The United States has filed a lawsuit against Visa, accusing the financial giant of illegally stifling competition to maintain a monopoly in the debit card market.
Visa punished companies that wanted to use alternative payment networks and paid off potential competitors to maintain its grip on the market.
The Justice Department said the measures slowed innovation and created significant additional costs for American consumers and businesses.
Visa said the claims were “meritless” and that it would defend itself in court.
Julie Rottenberg, Visa’s chief legal officer, said businesses and consumers chose Visa because of its “secure and reliable network.”
“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a growing debit space, with entrants thriving,” she said.
“This lawsuit is without merit and we will defend ourselves vigorously.”
The filing against Visa is the latest competition lawsuit brought by the Biden administration, which has taken a more aggressive approach to monopoly issues, known as antitrust in the United States, than previous administrations.
The company’s practices have also been the subject of lawsuits and scrutiny from traders and competition regulators in other parts of the world, including Europe and Australia.
The Justice Department began investigating Visa in 2021.
According to the complaint, the company processes more than 60% of debit transactions in the United States, generating $7 billion in fees annually. In 2022, its debit card business was larger by revenue than its credit card division, and highly profitable.
Attorney General Merrick Garland said Visa’s dominant position allowed it to extract fees far higher than it could have charged in a “competitive market.”
“Merchants and banks pass these costs on to consumers, either by raising prices or reducing quality or service,” he said. “As a result, Visa’s illegal behavior affects not just the price of one product, but the price of almost everything.”
The company’s shares fell more than 5%.
The complaint, filed in federal court in New York, claims that Visa used a “web of contracts” that required companies to commit to routing a certain volume of transactions to the Visa network or face higher fees — creating illegal “exclusive agreements.”
The company said it began making such deals after a new law in 2012 sought to increase competition in the debit market by requiring banks to make debit cards usable on at least two competing payment networks.
The Justice Department said Visa also used its market dominance to threaten technology companies such as PayPal with steep fees unless they signed agreements committing them to routing payments through the company.
She asked the court to declare Visa a monopoly and to prohibit it from continuing its allegedly “anti-competitive” practices.
George Alan Hay, a Cornell Law School professor and antitrust expert, said the case was not radical but would nonetheless pose a challenge to the government.
Among the sticking points, he said, would be how the debit card market is defined – and whether 60% is enough to constitute a monopoly.
“It’s going to be difficult,” he said.
He added that Visa, having faced decades of scrutiny from regulators, will have anticipated litigation when structuring its fees.
“They will have answers,” he said. “It’s not like this came to them by surprise.”
