Dispute escalates as El Al accuses Cal of “consumer fraud”

The battle between airline loyalty clubs is heating up. In recent days, Cal launched its new brand in the field, FlyAll, after losing El Al’s frequent flyer Play Card to Isracard at the end of more than a decade of cooperation. But as things stand, the saga between the sides is only beginning. Globes has learned that, against the backdrop of Cal’s new campaign, El Al is accusing its former partner of “consumer fraud.” In a warning letter sent to Cal CEO Yifat Griani, El Al argues that the credit card company is violating the agreement between the parties as well as the law. Among other things, the letter refers to “false, misleading and offensive statements.”

El Al’s club argues that, contrary to the understandings under which “the parties undertook in the amendment in writing to continue working to fulfill the agreement and continue operating the existing Play Card cards,” Cal launched a campaign for the new club, which constitutes a breach of contract. They also claim that this involves “misleading the public, an improper comparison between different club cards, false advertising and unlawful exploitation of the substantial reputation that has been built up.”

One claim concerns the apparent similarity between the club names. “The similarity is impossible to ignore and, in the eyes of the reasonable consumer, creates a direct link between the brands, especially when it concerns two entities identified as ‘partners’ with regard to the product,” El Al says. Beyond the new name chosen by Cal, El Al also argues that the value proposition in FlyAll’s new campaign harms it. “Cal’s marketing move, offering customers to ‘upgrade’ the Play Card they hold at the click of a button, without needing to replace it, led the consumer to the mistaken conclusion that this is an official update or a new version of El Al’s Play Card club, and that this is supposedly a marketing approach on behalf of the club.”

In the end, El Al is demanding that Cal stop using the new brand name it chose, especially the word “FLY.” In addition, it is demanding that the campaign be halted, all within 48 hours, otherwise it is threatening renewed recourse to legal channels.

Cal responded: “FlyAll offers Israeli consumers a new, simple and transparent value proposition, a model in which every point is worth one shekel and there is a wide range of redemption options, without complex mechanisms and without unnecessary restrictions. El Al’s warning letter is a direct continuation of the attempt to create fear and deterrence instead of competing through a better value proposition for consumers. Israeli consumers are smart consumers. They know how to compare, check and make decisions on their own, and in the end they will choose the best value proposition for them.”

Frequent Flyer Club CEO Moshe Morgenstern said in response that “it appears that Cal’s management, which is under pressure following the business failure that led to the loss of the Play Card club, chose to respond in a prohibited way, misleading customers, riding on a brand that is not its own and presenting false representations. Cal’s offer is not an ‘upgrade’, but an attempt to get customers to give up their card and switch to a lower-quality Cal product that does not grant the benefits accumulated at El Al. This is not competition, this is consumer fraud.”

The background to the current fight: The saga began a little more than two months ago, with a surprise move in which Isracard, under the new ownership of Delek Group and new CEO Itamar Forman, announced that the Frequent Flyer Club was moving to it. Play Card is Israel’s largest customer club, with about 3.6 million members, more than half a million of whom hold a credit card issued on its behalf. The announcement was a major drama in the credit card market and led to one of the most bitter battles seen in recent years. Alongside the financial aspects and the exchange of accusations between the companies, many consumer questions also arose, such as how the transition would be carried out and what would happen to point accumulation.

As first revealed by Globes, the first side to threaten legal action was Cal, which initially claimed there had been a “raid” and warned of legal steps. Later, the sides entered mediation before retired judge Hila Gerstel, which was granted the force of an arbitration award by retired Tel Aviv District Court President Eitan Orenstein. Among other issues, the parties disputed whether Isracard could begin issuing Play Card cards already now, or whether it had to wait until the end of the year, when the original agreement between Frequent Flyer and Cal would expire. Under the compromise reached, El Al was set to pay Cal about NIS 75 million and could issue new cards immediately. But as noted, Cal’s new campaign has upset the balance and may send the parties back into a legal battle sooner than expected.