Department of Justice investigating debit card visa practices

The probe highlights the important role of so-called invisible network tariffs for consumers, lucrative for card companies, but weighing on merchants, who often pass on rates in the form of higher prices to customers.

It occurs when the antitrust authorities of the Department of Justice of all administrations have placed emphasis on examining the activities of the digital market, including the financial sector, and on investigating the business practices of dominant companies.

In the new survey, the department is considering whether Visa practices allow it to maintain a dominant market share illegally, people said.

A Visa spokesman declined to comment. The Justice Department did not comment immediately.

Some of the people said antitrust researchers have asked questions beyond the debit card routing problem. The department has also asked about Mastercard Inc

MA -4.12%

one of the people said the role in the debit card market and whether financial technology companies are real competitors of Visa and Mastercard.

A Mastercard spokesperson did not provide any comments.

The new civil investigation, which began in recent weeks, follows the department’s investigation into Visa’s proposed acquisition of financial technology firm Plaid Inc., according to People. The department sued Visa in November over the Plaid deal, alleging that the acquisition would allow Visa to illegally maintain a monopoly on online debit, where the department said it had an approximate market share of 70 %.

Plaid was developing an innovative and cheaper payment technology that could have been a threat to Visa, according to the government. Visa defined the misguided demand and said Plaid was not actually a competitor.

The companies withdrew the deal in January, citing the length and potential complexity of the litigation.

The way debit card transactions are routed is a long-standing conflict between merchants and card companies. The Durbin amendment, which is part of the 2010 Dodd-Frank Act, requires merchants to have the ability to choose at least two unaffiliated debit card networks to route transactions.

For years, merchants have alleged that they are often unable to route online debit card purchases over smaller networks, such as Shazam or NYCE, when the Visa or Mastercard name appears on the front of the card. . Merchants say that as a result, they often end up paying higher network rates compared to what they would pay on lesser-known networks.

According to one of the people familiar with the matter, the Department of Justice is looking for information about the financial incentives that Visa provides to banks that issue cards in their network. He is studying whether these incentives encourage banks not to allow routing on other networks, the person said.

One person said the DOJ has also asked about debit card routing practices related to newer payment methods. This includes when debit cards are used with mobile wallets such as Apple Pay and separately when in-store customers pay by touching debit cards at payment terminals instead of inserting them.

In addition, the Federal Trade Commission has been investigating Visa and Mastercard on routing debit cards. Senator Richard Durbin and Rep. Peter Welch also raised the issue in a letter to the Federal Reserve last summer.

Write to AnnaMaria Andriotis to [email protected] and Brent Kendall to [email protected]