By Robin Sidel
American Express Co. Chief Executive Kenneth Chenault said the
company plans to seek a stay of a judge's recent ruling that could
ultimately permit merchants to steer consumers to cheaper cards
from Visa Inc. and MasterCard Inc.
In an investor meeting, Mr. Chenault also defended the company's
decision to fight an antitrust lawsuit filed by the Justice
Department in 2010 that led to the judge's ruling last month. The
federal judge determined that AmEx's rules for merchants violate
antitrust laws.
"Fighting this suit was the right call in 2010 and continuing to
fight is the right call now," Mr. Chenault said.
AmEx, which had previously said it would appeal the ruling, will
begin the appeals process after the judge sets a remedy in the
case, Mr. Chenault said. Although the judge sided with the
government in the case, he didn't lay out a remedy at the time of
the ruling.
Both sides filed their proposals for a remedy earlier this
week.
Mr. Chenault and AmEx President Ed Gilligan declined to specify
how the company plans to make up for the loss of spending and
lending when its 16-year-old relationship with Costco Wholesale
Corp. expires next year. The warehouse giant recently said it
wasn't renewing the relationship in which AmEx is the only credit
card accepted at Costco stores.
Some 70% of spending on AmEx's co-branded Costco cards takes
place outside of the warehouse stores, meaning AmEx will be under
pressure to shift those cardholders to its other products when the
relationship ends.
"Our intent is to provide these customers with high-value
proprietary products that meet their spending needs," Mr. Chenault
said. He also said the company will shift investment money that
would have been spent on the Costco partnership into other areas
that will provide higher returns, although he wasn't specific.
Mr. Chenault added AmEx intends to compete aggressively on other
co-branded partnerships that are expected to come up for renewal in
the next 18 months. It isn't clear, however, if any new
partnerships would provide AmEx with the exclusive acceptance it
now has with Costco.
Shares of AmEx were down 90 cents, or 1.1%, to $80.47 in
afternoon trading as the meeting continued.
Write to Robin Sidel at robin.sidel@wsj.com
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