Visa gets snarled in probes


Dive Brief:

  • The antitrust division of the Justice Department demanded more documents and information from Visa in connection with its ongoing investigation of the company’s debit card practices, Visa said in a regulatory filing with the Securities and Exchange Commission on Friday. Visa, the largest U.S. card network company, said it’s cooperating with the investigation.
  • The federal agency “issued a further Civil Investigative Demand seeking additional documents and information focusing on U.S. debit and competition with other payment methods and networks,” the quarterly SEC filing said.
  • In addition, the European Commission told the card giant last month that it has opened a “preliminary investigation” of “Visa’s incentive agreements with clients,” according to the filing. Visa said it’s also cooperating in that probe.

Dive Insight:

The Justice Department investigation has been ongoing since 2021 so the latest civil investigative demand shows the antitrust regulators are digging deeper into how Visa competes with rival card networks and other types of payments methods. The company’s card practices have long been a point of regulatory interest, with past challenges to the card network company’s dominance of the industry.

In 2020, DOJ’s antitrust division sued Visa to stop its $5.3 billion acquisition of Plaid, a fintech company contemplating an electronic debit payment network to rival Visa’s business. In its civil lawsuit, the Justice Department said Visa violated antitrust laws in seeking to buy Plaid in 2019.

“By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers,” the November 2020 lawsuit said. The companies subsequently dropped the planned transaction. 

The current antitrust division investigation turns on whether Visa incented banks to limit merchants’ ability to route transactions over less expensive networks, The Wall Street Journal reported in 2021, citing sources familiar with the probe.

That investigation is similar to one that was underway at the Federal Trade Commission, delving into whether Visa illegally “inhibited merchant choice in the selection of debit payments networks,” according to Visa’s annual filing with the SEC in November 2020. It focused on whether transactions are illicitly routed away from alternative networks such as Pulse, NYCE and Star.

That FTC probe wasn’t mentioned in Visa’s Friday filing, but the agency last month told Mastercard, the No. 2 U.S. card network, to “end to illegal business tactics that Mastercard has been using to force merchants to route debit card payments through its payment network, and is requiring Mastercard to stop blocking the use of competing debit payment networks.”

As part of that action, the FTC ordered Mastercard to start providing its network competitors with certain customer information they need in order to process debit card transactions. The agency said that Mastercard had “allegedly” been keeping rivals out of the e-commerce debit market in violation of provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Those particular provisions are often referred to as the Durbin Amendment because they result from Sen. Dick Durbin’s years-long efforts to curb what he’s called the Visa-Mastercard duopoly controlling the card network industry. Most recently, he proposed a bill in Congress last year that would have injected similar guardrails on the credit card market, but that legislation failed to pass before the session ended.

Nonetheless, Durbin’s office has said the Illinois Democrat will reintroduce the legislation this year as he continues his crusade to rein in the card network practices. The Federal Reserve has also sought to institute more competition in the industry, updating a debit card rule in October to stress the requirement that multiple networks be available for routing transactions, including online.

Visa’s actions have caught the attention of European regulators, too. The regulatory filing Friday said: “On December 2, 2022, the European Commission (EC) informed Visa that it had opened a preliminary investigation into Visa’s incentive agreements with clients.”

San Francisco-based Visa will usher in a new CEO this week to navigate the regulatory scrutiny. Visa President Ryan McInerney is set to take the CEO post on Wednesday from Al Kelly, who will then transition to a full-time executive chairman role.


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