Advanta Agrees to Stop Offering Amex's Travel Rewards Program

Advanta Corp., MasterCard International, and Visa U.S.A. have settled their legal dispute over Advanta's plan to market an American Express service.

Under the out-of-court settlement, Advanta announced Thursday that it had agreed to stop offering Rewards Accelerator, which links use of MasterCard and Visa cards to travel rewards from American Express.

"We still hold to our original view that the product was in compliance" with the bank card associations' bylaws, Advanta chief executive officer Alex W. Hart said in a prepared statement.

But the Spring House, Pa., company left open the possibility that Rewards Accelerator could return after completion of a federal antitrust investigation.

"We were heading toward a long, drawn-out affair," Mr. Hart said in an interview. "It seemed more sensible for the Department of Justice to take that on" as part of its probe of card association rules, he said.

The Advanta settlement had been expected in legal circles for weeks.

"Advanta's antitrust claim was going nowhere," said a lawyer for one of the associations, who insisted on anonymity. "They decided to cut their losses," a move "hastened by their well-publicized financial woes."

Advanta, the No. 8 bank card issuer, lost $19.8 million in the first quarter.

No cash settlement was involved. Advanta has a year to close down an estimated 5,000 Rewards Accelerator accounts opened in October and November 1996, when marketing was halted by a standstill agreement.

Advanta sustained a major setback last month when a federal judge in San Francisco ruled against its antitrust claim. Advanta had the right to appeal.

Reacting to the settlement, American Express spokeswoman Gail Wasserman said, "This is a heavy-handed attempt by Visa to prevent a bank from issuing a unique product. Clearly, Visa thought this product was so good it had to die."

"American Express' free ride on the Visa brand is over," said Kelly J. Presta, a Visa spokesman. "They will have to find another way to stop their slide in market share."

MasterCard's U.S. president, Alan Heuer, declared victory over a "blatant misuse" of the MasterCard trademark. The association also dismissed the likelihood that Rewards Accelerator would ever return.

"This was a settlement on all sides for all claims," said Advanta's lead attorney Edward F. Mannino, senior partner at Wolf, Block, Schorr & Solis- Cohen, "Advanta believes it is more prudent to develop new opportunities for customers, and it made sense to focus energy on those new opportunities."

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