Visa Vows to Press Fight With Sears Over No-Fee Card

Sears, Roebuck & Co. said Monday that it will launch an ambitious program to issue millions of no-fee Visa credit cards next month after a federal judge gave it the go-ahead despite strenuous objections from Visa U.S.A.

Visa said it will seek to delay the Sears plan while it appeals the ruling.

U.S. District Judge David Sam of Salt Lake City ruled Friday that Sears could issue its Prime Option Visa cards pending the outcome of a lawsuit filed by the retailer against the credit card company.

The lawsuit challenges a Visa regulation that prohibits major competitors such as Sears, which owns the Discover card, from issuing Visa cards.

Although Sam did not rule on the lawsuit itself, he issued a preliminary injunction in favor of Sears, saying that “perhaps it is in the best interest of the consuming public to allow Prime Option to proceed.”

A Sears spokesman called the ruling “a victory for the state of Utah and consumers nationwide.”

A spokeswoman for Sears’ Dean Witter Financial Services Group said about 6.5 million consumers will be offered the new Visa cards beginning next month through MountainWest Financial, a failed Sandy, Utah, savings and loan that Sears bought from the federal government last year. The new cards will also include other unspecified “value-added features,” Sears said.

Visa said in a statement that it still believes Sears’ lawsuit is “totally without merit.”

“Sears is trying to gain entrance to the Visa system even though our bylaws specifically prohibit membership by a major competitor,” said Visa General Counsel Bennett Katz. “Handing over the Visa franchise to Sears would be tantamount to permitting Burger King to open McDonald’s franchises in every major city in the United States.”

Last year American Telephone & Telegraph Co. launched its Universal telephone and credit card, which it has issued to more than 7 million consumers. Sears has issued about 38 million Discover cards, which also carry no annual fee but are accepted by about 1 million merchants globally, compared to about 7 million for Visa.