On July 1, 2008, Visa Inc. rescinded a rule that required merchants to treat Visa-branded debit cards differently when used as a PIN-debit card (and processed via non-Visa networks) from the same cards when used as signature debit cards and processed on the Visa network.
The rule was rescinded in response to the Department of Justice’s (“DOJ”) Antitrust Division’s investigation. Rescinding the rule allows affiliated banks to provide merchants the option of waiving the entry of a PIN for most non-Visa debit transactions initiated from Visa branded debit cards. Before the investigation, Visa prohibited banks from allowing its merchants to waive the PIN, even for “small ticket” transactions ($25 or less) from a non-Visa PIN network. The DOJ’s Antitrust Division began investigating the effects of this regulation on competition in the debit card industry.
During a debit card transaction, a consumer’s checking account is debited enabling the consumer to pay the merchant. The debited payment is transferred to the merchant’s bank account. There are two ways to authenticate this transaction: by entering a PIN or by the consumer’s signature. More than two-thirds of all signature debit cards in the United States carry the Visa brand and virtually all Visa signature debit cards can be used to conduct PIN debit transactions. For some time, however, Visa has allowed some of its merchants to waive PIN entry or signature to authenticate the transaction for “small ticket” transactions.
The DOJ’s Antitrust Division will close its investigation in response to Visa’s proposed elimination of rules under investigation. However, the Antitrust Division did not require a consent decree that would prohibit Visa from reinstating the rule.