Visa is in legal hot water as it faces a regulatory investigation by the US Department of Justice (DOJ) over concerns of whether it is using anticompetitive practices in the debit card market.
“The US Department of Justice has informed Visa of its plans to open an investigation into Visa’s US debit practices,” the company said in a regulatory securities filing. “We have received a notice to preserve relevant documents related to the investigation.”
The Justice Department’s antitrust division was looking into whether Visa limited merchants’ ability to route debit-card transactions over card networks that are often less expensive.
“We believe Visa’s US debit practices are in compliance with applicable laws,” it added. “Visa is cooperating with the Department of Justice.”
The probe will also look at the issue of network fees, a cost which only benefits card companies. Businesses and traders have criticised the high cost of network and interchange fees, which can be circa 2% or more of each transaction. This surcharge then goes to the financial institutions behind the transactions.
DOJ’s investigation will examine if Visa’s practices are aiding it to maintain a dominant market share unlawfully.
This is hardly the first time Visa was under fire by the DOJ. Earlier this year in January, Visa and FinTech startup Plaid scrapped a $5.3bn merger following a lawsuit from the Justice Department which blocked the deal on antitrust grounds. In the lawsuit, the government called Visa a “monopolist in online debit transactions” and argued that the tie-up would “eliminate a nascent competitive threat” to Visa.
Visa shares slumped 6.2% to $206.90 last week, its biggest one-day decline in a year.
Earlier this week it emerged that Visa was planning to hike interchange fees to 1.5% – up from 0.3% – for online credit card payments and transactions between the United Kingdom and European Union countries. This move was because of Britain’s exit from the EU, which regulates the fees within the trading bloc.
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