... While the thrill of Lillehammer dominates AmEx's latest effort. A DONKEY'S TALE AND OLYMPIC COMPETITION SPARK LATEST ROUND

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American Express Co. and Visa USA are escalating the nastiest competitive ad battle in years.

This time, both credit card companies are trading charges over two new campaigns-one involving the Olympics, the other an Italian donkey-in what one participant called out and out "warfare."

AmEx, led by Chairman-CEO Harvey Golub, appears to have adopted an attack strategy designed to undermine Visa's successful, long-running campaign focusing on merchants who "don't take American Express."

Each time Visa trots out a new commercial, AmEx uses lawsuits, public relations efforts and newspaper ads to blunt the spot's impact, often claiming Visa is "misleading" consumers by implying broader exclusivity than exists.

Visa says its ad claims are truthful and calls AmEx's tactics "desperate ... dirty tricks" from a company at a competitive disadvantage because of its far lower acceptance at merchant locations.

Neither is entirely blameless. And both are unlikely to give in, paving the way for still more lawsuits in an unending torrent of venom that makes the cola wars seem like child's play.

Last week, AmEx began running two spots on CBS' Winter Olympic coverage that highlight Norway-site of the Games-and AmEx's 34-year history of service in Oslo and Lillehammer, the major Olympic site.

Borrowing similar phrasing from Visa's campaigns, an announcer warns ominously: "If you're traveling to Norway, you'll need a passport, but you don't need a Visa."

"In the context of the credit card arena, that's not just a play on words," complained Jan Soderstrom, senior VP-advertising and promotion at Visa USA. "They're suggesting we don't have a place in Norway, which undermines our sponsorship and everything we've done to support the Olympics."

The International Olympic Committee last week sent a letter to AmEx asking that its ads be pulled, but AmEx executives at press time said they were unlikely to yank the spots.

The IOC planned a weekend news conference to embarrass AmEx, and will allow Visa to re-edit its Olympic spots to include references to AmEx if the Norway ads aren't pulled.

Visa earlier agreed not to mention AmEx in Olympic-theme spots to prevent ambush marketing, and instead substituted a broader claim that no other cards were accepted at the Olympics.

But AmEx ambushed anyway, saying its own spots, from Ogilvy & Mather, New York, didn't violate the agreement because they don't feature Olympic symbols or sports motifs.

The shoe is on the other foot, meanwhile, in a Visa spot that AmEx is seeking to have pulled. That 30- and 60-second commercial from BBDO Worldwide, which began in mid-January and aired during the Super Bowl, portrays a U.S. couple on vacation in Todi, Italy, where through a language mix-up they unwittingly trade their camera to two children for a donkey.

In typical fashion, a narrator says: "If you take off for the Italian town of Todi ... but your camera just takes off, you'd better have a Visa Gold card, because there's not a camera store there that takes American Express." Visa claims that after its spot began, AmEx hastily signed up Pocker, a local variety store that also sells cameras, to accept its card. Days later, it fired off a letter to Visa, demanding the spot be pulled because the claim is "no longer true."

Visa is awaiting substantiation, but said it's unlikely to make the changes because the literal claim remains true: Pocker is not a camera store.

"We're questioning their ethics in this whole issue in trying to sabotage our campaign," Ms. Soderstrom said.

AmEx marketing executives weren't available for comment, but a spokesman defended its action, claiming the signing of the Italian store was simply part of a mission to increase merchant acceptance worldwide.

But AmEx has stepped up attacks on Visa in more than advertising.

Mr. Golub told a recent analysts meeting that the company is "on the offensive" and is no longer simply reacting to its poor performance of the past several years.

Mr. Golub announced plans to introduce several co-branded credit cards, belatedly joining the ranks of Visa and MasterCard International in offering stepped-up reward programs and revolving credit products.

Analysts say AmEx's logical partners for co-branded cards are travel marketers such as hotels and car rental companies without current card programs.

AmEx's Membership Miles, a feature of its existing charge card, has signed up 1.5 million members who earn mileage on any of several airlines.

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