Visa’s share price declined on Friday when the card giant confirmed that the credit needs to investigate whether it had used competitive competition to maintain its dominance in the debit card market.
Shares in the payment processor tumbled 6.2 percent and closed at $ 206.90 after the Wall Street Journal reported that the U.S. Department of Justice’s antitrust division had the company in its hair.
Investigators are investigating whether Visa is improperly blocking merchants from conducting debit card transactions through competing payment networks, which regularly charge lower fees, according to the newspaper, citing unnamed people familiar with the matter.
In a regulatory submission on Friday afternoon, Visa confirmed that it was cooperating with the DOJ, which ordered it to keep relevant documents related to the investigation, adding: “We believe that Visa’s US debit practices are consistent with applicable laws. “
According to the facts, it matters whether Visa uses illegal tactics to maintain its grip on an industry that earns billions of dollars in fees annually.
According to the latest annual report, Visa’s total payment volume in 2019 was $ 8.9 trillion – almost twice as much as Mastercard, the second largest player in the market.
Merchants who accept debit card purchases have been complaining for years that they often cannot use smaller networks, such as NYCE or Shazam, when a card bears Visa or Mastercard’s name.
This forces businesses to pay higher transaction fees than they would pay if they could use other options, reports the Journal.
Federal investigators investigating the issue have largely asked questions about online debit card payments, though they have also asked about issues with in-store transactions, the report said.
They are also looking for information about the financial incentives Visa gives to banks that issue cards on its network and whether the incentives encourage banks not to allow payments through other networks, one source told the Journal.
The justice department declined to comment Friday.
The news of the investigation comes less than two months after Visa investigated the $ 5.3 billion acquisition of financial technology firm Plaid amid monitoring.
The companies decided to abandon the deal rather than fight a November lawsuit filed by the Justice Department to block the merger, claiming Visa was trying to destroy an emerging competitor.
About 200 million bank accounts are apparently linked to Plaid’s technology, which allows developers to take consumer spending with them. According to the Feds, Plaid plans to build a payment network that could compete with Visa by enabling consumers to pay merchants directly from their bank accounts.
Visa CEO Al Kelly saw the purchase of Plaid as an ‘insurance policy’ to protect the company’s US debit business, the DOJ claimed. Visa disputes the Feds’ argument, saying Plaid is not a competitor.