NEW YORK (AP) — The Justice Department has filed an antitrust lawsuit against Visa, accusing the financial services giant of using its size and dominance to stifle competition in the debit card market, causing billions of dollars in harm to consumers and businesses.
According to the complaint filed Tuesday, San Francisco-based Visa penalizes merchants and banks that don't use Visa's proprietary payment processing technology to process debit transactions when alternatives exist. Visa earns an additional fee from every transaction processed on its network.
According to the Justice Department's complaint, 60% of debit transactions in the United States occur on Visa's debit network, and the company charges more than $7 billion each year in fees for processing those transactions.
“We allege that Visa has illegally amassed the power to collect fees far in excess of what it could charge in a competitive market,” Attorney General Merrick B. Garland said in a statement. “Stores and banks then pass these costs on to consumers, either by raising prices or reducing quality and service. As a result, Visa's unlawful conduct affects not just the price of one thing, but the price of nearly everything.”
Visa general counsel Julie Rottenberg said in a statement that the lawsuit fails to take into account “the ever-expanding world of companies offering new ways to pay for goods and services.”
“Today's lawsuit ignores the reality that Visa is just one of many competitors in a growing debit card industry as new entrants thrive,” Rottenberg said, adding that the lawsuit is “without merit” and that the company will defend itself “vigorously.”
The Biden administration is aggressively going after U.S. companies that act like middlemen. Ticketmaster's parent company, Live Nation Real Estate Software Company Real PageThe Trump administration has accused them of burdening Americans with pointless fees and anti-competitive practices, and it has also filed lawsuits against tech giants including Apple and Google for monopoly practices.
“In some of the Department of Justice's antitrust enforcement actions, the harm caused by allegedly unlawful conduct is more visible, such as higher prices for airfares, concert tickets or smartphones,” Garland said at a news conference in Washington on Tuesday. “The harmful effects of Visa's alleged anticompetitive conduct are less visible, but they are no less harmful.”
According to the Department of Justice's complaint, filed in the U.S. District Court for the Southern District of New York, Visa uses the sheer volume of transactions on its network to impose transaction volume limits on merchants and their banks, as well as on financial institutions that issue debit cards, making it difficult for merchants to use alternatives, such as lower-cost or smaller payment processors, in place of Visa's payment processing technology, and subjecting them to what the Department of Justice calls “bad faith penalties” from Visa.
The Justice Department also said Visa stifled competition by paying potential rivals to enter into collaboration agreements.
In 2020, the Department of Justice It filed a lawsuit to block the company's $5.3 billion acquisition of financial technology startup Plaid.The company called it a monopoly on a potential competitor to Visa's popular payments network. The deal was ultimately called off.
visa The Department of Justice revealed in 2021 that it was investigating the company.The company said in a regulatory filing that it was cooperating with a Department of Justice investigation into its debit practices.
Since the pandemic began, more consumers around the world have been buying goods and services online, which has led to increased revenue for Visa in the form of fees. Traditionally cash-based businesses such as bars, barbershops and coffee shops have also started accepting credit and debit cards as a form of payment via smartphone.
KBW analyst Sanjay Safrani said in a note to investors that he expects U.S. debit card revenue to be around 10% of Visa revenue at most.
“Any financial impact could be offset by some of that,” he said. Visa's “U.S. consumer payments business is the slowest growing part of the overall business and even if its contribution is affected, the impact on revenue growth is likely to be very limited.”
He added that if the case isn't settled and goes to trial, it could drag on for years.
visa The network processed $3.325 trillion in transactions. Payments rose 7.4% in the quarter ended June 30 compared with the same period a year ago. U.S. payments rose 5.1%, outpacing U.S. economic growth.
Visa shares fell $15.85, or 5.5 percent, to close at $272.94 on Tuesday.
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Associated Press writer Alanna Durkin Richer in Washington contributed to this report.
