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The US Department of Justice has filed an antitrust lawsuit accusing Visa of monopolising the market for debit payments and using its dominant position to crush potential competitors.
The civil complaint filed on Tuesday in Manhattan federal court alleged that the company behind the US’s biggest payments network “insulates itself from competition” in the debit market by imposing a “web of exclusionary agreements” on merchants and banks that penalise customers whose transactions are routed through different networks, according to the DoJ.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” US attorney-general Merrick Garland said.
More than 60 per cent of debit transactions in the US are completed on Visa’s debit network — a dominant position that allows it to charge more than $7bn in processing fees annually, the complaint says.
“Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service,” Garland added. “As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
Its dominance has been threatened by “twin competitive threats”, a DoJ official said, including the growth of debit rivals and technology companies launching payments products, such as Apple.
“Visa did not respond by competing on the merits,” he said. “Instead, Visa went to war with the forces of competition, and merchants and consumers lost.”
Visa has built what it describes as an “enormous moat” around its business, both through its relationship with the banks that issue cards and the retailers that accept them, the DoJ said. The company stifled competition by co-opting potential rivals through partnerships that offered “generous monetary incentives”, or by threatening to impose punishing fees, the DoJ alleged.
For instance, the company regularly enters into contracts with merchants and banks that offer significant bulk discounts if they routed a certain volume of transactions over Visa’s network, the agency said.
The DoJ alleges the volume floors that the group set essentially force merchants to almost always chose Visa, even if rivals offered significantly lower prices on a per-transaction basis.
Visa did not immediately respond to a request for comment.
Visa shares fell 4 per cent on Tuesday, a day after reports that the DoJ was preparing a lawsuit.
The company has faced legal threats over the years. The DoJ in 2020 filed a civil antitrust lawsuit to block Visa’s acquisition of tech company Plaid. The businesses ultimately abandoned the $5.3bn merger.
Antitrust agencies have also scrutinised Visa’s competitors. Mastercard last year reached an agreement with the US Federal Trade Commission to settle charges that it illegally forced merchants to direct debit card payments via its payment network.
Visa and Mastercard earlier this year agreed to cut the so-called swipe fees they charge retailers in a legal settlement that merchants said would save them $30bn over five years, but the deal was later rejected by a federal judge.
Progressive antitrust officials in the Joe Biden administration have adopted tougher antitrust policies in an attempt to course correct what they have described as decades of lax enforcement.
Under the leadership of Jonathan Kanter, the DoJ’s antitrust division has pursued big cases attempting to curb powerful businesses, including in Big Tech. The justice department is facing off against Google in a trial that accuses the company of monopolising the digital advertising space. It won a separate case against the tech group in which the company was branded a monopolist in online search.
Additional reporting by Stephen Gandel in New York.
https://www.ft.com/content/59479f79-7f0b-43c2-973c-1578e2999c3c
