Justice is investigating whether Visa Inc.
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according to people familiar with the matter, is guilty of anti-competitive practices in the debit card market.
The department’s antitrust arm has gathered information and asked whether Visa, the largest U.S. card network, has limited options for merchants to route debit card transactions through card networks that are often less expensive, the people said. Many of the department’s questions focused on online bank card transactions, but researchers have also asked about in-store issues, the people said.
The probe highlights the important role of the so-called network fees that are invisible to consumers, lucrative for card companies, but weigh heavily on merchants, who often pass the fees on to customers in the form of higher prices.
This is because Justice Department antitrust enforcers have placed an emphasis in all administrations on investigating activities in the digital marketplace, including in the financial sector, and on examining the business practices of dominant companies.
In the new investigation, the department is considering whether Visa’s practices allow it to unduly maintain a dominant market share, the people said.
A Visa spokesperson declined to comment. The Justice Department did not immediately comment.
Antitrust researchers have raised questions beyond just the problem with bank card routing, some of the people said. The department has also asked for Mastercard Inc.’s
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role in the debit card market and whether financial technology companies are real competitors to Visa and Mastercard, one said.
A Mastercard spokesperson did not comment.
The new civil investigation, which has begun in recent weeks, follows the department’s investigation into the proposed acquisition of financial technology company Plaid Inc. by Visa, the people said. The department sued Visa in November over the Plaid deal, claiming that the acquisition would allow Visa to illegally maintain a monopoly in online debiting, where the department said it has a market share of about 70%.
Plaid was developing an innovative, lower-cost payment technology that could have posed a threat to Visa, the government claimed. Visa called the lawsuit misplaced, saying that Plaid was not actually a competitor.
The companies dropped the deal in January, citing the potential length and complexity of the lawsuits.
How debit card transactions are routed is a long-standing point of contention between merchants and card companies. The Durbin Amendment, part of the Dodd-Frank Act of 2010, requires merchants to be able to choose from at least two unaffiliated debit card networks to route transactions.
For years, merchants have argued that they are often unable to route online debit card purchases across smaller networks, such as Shazam or NYCE, when the Visa or Mastercard name is on the front of a card. Merchants say they often pay higher network costs as a result compared to what they would pay on lesser known networks.
The Justice Department is seeking information about the financial incentives Visa is providing to banks that issue cards on its network, said one of those familiar with the case. It is looking into whether those incentives encourage banks not to allow routing on other networks, the person said.
The DOJ has also asked about debit card routing practices associated with newer payment methods, one said. This also applies when debit cards are used with mobile wallets such as Apple Pay and separately when customers pay in-store by tapping debit cards on payment terminals instead of entering them.
Separately, the Federal Trade Commission has investigated Visa and Mastercard via debit card routing. Senator Richard Durbin and Rep. Peter Welch also raised the issue in a letter to the Federal Reserve last summer.
Write to AnnaMaria Andriotis at [email protected] and Brent Kendall at [email protected]
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