Visa woes going forward?25 Sep 2024 07:04
A story from M@rhrtwAtch. Good news for Visa competitors going forward perhaps?
"Why Visa’s antitrust battle could be so worrying to Wall Street
Emily Bary
Visa Inc.’s stock was among the worst performers in the S&P 500 on Tuesday and flirted with its steepest percentage drop in nearly three years.
Investors’ worries reflected a Justice Department lawsuit filed Tuesday, which alleged Visa
“Visa deploys a web of unlawful anticompetitive agreements to penalize merchants and banks for using competing payment networks,” Attorney General Merrick Garland said in an announcement. “At the same time, it coerces would-be market entrants into unlawful agreements not to compete by threatening high fees if they do not cooperate, and promising big payoffs.”
In a statement, he further criticized Visa’s fees. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service,” Garland said. “As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
Visa called the suit “meritless” and vowed to fight it.
“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” Julie Rottenberg, Visa’s general counsel, said in a statement. “Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.”
Investor fears began to surface late Monday when a Bloomberg News report said that the Justice Department was readying an antitrust case against the payment-technology giant.
Shares of Visa were already down more than 4% prior to the official filing and fell further after the start of Garland’s press conference. The stock ended the day down 5.5%, its worst one-day drop since a 6.9% fall on Oct. 27, 2021.
It remains unclear what the exact implications would be if the government is successful in its efforts.
In an interview before the official lawsuit was filed, Mizuho analyst Dan Dolev told MarketWatch that the Justice Department’s interest in Visa’s debut business is “not surprising, but not good either.”
One factor likely worrying investors Tuesday is that the payments landscape is different than it was even five years ago. Then, there were few viable payment options beyond the card networks. But now there are more ways to make transactions, including the Federal Reserve’s FedNow offering, a real-time payment service that lets people and businesses send money between accounts.
“The difference between then and now is you’ve got alternatives to debit,” Dolev said. Not only does FedNow have more than 900 financial institutions signed up, but companies are working on their own ways of bypassing the card networks. For instance, Walmart Inc.
is planning an instant option that would let peo
Sign In
Follow the stocks
