Visa was hit with a civil antitrust lawsuit this week by the U.S. Justice Department for monopolization and other unlawful conduct in violation of the Sherman Act.
The complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Visa illegally maintains a monopoly over debit network markets by using its dominance to thwart competitors and prevent others from developing new alternatives.
The complaint said that more than 60 percent of debit transactions in the United States run on Visa’s debit network, allowing it to charge over $7 billion in fees each year for processing those transactions.
The Justice Department alleges that Visa illegally maintains its monopoly power by insulating itself from competition through various exclusionary agreements on merchants and banks. These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.
In so doing, the complaint alleges, Visa locks up debit volume, insulates itself from competition, and smothers smaller competitors. Further, it alleges that Visa induces would-be competitors to become partners instead of entering the market as competitors by offering generous monetary incentives and threatening punitive additional fees.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said. “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 complaint also alleges that through Visa’s efforts to limit competition for debit transactions, billions of dollars in additional fees have been imposed on American consumers. Through this lawsuit, the Justice Department seeks to restore competition to this market.
“Anticompetitive conduct by corporations like Visa leaves the American people and our entire economy worse off,” Principal Deputy Associate Attorney General Benjamin Mizer said. “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.”
In 2020, the Justice Department filed a civil antitrust lawsuit to stop Visa from acquiring Plaid, a technology company that powers fintech apps developing disruptive options for online debit payments.