Visa lawsuit benefits Mastercard, Fiserv and FIS, says JPMorgan

JPMorgan analyst Tien-tsin Huang keeps an Overweight rating on Visa (V) after the Department of Justice filed an antitrust lawsuit against the company over its U.S. debit practices, alleging that Visa has stifled competition. The DOJ is arguing that Visa’s contracts and pricing structures prevent other networks as well as “fintech debit networks” from competing on a level playing field, the analyst tells investors in a research note. JPMorgan is not overly surprised by the majority of the DOJ’s findings “given they touch on common practices in payments: volume-based discounting and co-opetition.” It suspects a resolution “will be multiple years in the making” given historical precedent but wouldn’t be surprised to see some ongoing weight on Visa’s shares near-term given regulatory attention likely pressures pricing power. JPMorgan reiterates its preference for top-pick Mastercard (MA). It also see Fiserv (FI) and FIS (FIS) as possible beneficiaries given their ownership of competing PIN networks, which should benefit if any injunctive measures are taken to encourage more competition in debit.