MasterCard International Inc. sounded tough this week in raising the competitive stakes against American Express Co., but a closer examination reveals more nuance in the bank card association's message.
By voting last weekend to prohibit U.S. members from offering the cards of nonbank competitors, MasterCard joined Visa U.S.A. in a united front against American Express, Dean Witter, Discover and Co., and others who covet comarketing or cobranding deals with banks.
But MasterCard adopted what it called a "policy," whereas Visa U.S.A. five years ago had etched its rule in the company bylaws. The distinction may be subtle, but MasterCard is being perceived as more flexible.
"Reading between the lines, it looks like MasterCard is saying that exceptions will be made," said Cynthia Graham, president of Barnett Card Services Corp.
Even as MasterCard threatened the expulsion of any U.S. member bank that violated its comarketing ban, it said its policy "may not be applied at a future time if participation in a particular program is not viewed as detrimental to the brand."
"It seems like MasterCard is making a statement of philosophy," said A. Christian Fredrick, a former MasterCard executive who is now managing director of Dove Associates in Boston. "They have put some teeth in their policy, but left the door open."
MasterCard spokesman Sean Healy said: "The U.S. board wanted to affirm MasterCard's philosophy of being flexible. If it had been a 'rule,' there would be no exceptions."
Just as Visa did a month ago at its international board meetings, MasterCard directors left it up to the regions to set comarketing policies. Only the U.S. and Canadian boards assumed the tough-sounding, anti-American Express posture.
For Europe, the MasterCard International board deferred to its affiliate, Europay International, which is expected to have to follow the same European Union dictates as Visa EU. The latter withdrew the restrictive policy from consideration after American Express had heavily lobbied the European Commission to oppose it.
MasterCard's Middle East/Africa board said it would not follow the U.S. board's lead. The Latin American board said its members may issue competing card brands provided that "MasterCard's brand is not disadvantaged."
On Tuesday, a day after American Express had issued a statement highly critical of MasterCard's U.S. action, Dean Witter followed suit.
MasterCard and Visa "talk piously about the virtues of 'intersystem competition,' but their actions speak louder than their words," said the issuer of the Discover card. It called MasterCard's move "especially outrageous" in light of recent statements by European officials favoring the American Express-Discover arguments.
MasterCard was seeking to put a brake on American Express approaches to banks, said a banker who is close to MasterCard but asked to remain anonymous. He acknowledged that "smart, aggressive bankers will find a way to circumvent any rule or policy."
Though acknowledging a "chilling effect" on its attempts to sign bank partners, American Express said it has had discussions with about 40 institutions. Some industry observers doubted these banks would go beyond curiosity to actually issue Amex cards.
"What's missing from these discussions is what American Express is offering banks," said Ronald Zebeck, president of Fingerhut Financial Services and a MasterCard director.
"Harvey Golub's statement, 'Come join us,' sounds good in theory," Mr. Zebeck said of the chairman of American Express. "But what does it really mean? What are the economics?"
Irving J. Levin, president of Renaissance Bankcard Services in Portland, Ore., contended that Visa's rule and MasterCard's policy are not "in the spirit of true competition," But he also said, "I don't think many issuers are going to lose sleep over" either measure.
Mr. Levin and others suggested that the issue is crucial only to MasterCard, Visa, and their biggest card-issuing members, not the industry rank-and-file.
