Merchants are pleased–but not entirely surprised–to hear that the U.S. Department of Justice's antitrust division is taking a close look at Visa Inc.'s unpopular fixed merchant acquirer fee.
The Merchants Payments Coalition, a Washington, D.C.-based lobbying group, on May 3 issued a statement welcoming the investigation of the fee, which the coalition said Visa is using to "muscle" merchants into routing more credit and debit transactions over its network.
Visa disclosed the investigation May 2 when announcing its quarterly earnings.
That Visa's fee has triggered antitrust questions underscores merchants' concerns about the fee's long-term market effects, Doug Kantor, the coalition's legal counsel, tells ISO&Agent Weekly.
"Visa's new fee creates a situation where merchants that want to accept its credit and debit cards would have to pay more to Visa upfront, which more or less locks them in to routing more transactions over Visa's network in order to get the most out of their investment," he said. "Once a merchant has been forced to sink costs into such an upfront fee, it affects all the economic decision-making about where to route future transactions, which would reduce competition with other networks."
Visa on Feb. 9 informed merchants of the fee, which went into effect April 1. Visa is slated to begin collecting the first revenue from the fees beginning July 1.
Visa said it crafted the fee in response to new Federal Reserve Board rules associated with the Durbin amendment to the Dodd-Frank law that changed the game for debit pricing and network-routing.
As part of the new acquirer-fee structure, Visa said it was lowering its network acquiring processing fee and would base merchants' costs on their total number of locations.
Merchants complained they did not receive ample warning before the fee went into effect.
The Electronic Transactions Association on March 7 sent a letter to Joe Saunders, Visa's CEO, requesting that the network delay the fee, but Visa refused to do so. The association declined to comment on the news about the Justice Department’s investigation.
Acquirers said they expect merchants to react negatively when the fee takes hold.
"Aside from the fact that merchants objected to many aspects of Visa's new fixed fee, there is a real risk here that Visa's fee will make it tougher for other networks, including MasterCard, Discover, American Express and the electronic funds transfer networks to compete," Kantor says. "We are grateful that the government is taking it seriously."
During a May 2 conference call with analysts, Visa's Saunders said "there hasn't been any reaction" yet from merchants "because I don't believe the fee has been billed to anyone yet."
Visa met with the Justice Department twice in March and remains "confident that our actions are appropriate," Saunders said.
"Visa has received four other requests for information from the department since 2007, each of which took from nine to almost 24 months to complete,” he said. “All have been resolved with our full cooperation."