US accuses Visa of monopolizing debit card swipes
Prosecutors say Visa used threats, incentives to thwart competition in debit processing
Visa says it will fight the claims, which it calls meritless
Justice Department officials said Visa's conduct imposed hidden costs on consumers
Updates with closing share price, adds comment from Visa in paragraphs 4-5, adds attempts to seek fintech companies' comments in paragraph 10, adds bullets
By Jody Godoy
Sept 24 (Reuters) -Visa V.N shares took a hit on Tuesday after the U.S. Department of Justice filed a lawsuit accusing it of violating antitrust law by suppressing competition by threatening merchants with high fees and paying off potential rivals.
Visa, one of the world's largest payment networks, processes more than 60% of debit transactions in the U.S., bringing it $7 billion each year in fees collected when transactions are routed over its network, the Justice Department said. The company protects that dominance through agreements with card issuers, merchants, and competitors, prosecutors allege.
Visa shares closed down around 5.5% on Tuesday.
Julie Rottenberg, Visa's general counsel, said competition is thriving in the debit market, and that the claims are meritless and the company will contest them vigorously.
"When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide," she said.
The bid to tackle the fees, sometimes known as swipe fees or interchange fees, is part of the Biden administration's efforts to combat rising consumer prices, a major issue in the Nov. 5 presidential election between Democrat Kamala Harris and Republican Donald Trump.
"Visa's unlawful conduct affects not just the price of one thing, but the price of nearly everything," Attorney General Merrick Garland said in a statement, noting merchants and banks pass payment network costs to consumers.
Visa's alleged anticompetitive conduct began around 2012, as competing companies entered the payments space following reforms that required card issuers to accommodate unaffiliated networks, a senior Justice Department official said.
Visa entered lucrative agreements with would-be financial technology competitors including Apple APPL.O, PayPal PYPL.O and Block Inc's SQ.N Square that they would not release products that threatened its dominance, prosecutors alleged.
PayPal declined to comment on Tuesday. Apple and Block did not respond to requests for comment.
The card network also levies "staggering financial penalties" on merchants who do not route all or most eligible transactions through Visa's network, according to the lawsuit.
Prosecutors seek an order from a judge in Manhattan blocking Visa from imposing pricing structures that discourage competition, and paying rivals not to compete, which they said would restore competition for services to process debit payments both online and at physical stores.
The Justice Department's antitrust division began investigating Visa over its debit card practices in 2021, the same year it blocked Visa's acquisition of financial technology company Plaid. Rival Mastercard MA.N said in April it was being investigated by the Justice Department as well.
Both companies have been in litigation for nearly two decades over their dominance in the cards market.
Visa and Mastercard agreed in 2019 to pay U.S. merchants $5.6 billion to settle damages claims in a class action lawsuit accusing them of anticompetitive practices.
A federal judge in Brooklyn rejected a parallel settlement in June that would reduce swipe fees by an estimated $30 billion over five years and require Visa and Mastercard to lift some rules that bar merchants from charging customers to use their cards.
Visa has set aside around $1.6 billion for potential settlements in those and other U.S. cases over interchange fees.
Reporting by Jody Godoy in New York; Editing by Bill Berkrot and Daniel Wallis
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
