Executives at Visa U.S.A. and Dean Witter Financial Services vowed Wednesday to continue their legal battles, despite Sears, Roebuck and Co.'s decision to sell Dean Witter.
Dean Witter, which issues the Discover card, said it will not withdraw its closely watched antitrust lawsuit against Visa. It is seeking to reverse a Visa bylaw that prohibits Discover from joining the bank card association.
Visa was granted a delay in the opening of the antitrust trial, which was to have begun Wednesday in a federal court in Utah. A Visa spokesman said the card association needed time to study the Sears announcement, but added that Visa has no plans to back off from its fight against Discover.
|Nothing Has Changed'
"As far as Discover being a major competitor, nothing has changed," said David Brancoli, the Visa spokesman.
The Sears affiliate filed its lawsuit in January 1991, after Visa turned down its application to issue cards through Moutain-west Financial, a Utah thrift that Sears bought in 1990. The case is now scheduled to begin on Oct. 13 in U.S. district court in Salt Lake City.
Sears said Tuesday that it will spin off 20% of Dean Witter by the end of next year in a public offering and distribute the rest of the firm to its shareholders.
Discover, whose card is held by more than 40 million people, will continue its fight to issue Visa cards, a spokesman said Wednesday.
MasterCard International earlier this year also turned down a membership request from Discover, but no legal action has been brought.
Discover may lose a valuable marketing affiliation after the Sears spinoff. Last year, Sears' customers charged 6.7% of their $24.75 billion of purchases at the store to their Discover cards. (Another 57.3% was charged to Sears' proprietary cards.)
Sears does not accept Visa, MasterCard, or American Express cards at its 860 retail outlets. A Sears spokesman on Wednesday said no decision has been made on modifying its card acceptance rules once the Dean Witter unit is shed.
Whatever Sears' plans, Discover is expected to remain a serious contender in the general-purpose card market. The seven-year-old card unit earned $131.6 million in the first half of 1992, more than half of Dean Witter's total profits.
Discover is the second-largest card issuer in the nation, with about $15 billion of outstandings.
Legal Tack Unlikely to Change
The Dean Witter lawsuit specifically challenges a 1989 Visa bylaw prohibiting "direct competitors" from membership, a phrase widely assumed to mean Sears and American Express Co. Card industry attorneys said legal arguments are unlikely to be affected by the developments at Sears.
"Whether or not Discover is owned by Sears, it is still a competing brand," said Anita Boomstein, a partner with Hughes, Hubbard, & Reed in New York. "The issue for Visa still remains strong."
Bruce Brittain, an Atlanta-based consultant who collects data on the Discover card, speculated Wednesday that an independent Dean Witter might eventually skirt the bank card membership issue by seeking a cobranding relationship with a bank issuer that is a member of MasterCard or Visa.
Discover needs to expand internationally to keep growing, but does not have a network of merchants that accept the card outside the United States. The bank card associations are already well established outside U.S. borders.
"I think cobranding is one of their ultimate goals," Mr. Brittain said. "It allows them to go after the market outside the U.S."