Discover Challenges Visa’s Signature Debit in Court
Dec. 4, 2014
Just before the holiday weekend in the U.S. last week, Discover filed suit against Visa alleging “a series of illegal actions” that have resulted in a monopoly in its debit-card business. Discover, specifically Pulse, the unit that runs the Riverwoods, Ill. company’s debit network, brought suit against Visa in U.S. District Court in Houston last week. At issue, Discover said in the suit, are Visa’s efforts to thwart PIN debit in favor of signature and what they are calling illegal requirements steering merchants toward Visa’s debit network.
“Despite the significant advantages of PIN debit, most debit card usage in the United States is still based on signature debit. The reason is Visa,” the filing said. “Visa dominates the provision of signature debit network services, maintaining a market position based on charging higher fees for its services and earning higher profits. Permitting the superior PIN debit to predominate in the marketplace would cost Visa a lot of money. Accordingly, Visa has a long history of making sure that does not happen, including undertaking illegal behavior to fend off competitive threats to its debit network services monopoly. Visa acquired its debit network services monopoly during the 1990s by requiring merchants that accepted Visa credit cards also to accept Visa signature debit cards. Because few merchants were willing to drop credit card acceptance, imposing this tying arrangement meant that Visa could assure itself of broad merchant acceptance for its signature debit network.”
A Visa spokesperson said the company is aware of the lawsuit and is reviewing it.