WASHINGTON (12/1/14)--Two major credit card companies may soon be entangled in federal court following a lawsuit by Discover Financial Services that accuses Visa Inc. of anticompetitive practices in its debit-card business.
Discover filed the lawsuit in federal court last week, and accuses Visa of "undertaking illegal behavior to fend off competitive threats to its debit network services monopoly" (The Wall Street Journal Nov. 25).
Discover asserts that it is an unfair advantage that Visa can require issuers of its debit cards to only use Visa's PIN services, rather than allowing other competitors, such as Pulse from Discover, to compete for the business.
In 2010, an overhaul of the U.S. financial system included a regulation that required financial institutions to feature at least two processing networks on each debit card so that merchants could rout transactions to their networks of preference.
Discover believes that Visa is offering merchants--especially those that process large numbers of transactions--monetary incentives if they agree to send all debit transactions to the Visa debit network.
The lawsuit is not the first filed against Visa with accusations of anticompetitive practices. A similar lawsuit was first filed in a U.S. District Court in Houston.
Visa, the largest credit card company in the United States, said the company is aware of the suit and is in the process of reviewing it, according to The Wall Street Journal.