The price of Visa shares fell on Friday as the card giant confirmed that the feds are investigating whether it has used anti-competitive practices to maintain its dominance in the debit card market.
Shares of the payment processor fell 6.2 percent to close at $ 206.90 after the Wall Street Journal reported that the U.S. Department of Justice’s antitrust division has the company among its pillars.
Investigators are examining whether Visa improperly prevents merchants from routing debit card transactions through rival payment networks that often charge lower rates, according to the newspaper, which cites anonymous people familiar with the matter.
In a regulatory filing Friday afternoon, Visa confirmed that it was cooperating with the Justice Department, which ordered it to “preserve relevant documents related to the investigation,” adding: “We believe that Visa’s U.S. debit practices comply with applicable laws “.
Federals are reportedly weighing in on whether Visa uses illegal tactics to maintain control over an industry that accumulates billions of dollars in fees a year.
The total volume of Visa payments amounted to $ 8.9 trillion in 2019, according to its latest annual report, almost double that of Mastercard, the second largest player in the market.
According to reports, 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 is named Visa or Mastercard.
This often forces companies to pay higher transaction fees than they would pay if they could use other options, the newspaper reported.
Federal researchers studying the problem have largely asked questions about online debit card payments, though they have also asked about issues related to in-store transactions, according to the report.
They are also looking for information about the financial incentives Visa offers to banks that issue cards in their network and whether those incentives encourage banks not to allow payments to be routed through other networks, a source told the newspaper.
The Justice Department declined to comment Friday.
News of the investigation comes less than two months after Visa canceled its $ 5.3 billion acquisition of start-up Plaid financial technology amid antitrust control.
The companies decided to withdraw the deal instead of fighting a November lawsuit filed by the Justice Department to block the merger, alleging that Visa was trying to overturn a rising rival.
About 200 million bank accounts are reportedly connected to Plaid technology, which allows developers to aggregate consumer spending data. Federals said Plaid was planning to build a payment network that could have competed with Visa by allowing consumers to pay merchants directly from their bank accounts.
Visa CEO Al Kelly considered the acquisition of Plaid as an “insurance policy” to protect the company’s debit business in the U.S., the DOJ alleged. Visa discussed the federation’s argument, saying Plaid was not actually a competitor.