on members' issuing the credit cards of competing organizations.
The Justice Department, apparently reacting to protests from American Express Co., is starting to scrutinize the issue.
"We are investigating competitive issues involving the prohibition of certain joint ventures in the credit card industry," a spokeswoman for the department said Monday.
Word of that probe came just a week after Visa dropped a plan to impose a similar membership policy overseas. The proposal had generated sharp criticism from competing card companies and a high-ranking European Union official.
At issue is a Visa bylaw, adopted for the United States in 1991, prohibiting Visa members from offering the cards of American Express and Dean Witter, Discover & Co. - or other brands deemed competitive.
American Express makes no secret that it wants U.S. regulators to halt the ban.
"We are looking at ways to keep a focus on this issue within" the United States, said American Express spokesman Michael O'Neill. He said the company is approaching the issue "from a Washington perspective."
While the Justice Department spokeswoman declined to elaborate on the investigation, industry sources close to the controversy say the department is focusing squarely on the 1991 Visa bylaw. They say the scrutiny was prompted by the scuffle in Europe, which involved Visa, American Express, Dean Witter, and Diners Club International.
Last week, at its annual meeting in Montreal, Visa discussed the possibility of exporting its U.S. rule to Europe and other foreign regions.
The Visa board retreated, however. Instead, it opted to let the association's six regional boards decide whether such a bylaw is needed in their local markets.
Visa's compromise came several days after Karl Van Meert, competition commissioner for the European Commission in Brussels, indicated to a group of journalists that the commission would not allow Visa to impose its U.S. policies in Europe. He called Visa's bylaw a "problem" that the commission "cannot accept."
As a result, Visa's European board said last week that it would not stand in the way of European members interested in partnerships with American Express or other card companies.
American Express and Dean Witter had filed separate complaints this year with the European Commission to stop the Visa proposal, calling it anticompetitive. And last month, Diners Club, a subsidiary of Citicorp, filed a similar complaint in Brussels against Visa. The three companies are pinning their international expansion plans on relationships with banks.
American Express already has partnerships with banks in Portugal, Greece, Israel, and several Asian countries. American Express shifted its international strategy within the past year, to capitalize on banks' relationships with their customers.
While Diners Club is a wholly owned subsidiary of Citicorp in the United States, some of its operations abroad are owned by other banks. And Dean Witter so far does not offer its credit cards outside the United States, but the New York card giant has said publicly that it is interested in overseas markets.
A source familiar with the complaints said the European Commission consulted with the Justice Department about the Visa bylaw. The regulatory agencies presumably "agreed with one another because Justice didn't talk the EC out of taking the action it took," said the source. Mr. Van Meert's comments were considered to be a warning to Visa before its annual meeting.
The Justice Department spokeswoman said, "We are aware of the EC position."
Even as Visa referred decisions on the bylaw to its regional boards, it warned them that the "vitality" of the Visa brand would be "diluted by member issuance of competing card products."
And at least some prominent credit card executives agree.
For example, People's Bank of Bridgeport, Conn., which recently launched a card operation in the United Kingdom, could conceiveably take advantage of Visa's decision last week. But Ronald T. Urquhart, who heads up the People's venture in Britain, said he has "no interest whatsoever" in aligning with American Express there.
Mr. Urquhart said bankers who enter partnerships with American Express have not learned from their experiences in the 1970s and 1980s, when banks sold American Express gold cards.
"All of a sudden those customers were being solicited for American Express products, and suddenly the banks lost their best customers to American Express," he said. "The bottom line is that American Express competes with Visa and, therefore, competes with the products we offer."
American Express sees it differently.
"If a bank operating in Europe can make its own choice and a U.S. bank has had that choice taken away, it puts the issue in stark relief," said Mr. O'Neill, the spokesman.
American Express says that it has been fielding calls from interested bankers since last month, when chief executive Harvey Golub invited U.S. banks to issue the company's cards.
The attention focused on Visa's bylaw, added Mr. O'Neill, shows that "the U.S. is playing by different rules than the international market."
Ultimately, American Express and Dean Witter are hoping the Justice Department finds that incongruity to be anticompetitive.
