US DoJ Sues Visa For ‘Monopolising’ Debit Cards

Financial services giant Visa has been sued by the US Department of Justice (DoJ) over alleged anti-competitive acts in the debit card sector.

The DoJ alleged on Tuesday that “Visa’s exclusionary and anticompetitive conduct undermines choice and innovation in payments and imposes enormous costs on consumers, merchants, and the American economy.”

As a consequence of this, the DoJ said it had “filed a civil antitrust lawsuit against Visa for monopoliszation and other unlawful conduct in debit network markets in violation of Sections 1 and 2 of the Sherman Act.”

DoJ lawsuit

Filed in the US District Court for the Southern District of New York, the complaint alleges that Visa illegally maintains a monopoly over debit network markets by using its dominance to thwart the growth of its existing competitors and prevent others from developing new and innovative alternatives.

According to the DoJ complaint, 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 complaint further alleges that Visa illegally maintains its monopoly power by insulating itself from competition. It alleged Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks.

The DoJ said these agreements penalise 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, lower-priced competitors.

Visa also allegedly induces would-be competitors to become partners instead of entering the market as competitors by offering generous monetary incentives and threatening punitive additional fees. As the complaint alleges, Visa co-opted the competition because it feared losing share, revenues, or being displaced by another debit network altogether.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” said Attorney General Merrick B. Garland.

“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.”

“Anticompetitive conduct by corporations like Visa leaves the American people and our entire economy worse off,” added Principal Deputy Associate Attorney General Benjamin C. Mizer. “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.”

The DoJ noted that in 2020, the Justice Department filed a civil antitrust lawsuit to stop Visa from acquiring Plaid. The companies then abandoned their planned $5.3 billion merger.

Visa response

Reuters meanwhile reported that the US bid to tackle the debit card fees is part of the Biden administration’s efforts to combat rising consumer prices, which is a major issue in the 5 November presidential election.

Rival Mastercard confirmed in April it was being investigated by the Justice Department as well.

Julie Rottenberg, Visa’s general counsel, told Reuters that competition is thriving in the debit market, and that the claims are meritless and the company will contest them vigorously.

“When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide,” she was quoted as saying.