The U.S. Justice Department filed a lawsuit against Visa, the largest payments network worldwide, alleging the company maintained an illegal monopoly over debit payments through “exclusionary” agreements with partners, ultimately stifling competition. The DOJ asserts that Visa’s actions led to American consumers and merchants incurring billions of dollars in additional fees. The civil antitrust suit filed in New York accuses Visa of “monopolization” and other forms of unlawful conduct.
Attorney General Merrick Garland stated that Visa has unlawfully leveraged its power to impose fees significantly higher than what would be possible in a competitive market environment. Garland emphasized that these costs are passed on to consumers through increased prices or reduced quality and service, affecting the cost of virtually everything.
Visa, alongside its smaller competitor Mastercard, has seen substantial growth over the past two decades, achieving a combined market capitalization of approximately $1 trillion. This growth is attributed to the increasing use of credit and debit cards over cash for both in-store and online purchases. Visa’s role has effectively become that of a toll collector, facilitating payments between banks for merchants and cardholders.
Visa dismissed the DOJ’s lawsuit as “meritless,” with General Counsel Julie Rottenberg asserting that there is a broad and expanding range of payment options available to consumers. Rottenberg highlighted Visa’s role as just one of many competitors in the dynamic and growing debit space.
The DOJ’s complaint points out that over 60% of U.S. debit transactions are processed through Visa, generating over $7 billion annually in processing fees. This dominance has drawn increasing scrutiny from regulators and retailers alike.
In previous actions, the DOJ has targeted Visa, including a 2020 antitrust suit intended to block Visa’s acquisition of the fintech company Plaid. Although the companies initially planned to contest the action, they ultimately abandoned the $5.3 billion deal. Earlier this year, Visa and Mastercard agreed to limit their fees and permit merchants to charge customers for credit card usage, a settlement estimated to save retailers $30 billion over five years. However, a federal judge later deemed the settlement insufficient.
According to the DOJ, Visa’s contracts penalize merchants and their banks if they redirect a significant share of debit transactions to competitors, insulating much of Visa’s debit volume from fair competition. The DOJ claims Visa employs its dominance to impose exclusionary agreements that penalize customers who use alternative payment networks or systems.
Additionally, the DOJ alleges Visa’s strategy includes paying competitors hundreds of millions of dollars annually to deter them from developing innovative technologies that could challenge Visa’s market position. Agreements with companies like Apple, PayPal, and Square have reportedly turned potential rivals into partners, thereby stifling competition. For instance, Visa secured an agreement with a predecessor of the Cash App product, ensuring it did not pose a significant threat to Visa’s debit network.
The DOJ is seeking court intervention to prevent Visa from engaging in anticompetitive practices, including fee structures or service bundles that inhibit new market entrants. This lawsuit arises during President Joe Biden’s administration, which has seen increased regulatory actions against intermediaries in various sectors.
In related industry developments, Capital One recently announced its acquisition of Discover Financial in a $35.3 billion deal. This merger aims to bolster Discover’s payments network, positioning it as a more formidable competitor against Visa, Mastercard, and American Express. Capital One plans to migrate its debit card volume and a significant portion of its credit card volume to Discover’s network post-acquisition.
