Trouble for American Express in U.K.
Restaurants and Hotels Threaten Boycott over Costs
LONDON -- American Express Co. has another rebellion on its hands.
Britain's hard-pressed restaurants and hotels, struggling in a recession that has bitten deeply into revenues, are threatening to boycott American Express Co. unless it reduces its sales commissions.
The protest echoes one in Boston earlier this year. American Express conceded there by reducing the discount - the percentage of a sale it collects from a merchant accepting the card - on certain transactions.
Chef Leads the Fight
Meanwhile, the British bank card companies, Access/MasterCard and Visa, are waiting to reap the benefits as merchants begin to shift transactions to those lower-priced systems.
Some British businesses are refusing to advertise their acceptance of American Express cards, which are carried by 1.3 million people in Britain. Many encourage customers to use other but will accept American Express as a last resort.
Michel Roux, owner-chef at the prestigious Waterside Inn in Berkshire, west of London, is leading the burgeoning boycott campaign among businesses that in effect pay commissions of up to 4.5% to the card company.
Difference Can Be Large
That compares with the 1.5% to 2% rates common on Access/MasterCard and Visa card sales. On a $100 charge, a merchant or restaurateur could thus save up to $3 by switching an American Express sale to a bank card.
American Express' terms are "totally unacceptable and are bordering on racketeering," Mr. Roux contended.
Mr. Roux has dropped American Express from the four restaurants in his chain after the company refused to reduce his fee by more than one.
Mr. Roux's campaign has been taken up by others, including the recently opened Serpentine restaurant in London's Hyde Park. Its owner, Nick Tarayan, said other new restaurants are likely to do the same.
"Anyone working on tight profit margins has to wipe out Amex," he said.
At L'Escargot in London, chef-manager Martin Lam complained that the travel-and-entertainment card company has his industry over a barrel. "We are paying much more to Amex than the major credit cards," he said.
At the Lastingham Grange hotel in northern England, a spokesman said that if a guest was in an "embarrassing situation, then we would accept Amex, but we don't like to advertise the fact."
Defending the Card
American Express rejects all claims that it overcharges. It provides merchants with market research that shows its card generates income that otherwise would not have come in. American Express holders, the data show, tend to spend more per transaction, and may not have even entered a store if it did not take the card.
In response to the Boston protests, American Express cut its commission by 0.5 percentage point for restaurants that enter transactions in electronic point-of-sale terminals.