The Justice Department is investigating whether Visa Inc.
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engages in anti-competitive practices in the debit card market, according to people familiar with the matter.
The department’s antitrust division collected information and asked if Visa, the largest card network in the United States, has the limited ability of merchants to direct debit card transactions through card networks that are often less expensive, people said. Many of the department’s questions focused on online debit card transactions, but investigators also asked about problems in the store, people said.
The probe highlights the important role of so-called network charges that are invisible to consumers, profitable for card companies, but a share for merchants, who often pass on the fees in the form of higher prices to customers.
Whereas the antitrust authorities of the Department of Justice in all administrations have focused on examining the activities of the digital market, including in the financial sector, and on investigating the business practices of the dominant firms.
In the new probe, the department is examining whether Visa practices allow it to maintain a dominant market share illegally, people said.
A Visa spokesman declined to comment. The Justice Department did not comment immediately.
Antitrust investigators have asked questions beyond the issue of debit card routing, some people said. The department also asked about Mastercard Inc.
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one of the people said that the role in the debit card market and whether financial technology firms are true competitors of Visa and Mastercard.
A Mastercard spokesperson did not provide any comments.
The new civil investigation, launched in recent weeks, follows the department’s investigation into the proposed Visa acquisition of Plaid Inc., people said. The department sued Visa in November for the Plaid deal, claiming that the acquisition would allow Visa to illegally maintain a monopoly on online debit, where the department said it has a market share of about 70%.
Plaid is developing an innovative, cheaper payment technology that could have been a threat to Visa, the government said. Visa called the trial a scam, saying Plaid was not actually a competitor.
The companies dropped the transaction in January, citing potential lengths and the complexity of the litigation.
The way debit card transactions are handled is a long-standing point of contention between merchants and card companies. The Durbin amendment, which is part of the Dodd-Frank Act of 2010, requires merchants to be able to choose from at least two unaffiliated debit card networks to direct transactions.
Merchants have argued for years that they are often unable to direct online purchases of debit cards through smaller networks, such as Shazam or NYCE, when the Visa or Mastercard name is on the front of a card. Merchants say that as a result, they often end up paying higher network fees compared to what they would pay to lesser-known networks.
The Justice Department is looking for information about the financial incentives Visa offers to banks that issue cards in its network, according to one of the people familiar with the matter. The person examines whether these incentives encourage banks not to allow routing on other networks.
The DOJ also asked about debit card routing practices related to newer payment methods, one of the people said. This includes when debit cards are used with mobile wallets such as Apple Pay and separately when in-store customers pay by touching debit cards on payment terminals, rather than inserting them.
Separately, the Federal Trade Commission is investigating Visa and Mastercard in connection with 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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