July 31 (Bloomberg) -- Visa Inc., the world’s biggest payment network, fell the most in two-and-a-half years after a judge ruled that the Federal Reserve had erred by inflating debit-card fees and restricting retailers’ choice of network.
Visa dropped 7.5 percent in New York trading to $177.01, the most since December 2010. Swipe, or interchange fees, are set by Foster City, California-based Visa and MasterCard Inc., which collect the money and remit it to card-issuing member banks.
U.S. District Court Judge Richard Leon in Washington ruled today that the Fed considered data it wasn’t allowed to use in setting a 21-cent cap on debit-card fees under the Dodd-Frank Act of 2010. The judge also sided with retailers who challenged the central bank’s regulation of exclusivity agreements between banks and payment networks, saying it doesn’t create “competition of choice.”
“The potential revisiting of routing rules” is spooking Visa investors, said Andrew Jeffrey, an analyst with SunTrust Robinson Humphrey Inc., who has a ‘buy’ rating on the shares. “It potentially unearths a body.”
Visa dominates the market for U.S. debit- and prepaid-card transactions, which amounted to $1.98 trillion in 2012, according to the Nilson Report. The firm, led by Chief Executive Officer Charles Scharf, 48, controls 56 percent of the market, according to the industry newsletter.
MasterCard, the second-biggest U.S. network, gained 1.5 percent to $610.61 after reporting profit that beat analysts’ estimates. The Purchase, New York-based firm’s share of the debit-and prepaid card market was 23 percent last year, according to the Nilson Report.
To contact the reporter on this story: Donal Griffin in New York at email@example.com