Isracard Pressed, Ministers Wilted, Competition Lost

The Ministerial Committee for Legislation yesterday postponed voting on a bill that would prise open the credit card sector to competition, in the wake of intense pressure from Isracard, its CEO and its lobbyists.

Dov Kotler, chief executive of Isracard, hired the lobbying firm of Cohen-Rimon-Cohen and has personally been working to persuade committee members to oppose the proposal. Among other figures, Kotler spoke with Improvement of Government Services Minister Michael Eitan.

It was at Eitan's urging that the committee yesterday agreed to put off voting for two weeks. Eitan threatened to take the issue to the cabinet if the committee insisted on approving the bill yesterday.

The matter needed further study, Eitan said after the session, and confirmed that he had spoken with Kotler.

"I had heard only one side," Eitan said, referring to the bill's sponsors. "I decided to form an opinion only after hearing the other side. I am a great advocate of competition, including regulatory intervention to assure competition. But intervention needs to be proportional; I'm glad the committee didn't reach a decision, because a position cannot be reached on 35 laws discussed in two hours," Eitan said.

The bill, drafted by Finance Minister Yuval Steinitz and aides, aims to open the market to competition and to reduce the fees paid by businesses. Eitan said he would be meeting with them again to discuss the proposal.

At present the credit card companies clear for one another, with the notable exceptions of American Express and Isracard, whose transactions are cleared only by Isracard itself, and Diners, which is cleared only by Visa Cal.

But Diners and American Express are minnows, locally, with 4% and 5% market share, respectively. Isracard has 17% of the market. Since it doesn't let its rivals clear for it, businesses that want to accept Isrcard must contract with it and pay whatever price it demands.

If passed, the new law would enable businesses to clear Isracard transactions with other clearers if they so desire. This would reduce Isracard's power.

The change would apply to any credit-card company that issues 10% or more of all credit cards in Israel: They would have to let other clearers clear transactions carried out with its cards.

Isracard commented that it believes in its Israeli brand and maintains competitive pricing. It will make every effort to preserve its Israeli brand.

MK Danny Danon (Likud ), who submitted a private member's bill that is similar to the Finance Ministry's, said yesterday it was obvious that as long as a monopoly maintained in the market everyone but Isracard will lose.

Visa Cal also opposes the bill.

At the start of yesterday's committee session Justice Minister Yaakov Neeman said there was a legal problem with the bill but he did not elaborate.