When it was founded, Citigroup was a key player in US economic growth. Lately, however, the firm’s growth strategy appears askew, as a recent ruling in US District Court in the Southern District of New York illustrates.
Citigroup sues valuable co-branding partner AT&T over the word “thanks”
What would cause the bank to sue AT&T, its co-branding business partner since 1998? Did the relationship sour over financial dealings gone bad? What could possibly motivate Citigroup to endanger such a valuable and time-tested relationship?
Citigroup was suing AT&T over using the words “thanks” in its customer loyalty program and in the process placed a fundamental and important business relationship at risk.
It didn’t end well.
U.S. District Judge Katherine Forrest was perhaps politer to Citigroup than expected. Instead of just saying, “No, you cannot lay claim to the word ‘thanks,’ it is part of civil conversation, and you can’t own it. Next case,” Forrest actually took time to explain why Citigroup can’t own the word “thanks” and “thank you.” In a 30-page decision, she explained to Citigroup that “the law does not allow one company to own the word ‘thanks.'”
As if that wasn’t enough, Forrest went on. While the AT&T customer loyalty program “AT&T Thanks” might convey a message of gratitude similar to Citigroup’s “thankyou” rewards program, Forrest found no evidence of customer confusion in how various corporate trademarks, color schemes, logo designs and core verbiage were used.
Not only did Citigroup likely spend millions on a losing lawsuit that generated negative (if slightly humorous) publicity, they also lost a valuable customer relationship. Who was responsible for the probability analysis? Was it the same person who is in charge of the bank’s derivatives programs?
Commentary: Don’t Citigroup executives have better things to do than sue AT&T? Where has the product innovation, earnings and stock price gone since 1993?
The ruling is yet another setback for the bank that became the first contributor to the Federal Reserve Bank of New York.
Citigroup, initially chartered as City Bank of New York on June 16, 1812, has a history of innovation. It was the first bank to surpass $1 billion in assets and was the first to offer compound interest on savings, unsecured personal loans, customer checking accounts and negotiable certificates of deposit.
Since 1998, the year it merged with Travelers Group, the financial engineering has focused extensively on derivatives, which is now reported by the FDIC to be at $55.6 trillion, the bank’s largest notional risk by far.
While Citigroup financial innovation during the derivatives era has been weak, its lobbying efforts have been outstanding. Too bad this strategy has not delivered for the stock price. The stock is currently trading at $46.44 — a price similar to that in 1993 and the firm hasn’t had positive product innovation since then, except in terms of its government lobbying and derivatives obfuscation. Rather than focus on products that help individual savers, the bank’s publicly unknown derivatives remains a threat to economic security.
“Product innovation” over the last few years has tended to result in a $770 million fine over improper credit card practices and a $425 million fine for rate rigging, which the New York Times noted was done while avoiding criminal charges, to name a few.
Is attempting to claim ownership of the word “thanks” another of Citigroup’s recent “innovations?” If so, it might fall in line with its other recent product “innovations”?