The U.S. Justice Department sues Visa.
Key Points
- The U.S. Department of Justice on Tuesday sued Visa, the world’s biggest payments card network, saying it propped up an illegal monopoly over debit card payments.
- The DOJ said Visa imposed “exclusionary” agreements on partners and smothered upstart firms.
- Visa and its smaller rival Mastercard have surged over the past two decades, reaching a combined market cap of roughly $1 trillion.
The U.S. Justice Department is suing Visa, accusing the company of dominating the debit card market through excessive fees and restricting competition.
Antitrust Lawsuit
A civil antitrust lawsuit was initiated on Tuesday in the U.S. District Court for the Southern District of New York, alleging that Visa has breached sections 1 and 2 of the Sherman Act. The complaint highlights that over 60% of debit transactions in the United States are conducted through Visa's debit network, which generates more than $7 billion in fees annually for processing these transactions.
DOJ Response
Attorney General Merrick Garland stated: "We assert that Visa has illegally gained the ability to impose fees that significantly surpass what would be permissible in a competitive marketplace. Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa's unlawful conduct affects not just the price of one thing -- but the price of nearly everything."
The Justice Department filed Tuesday's lawsuit to restore competition and to benefit the American public, alleging that Visa employed exclusionary tactics to protect its position in the debit market. Visa reports a global operating income of $18.8 billion as stated in the lawsuit and charges approximately $8 billion in network fees annually from U.S. debit transactions. Globally, Visa handles a total payment of $12.3 trillion.
Principal Deputy Associate Attorney General Benjamin Mizer stated: "Anti-competitive conduct by corporations like Visa leaves the American people and our economy worse off. Today's action against Visa reminds those who would stifle competition rather than competing on price or investing in innovation that the Justice Department will never hesitate to enforce the law on behalf of the American people."
Visa has faced legal challenges from the U.S. government in the past. Four years ago, the Justice Department initiated a lawsuit aimed at preventing Visa from acquiring the fintech firm Plaid. The lawsuit asserted that Visa's $5.3 billion acquisition was a tactical effort to safeguard its debit card operations from potential competition posed by Plaid. Consequently, the companies abandoned their proposed merger.
Visa Response
Visa's general counsel Julie Rottenberg responded with a statement: "Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services. We are proud of the payments network we have built, the innovation we advance and the economic opportunity we enable."
