Discover Network, through its Pulse Network subsidiary,sued Visa, Inc. on 11/25/14 for alleged anti-competitive practices related tothe US debit marketplace.
Pulserequires its debit cardholders to authorize transactions with a personalidentification number (PIN). Most Visa transactions use customer signature.
Thelawsuit alleges that “Visa has a long history of making sure that PINdebit does not predominate, including undertaking illegal behavior to fend offcompetitive threats to its debit network services monopoly.”
Inthe petition, Discover said that Visa is offering economic incentives tomerchants to choose the Visa network for transactions.
Discoveris challenging a Visa rule that requires financial issuers of Visa signaturedebit cards to also include Visa’s PIN services instead of allowing other PINnetworks like Pulse to compete for that business.
The challenge appears to stem in part from Visa’spost-Durbin amendment FANF fees (which added volume incentives for acquirersand their major merchants) and their PAVD transaction type (which allowedmerchants to route PIN transactions via either PIN or signature networks, andrequires Visa issuers to support these transactions). FANF fees havealready been subject to antitrust scrutiny. Both structures have beenperceived by PIN debit networks to unfairly siphon PIN debit volume away fromthe second debit networks implemented on all debit cards under the DurbinAmendment.
Overview by Ken Paterson, VP of Research Operations for Mercator Advisory Group
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