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Jimmy Williams
The U.S. Justice Department filed a civil antitrust lawsuit against Visa on Tuesday, accusing the world’s largest payments network of maintaining an illegal monopoly over debit payments through exclusionary agreements that stifled competition and harmed consumers.
In its lawsuit, filed in New York, the DOJ claims Visa’s dominance in the U.S. debit payments market has cost American consumers and merchants billions of dollars in inflated fees. The Justice Department accuses Visa of monopolization and other unlawful conduct, alleging that its tactics have allowed it to charge fees that far exceed competitive market rates.
“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 in a statement. “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.”
Visa, along with smaller rival Mastercard, has dominated the U.S. payments landscape over the past two decades as consumers have increasingly relied on debit and credit cards for purchases rather than cash. Together, the two companies control a significant portion of the payments industry, with Visa alone processing more than 60% of all U.S. debit transactions.
According to the DOJ’s complaint, Visa’s exclusionary agreements with merchants and banks have allowed it to generate more than $7 billion in annual processing fees, inflating costs for consumers across the board.
Visa’s dominance in the payment processing market has long drawn scrutiny from regulators and retailers alike. In 2020, the DOJ successfully blocked Visa’s attempted $5.3 billion acquisition of fintech company Plaid, citing antitrust concerns. This past March, Visa and Mastercard agreed to limit their fees in a deal that retailers estimated would save them $30 billion over five years, though a federal judge rejected the settlement, calling for a more substantial agreement.
The Justice Department’s lawsuit further alleges that Visa uses its market power to penalize merchants and banks that attempt to route transactions through competing debit networks or alternative payment systems. The DOJ claims Visa has engaged in a “deliberate and reinforcing course of conduct” to shut down competition, preventing rivals from gaining the scale, market share, and data needed to compete effectively.
The lawsuit represents the latest move in a broader regulatory crackdown under President Joe Biden’s administration. Regulators, including the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), have aggressively targeted monopolistic practices and so-called junk fees in various industries, including healthcare and finance.
In February, Capital One announced plans to acquire Discover Financial in a $35.3 billion deal that aims to strengthen Discover’s position as a competitor to Visa, Mastercard, and American Express. Once the deal closes, Capital One plans to switch all its debit card volume and a growing share of its credit card transactions to Discover, which currently lags behind its larger rivals.
Visa has yet to respond to the DOJ’s lawsuit, but the case is likely to have significant implications for the payments industry and could lead to more competitive pricing for consumers in the future.
