Visa’s stock price fell on Friday, when the card giant confirmed that the feds are investigating whether it used anti-competitive practices to maintain its dominance in the debit card market.
Payment processor shares fell 6.2 percent to close at $ 206.90 after the Wall Street Journal reported that the US Department of Justice’s antitrust division has the company in its sights.
Investigators are examining whether Visa improperly blocks merchants from routing debit card transactions through rival payment networks that often charge lower fees, according to the newspaper, which cited unidentified people familiar with the matter.
In a regulatory filing on Friday afternoon, Visa confirmed that it is cooperating with the DOJ, which has ordered “to preserve relevant documents related to the investigation”, adding: “We believe Visa’s US debt practices are in compliance with applicable laws ”.
The feds are evaluating whether Visa is using illegal tactics to maintain its control over an industry that collects billions of dollars in fees per year.
Visa’s total payment volume totaled $ 8.9 trillion in 2019, according to its latest annual report – almost double that of Mastercard, the second largest player on the market.
Merchants who accept debit card purchases have allegedly complained for years that they often cannot use smaller networks, such as NYCE or Shazam, when a card bears the name Visa or Mastercard.
This often forces companies to pay higher transaction fees than they would pay if they could use other options, the Journal reported.
Federal investigators investigating the problem have asked many questions about online debit card payments, although they have also asked about problems with in-store transactions, the report says.
They are also looking for information about the financial incentives Visa gives banks that issue cards in its network and whether those incentives encourage banks to not allow payments to be forwarded by other networks, a source told the Journal.
The Justice Department declined to comment on Friday.
News of the investigation comes less than two months after Visa canceled its $ 5.3 billion acquisition of financial technology startup Plaid amid antitrust scrutiny.
The companies decided to drop the deal instead of fighting a lawsuit in November that the Justice Department opened to block the merger, claiming that Visa was trying to nullify a rising rival.
About 200 million bank accounts are said to be connected to Plaid’s technology, which allows developers to aggregate consumer spending data. The feds said Plaid was planning to build a payment network that could compete with Visa, allowing consumers to pay merchants directly from their bank accounts.
Visa CEO Al Kelly saw the acquisition of Plaid as an “insurance policy” to protect the company’s debt business in the United States, the DOJ claimed. Visa contested the feds’ argument, saying that Plaid was not really a competitor.