Justice Department Eyes New Antitrust Suit Against Visa, MasterCard

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SAN FRANCISCO – Visa shares slumped more than 5% yesterday after the company revealed that the U.S. Justice Department is considering suing it over a policy that bars merchants from charging extra to customers who pay with credit cards.

“The department has indicated that it is considering filing a civil lawsuit,” Visa CEO Joseph Saunders said Tuesday in a conference call with analysts. “We are currently engaged in constructive negotiations with the department to resolve its concerns as it relates to Visa without litigation or payment of monetary damages.”

The threat comes as Visa and MasterCard, and their credit union and bank issuers, are waging a major legislative battle against efforts to rein in some of the payment policies and fee practices of the two networks. Bank reform legislation passed last month will ban certain practices by the two networks that prohibit merchants from encouraging the use of cash or low-cost cards – two practices targeted by the Justice Department. The bill, known as the Frank-Dodd Financial Reform Act, will also set up the Federal Reserve as the final arbiter of interchange fees charged on debit transactions.

The latest Justice Department investigation comes as Visa and MasterCard are still paying billions of dollars to settle civil antitrust cases brought by American Express and Discover Financial after a court found the two networks’ policies barring issuers from offering competitors’ cards in violation of antitrust law in a suit brought by Justice. The two networks have also been sued for antitrust violations regarding their practices with overseas charges.

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