Finance

DOJ accuses Visa of monopoly that impacts price of ‘nearly everything’

Published

3 months ago

September 24, 2024

Justin Sullivan | etty Images

The U.S. Justice Department on Tuesday sued Visa, the world’s biggest payments network, saying it propped up an illegal monopoly over debit payments by imposing “exclusionary” agreements on partners and smothering upstart firms.

Visa’s moves over the years have resulted in American consumers and merchants paying billions of dollars in additional fees, according to the DOJ, which filed a civil antitrust suit in New York for “monopolization” and other unlawful conduct.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said in a DOJ release.

“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 and its smaller rival MasterCard have surged in the past two decades, reaching a combined market cap of roughly $1 trillion, as consumers tapped credit and debit cards for store purchases and e-commerce instead of paper money. They are essentially toll collectors, shuffling payments between the merchants’ banks and cardholders.

More than 60% of debit transactions in the U.S. run over Visa rails, helping it charge more than $7 billion annually in processing fees, according to the DOJ complaint.

But the payment networks’ dominance has increasingly attracted attention from regulators and retailers.

In 2020, the DOJ filed an antitrust suit to block Visa from acquiring fintech company Plaid; the companies initially said they would fight the action, but soon abandoned the $5.3 billion takeover.

In March, Visa and Mastercard agreed to limit their fees and let merchants charge customers for using credit cards, a deal retailers said was worth $30 billion in savings over a half decade. A federal judge later rejected the settlement, saying the networks could afford to pay for a “substantially greater” deal.

“Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the DOJ said in its release. “These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.”

Furthermore, when faced with threats, Visa “engaged in a deliberate and reinforcing course of conduct to cut off competition and prevent rivals from gaining the scale, share, and data necessary to compete,” the DOJ said.

The move comes in the waning months of President Joe Biden‘s administration, in which regulators including the Federal Trade Commission and the Consumer Financial Protection Bureau have sued middlemen for drug prices and pushed back against so-called junk fees.

In February, credit card lender Capital One announced its acquisition of Discover Financial, a $35.3 billion deal predicated in part on Capital One’s ability to bolster Discover’s also-ran payments network, a distant No. 4 behind Visa, MasterCard and American Express.

Capital One said that once the deal is closed, it will switch all its debit card volume and a growing share of credit card volume to Discover over time, making it a more viable competitor to Visa and Mastercard.

This story is developing. Please check back for updates.

Finance

Treasury delays deadline for small businesses to file new BOI form

Published

13 hours ago

December 26, 2024

Business Finance News

Janet Yellen, U.S. Treasury secretary, on a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.

Valerie Plesch/Bloomberg via Getty Images

The U.S. Treasury Department has delayed the deadline for millions of small businesses to Jan. 13, 2025, to file a new form, known as a Beneficial Ownership Information report.

The Treasury had initially required many businesses to file the report to the agency’s Financial Crimes Enforcement Network, known as FinCEN, by Jan. 1. Noncompliance carries potential fines that could exceed $10,000.

This delay comes as a result of legal challenges to the new reporting requirement under the Corporate Transparency Act.

The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

Businesses and owners that didn’t comply would potentially face civil penalties of up to $591 a day, adjusted for inflation, according to FinCEN. They could also face up to $10,000 in criminal fines and up to two years in prison.

However, many small businesses are exempt. For example, those with over $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Why Treasury delayed the BOI reporting requirement

The Treasury delayed the compliance deadline following a recent court ruling.

A federal court in Texas on Dec. 3 had issued a nationwide preliminary injunction that temporarily blocked FinCEN from enforcing the rule. However, the 5th U.S. Circuit Court of Appeals reversed that injunction on Monday.

CNBC Small Business Survey finds confidence rising among small businesses

“Because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline,” according to the FinCEN website.

FinCEN didn’t return a request from CNBC for comment about the number of businesses that have filed a BOI report to date.

Some data, however, suggests few have done so.

The federal government had received about 9.5 million filings as of Dec. 1, according to statistics that FinCEN provided to the office of Rep. French Hill, R-Ark. That figure is about 30% of the estimated total.

Hill has called for the repeal of the Corporate Transparency Act, passed in 2021, which created the BOI requirement. Hill’s office provided the data to CNBC.

“Most non-exempt reporting companies have not filed their initial reports, presumably because they are unaware of the requirement,” Daniel Stipano, a partner at law firm Davis Polk & Wardwell, wrote in an e-mail.

There’s a potential silver lining for businesses: It’s “unlikely” FinCEN would impose financial penalties “except in cases of bad faith or intentional violations,” Stipano said.

“In its public statements, FinCEN has made clear that its primary goal at this point is to educate the public about the requirement, as opposed to taking enforcement actions against noncompliant companies,” he said.

Certain businesses are exempt from BOI filing

The BOI filing isn’t an annual requirement. Businesses only need to resubmit the form to update or correct information.

Many exempt businesses — such as large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.

Businesses have different compliance deadlines depending on when they were formed.

For example, those created or registered before 2024 have until Jan. 13, 2025, to file their initial BOI reports, according to FinCEN. Those that do so on or after Jan. 1, 2025, have 30 days to file a report.

There will likely be additional court rulings that could impact reporting, Stipano said.

For one, litigation is ongoing in the 5th Circuit, which hasn’t formally ruled on the constitutionality of the Corporate Transparency Act.

“Judicial actions challenging the law have been brought in multiple jurisdictions, and these actions may eventually reach the Supreme Court,” he wrote. “As of now, it is unclear whether the incoming Trump administration will continue to support the Government’s position in these cases.”