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The U.S. Justice Department filed a lawsuit Tuesday Visathe world’s largest payments network, saying it supported an illegal monopoly on debit payments by imposing “exclusionary” agreements on its partners and stifling new businesses.
Visa’s actions over the years have resulted in U.S. consumers and merchants paying billions of dollars in additional fees, according to the Justice Department, which filed a civil antitrust complaint in New York alleging “monopolization” and other illegal behavior.
“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 Justice Department statement.
“Merchants and banks pass these costs on to consumers, either by raising prices or reducing quality or service,” Garland said. “As a result, Visa’s illegal behavior affects not just the price of one product, but the price of almost everything.”
Visa and its little rival MasterCard Online transactions have grown rapidly over the past two decades, reaching a combined market capitalization of about $1 trillion, as consumers have preferred to use their credit and debit cards to make in-store purchases and conduct e-commerce rather than paper currency. They are essentially toll collectors, transferring payments between merchants’ banks and cardholders.
In the United States, more than 60% of debit transactions pass through Visa networks, contributing to more than $7 billion in processing fees annually, according to the Justice Department’s complaint.
But the dominance of payment networks is increasingly attracting the attention of regulators and retailers.
In 2020, the Justice Department filed an antitrust lawsuit to block Visa from acquiring fintech company Plaid; the companies initially said they would fight the suit but quickly abandoned the $5.3 billion buyout.
In March, Visa and Mastercard agreed to cap their fees and let merchants charge customers for using credit cards, a deal the retailers said would save them $30 billion over half a decade. A federal judge later threw out the deal, saying the networks could afford to pay for a “significantly better” deal.
““Visa uses its dominance, enormous scale, and centrality in the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the Justice Department said in its statement. “These agreements penalize Visa customers who route their transactions through another debit network or alternative payment system.”
Additionally, in the face of threats, Visa “engaged in deliberate and escalated conduct to cut off competition and prevent rivals from gaining the scale, share, and data needed to compete,” the DOJ said.
The move comes in the final months of President Joe Biden’s administration, during which regulators including the Federal Trade Commission and the Consumer Financial Protection Bureau have been going after middlemen over drug prices and pushing back against so-called junk fees.
In February, credit card lender Capital One announced its acquisition of Discover financea $35.3 billion deal based in part on Capital One’s ability to support the payments network also operated by Discover, a distant No. 4 behind Visa, MasterCard and American Express.
Capital One said that once the deal closes, it will over time shift all of its debit card volume and a growing share of its credit card volume to Discover, making it a more viable competitor to Visa and Mastercard.
This story is currently developing. Please check back for updates.
