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More cracks are showing in co-branded rebate credit card deals as Buffalo-based M&T Bank is attempting to terminate its relationship with Washington, D.C.-based supermarket chain, Giant Food Inc. because the nine-month-old VISA program will lose between $9 million and $14 million in its first year for M&T. Despite a five-year contract, M&T began notifying Giant in Oct. that the bank wanted out of the program with a final deadline of midnight tonight. Giant, unable to close a deal with another partner, filed suit yesterday in U.S. District Court seeking an injunction to keep the program intact and $40 million in damages. According to various sources, including court documents, M&T proposed the program to Giant in late 1995 to offer cardholders a 2% rebate on all purchases charged to the card, with Giant funding 10% of the rebates. Giant countered the offer proposing a 3% rebate on Giant purchases, a 1% rebate on all other purchases, no rebate funding and a 1.0% reduction in Giants merchant rate. M&T accepted the counter offer and signed a contract in January of this year. M&T projected 50,000 new cardholders would charge an average of $3,600 the first year. Since the launch in March the program has signed up 65,000 cardholders who charge about $8,000 annually. The program also reduced Giants merchant rate to 20 basis points. A hearing is scheduled for this afternoon.

Giant Food says it has reached an agreement with Chevy Chase Bank pending resolution of the M&T dispute but the replacement deal will not be so sweet. Cardholders will continue to earn the same rebates on the Giant VISA and Super G VISA but Giant will have to pony up for the program and Giant will not get a merchant fee discount. Giant projects it will shell out $20 million over the next four years. Giant is seeking to recover its additional costs from M&T bank.

Giant Food Inc. Files Suit in U.S. District Court in Greenbelt for the Southern District of Maryland Against M&T Bank of Buffalo, New York
Giant Food Inc. (AMEX: GFS.A) has today filed suit in the United States District Court in Greenbelt for the Southern District of Maryland against M&T Bank of Buffalo, New York, seeking an injunction to keep intact the co-branded Visa program begun last March.

Giant has taken this step to protect the interests of the more than 65,000 Giant customers who currently hold a Giant or Super G Visa card and earn rebates with the card. The current issuer of the card, M&T Bank, has notified Giant that it intends to terminate the Giant Visa Card program effective 11:59 p.m., Tuesday, December 10, 1996, without notice to its customers. Giant believes such an action is without legal justification, and has therefore gone to court to see that its customers’ rights and expectations are met — including the right to use the card and earn rebates.

At the time Giant signed a five-year contract with M&T, in January 1996, the company was delighted to be partnering with an institution with a claimed strong commitment to Giant and its customers. Despite numerous customer service concerns Giant raised with M&T almost immediately upon program launch, Giant looked forward to working together to make this the finest program of its kind in the industry. Unfortunately, despite Giant’s best efforts, M&T has in many instances not treated Giant’s customers in the manner Giant wishes or that they deserve. Now, with its notice of termination, M&T has taken the ultimate step in poor service. M&T’s original notice of termination was issued on October 9. Giant has worked diligently since that time to seek a substitute partner to serve its customers, while discussing with M&T the ways to achieve a transition that does not disrupt the program. At this time, however, M&T has informed us that further discussions are fruitless, forcing Giant to resort to the judicial system for protections for its customers.

Giant has reached agreement with Chevy Chase Bank, pending resolution of the current dispute with M&T, that provides for Chevy Chase to become the issuer of a co-branded Giant Visa card, one which continues to provide a 3% rebate on purchases made at Giant on the Card, and a 1% rebate on purchases made at other locations. Giant looks forward to being able to move ahead with Chevy Chase, a premier local institution whom Giant is confident will treat its mutual customers in an outstanding fashion.

Giant Food Inc. based in Landover, Maryland operates 171 Giant and Super G supermarkets, of which 130 are food/drug combination units in Maryland, Virginia, Delaware, New Jersey, Pennsylvania and the District of Columbia. The company also operates three free-standing drug stores. Giant Food has annual sales of $3.86 billion and employs approximately 27,000 associates.

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