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US ACCUSES VISA OF MONOPOLIZING DEBIT CARD SWIPES

By Jody Godoy
September 25, 202412:25 PM GMT+2Updated 5 days ago
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 * Summary
 * Companies

 * Prosecutors say Visa used threats, incentives to thwart competition in debit
   processing
 * Visa says it will fight the claims, which it calls meritless
 * Justice Department officials said Visa's conduct imposed hidden costs on
   consumers

Sept 24 (Reuters) - Visa (V.N), opens new tab shares took a hit on Tuesday after
the U.S. Department of Justice filed a lawsuit accusing it of violating
antitrust law by suppressing competition by threatening merchants with high fees
and paying off potential rivals.
Visa, one of the world's largest payment networks, processes more than 60% of
debit transactions in the U.S., bringing it $7 billion each year in fees
collected when transactions are routed over its network, the Justice Department
said. The company protects that dominance through agreements with card issuers,
merchants, and competitors, prosecutors allege.
Advertisement · Scroll to continue

Visa shares closed down around 5.5% on Tuesday.
Julie Rottenberg, Visa's general counsel, said competition is thriving in the
debit market, and that the claims are meritless and the company will contest
them vigorously.
"When businesses and consumers choose Visa, it is because of our secure and
reliable network, world-class fraud protection, and the value we provide," she
said.
The bid to tackle the fees, sometimes known as swipe fees or interchange fees,
is part of the Biden administration's efforts to combat rising consumer prices,
a major issue in the Nov. 5 presidential election between Democrat Kamala Harris
and Republican Donald Trump.
Advertisement · Scroll to continue

"Visa's unlawful conduct affects not just the price of one thing, but the price
of nearly everything," Attorney General Merrick Garland said in a statement,
noting merchants and banks pass payment network costs to consumers.
Visa's alleged anticompetitive conduct began around 2012, as competing companies
entered the payments space following reforms that required card issuers to
accommodate unaffiliated networks, a senior Justice Department official said.

Item 1 of 2 Visa credit and debit cards are seen in this picture illustration
taken August 2, 2022. REUTERS/Benoit Tessier/File Photo
[1/2]Visa credit and debit cards are seen in this picture illustration taken
August 2, 2022. REUTERS/Benoit Tessier/File Photo Purchase Licensing Rights,
opens new tab

Visa entered lucrative agreements with would-be financial technology competitors
including Apple , PayPal (PYPL.O), opens new tab and Block Inc's (SQ.N), opens
new tab Square that they would not release products that threatened its
dominance, prosecutors alleged.
PayPal declined to comment on Tuesday. Apple and Block did not respond to
requests for comment.
The card network also levies "staggering financial penalties" on merchants who
do not route all or most eligible transactions through Visa's network, according
to the lawsuit.

Prosecutors seek an order from a judge in Manhattan blocking Visa from imposing
pricing structures that discourage competition, and paying rivals not to
compete, which they said would restore competition for services to process debit
payments both online and at physical stores.
The Justice Department's antitrust division began investigating Visa over its
debit card practices in 2021, the same year it blocked Visa's acquisition of
financial technology company Plaid. Rival Mastercard (MA.N), opens new tab said
in April it was being investigated by the Justice Department as well.
Both companies have been in litigation for nearly two decades over their
dominance in the cards market.
Visa and Mastercard agreed in 2019 to pay U.S. merchants $5.6 billion to settle
damages claims in a class action lawsuit accusing them of anticompetitive
practices.
A federal judge in Brooklyn rejected a parallel settlement in June that would
reduce swipe fees by an estimated $30 billion over five years and require Visa
and Mastercard to lift some rules that bar merchants from charging customers to
use their cards.
Visa has set aside around $1.6 billion for potential settlements in those and
other U.S. cases over interchange fees.

Jumpstart your morning with the latest legal news delivered straight to your
inbox from The Daily Docket newsletter. Sign up here.

Reporting by Jody Godoy in New York; Editing by Bill Berkrot and Daniel Wallis

Our Standards: The Thomson Reuters Trust Principles., opens new tab

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Purchase Licensing Rights
Jody Godoy

Thomson Reuters

Jody Godoy reports on tech policy and antitrust enforcement, including how
regulators are responding to the rise of AI. Reach her at
jody.godoy@thomsonreuters.com

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