Reports making the rounds that the credit card company Visa Inc was being investigated for by the United States over allegations that the company uses anticompetitive practices in the debit-card market were confirmed by the company on Friday with it saying that its debit practices were being investigated by the the S The Justice Department.
“The U.S. Department of Justice has informed Visa of its plans to open an investigation into Visa’s U.S. debit practices,” the company said in a securities filing. “We have received a notice to preserve relevant documents related to the investigation.”
The allegations of Visa using anticompetitive practices in the debit-card market are set to t be probed by the Justice Department, said reports quoting sources familiar with the matter. According to a report published the Wall Street Journal, whether Visa limited merchants’ ability to route debit-card transactions over card networks that are often less expensive is being looked into by the Justice Department’s antitrust division.
“We believe Visa’s U.S. debit practices are in compliance with applicable laws,” the company said. “Visa is cooperating with the Department of Justice.”
No comment form the Justice Department was available on the issue.
Complains about high costs of network fees, or interchange fees – which can be 2 per cent or more for each transaction and which benefit the financial company that behind the transactions, have been made by merchants for long.
The probe news was described as good by the industry group the Merchants Payments Coalition, which is against the so-called swipe fees. “The MPC has been concerned about these practices to limit debit routing for years and it’s great to see the Department of Justice looking in to it,” said its spokesman Craig Shearman.
Even though this type of investigation is not uncommon, this one assumes importance because of the current environment of increased regulator interest in the digital marketplace.
A merger between Visa and fintech startup Plaid which was worth $5.3 billion gad to be called off by the companies earlier this year because of a cause filed by the US government against the proposed deal even as the government called Visa a “monopolist in online debit transactions.”
Investigations against the credit card payments industry have been previously conducted by the US Justice Department but in 2010, it had settled charges with Visa and Mastercard Inc after the companies agreed to allow merchants to make offers to customers to use credit cards that carried low costs.
American Express however refused to settle. Its battle with the Justice Department was taken by the company to the Supreme Court which ruled in American Express’s favour in 2018 and said that the company was within its legal rights to prevent merchants from trying to steer consumers to cheaper cards.
(Adapted from Reuters.com)