The US Department of Justice has filed an antitrust lawsuit against Visa, alleging that the financial services behemoth is using its size and dominance to stifle competition in the debit card market, costing consumers and businesses billions of dollars.
The complaint filed Tuesday alleges that Visa penalizes merchants and banks that do not use Visa’s payment processing technology to process debits, even though there are alternatives. Visa earns an incremental fee for every transaction processed on its network.
According to the DOJ’s complaint, 60% of debits in the United States use Visa’s debit network, allowing it to charge more than $7 billion each year for processing those transactions.
“We suspect that Visa has illegally amassed the ability to charge fees far in excess of what it would charge in a competitive market,” Attorney General Merrick B. Garland said in a statement. “Retailers and banks pass those costs on to consumers, by raising prices or lowering quality or service. As a result, Visa’s illegal behavior affects not just the price of one item – but the price of almost everything.”
The Biden administration has aggressively gone after American companies it says are acting as middlemen, such as Ticketmaster parent Live Nation and real estate software company RealPage, accusing them of burdening Americans with unreasonable fees and anti-competitive behavior. The administration also sued tech giants like Apple and Google.
According to the DOJ’s complaint, filed in the US District Court for the Southern District of New York, Visa uses a large number of transactions in its network to impose value obligations on merchants and their banks, as well as on financial institutions that issue debit cards. . That makes it difficult for merchants to use alternatives, such as low-cost or low-cost payment processors, instead of Visa’s payment processing technology, without incurring what the DOJ described as “disloyalty penalties” from Visa.
The DOJ said Visa also foreclosed competition by paying to enter into cooperative agreements with potential competitors.
In 2020, the DOJ sued to block the company’s $5.3 billion purchase of financial technology startup Plaid, calling it a takeover of a potential competitor to Visa’s ubiquitous payments network. That finding was eventually overturned.
Visa previously disclosed that the Department of Justice was investigating the company in 2021, saying in a regulatory filing that it was cooperating with a DOJ investigation into its debit practices.
Since the pandemic, more consumers around the world have been buying goods and services online, which has translated into more income for Visa in the form of funds. Even businesses that traditionally carry cash such as bars, barbers and coffee shops have begun accepting credit or debit cards as a form of payment, often through smartphones.
Visa processed $3.325 trillion in transactions on its network during the quarter ended June 30, up 7.4% from a year ago. US payments grew by 5.1%, faster than the growth of the US economy.
Visa, which is based in San Francisco, did not immediately comment.
-Mae Anderson, Associated Press business writer
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