In a major legal challenge to Visa’s dominance, the U.S. Department of Justice (DOJ) filed a civil antitrust lawsuit on Tuesday, accusing the global payment giant of monopolizing the debit card market through a series of anti-competitive practices. According to the DOJ, Visa has leveraged its market power to prevent competitors from gaining a foothold, leading to inflated costs for consumers and merchants across the U.S.
“Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service,” Attorney General Merrick Garland said in a statement. “As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
The lawsuit alleges that Visa has systematically engaged in “exclusionary agreements” with partners, preventing rival companies from offering viable alternatives in the debit card market. These agreements, the DOJ claims, have allowed Visa to retain control over more than 60% of all debit card transactions in the U.S., generating over $7 billion annually in processing fees.
The DOJ argues that Visa’s behavior has resulted in an illegal monopoly, with the company using its market dominance to suppress competition. As a result, businesses face higher fees that are often passed on to consumers in the form of increased prices. In some cases, merchants may even reduce the quality of their services to absorb the added costs.
Visa, however, strongly rejected the DOJ’s claims. In a statement, the company’s general counsel, Julie Rottenberg, called the lawsuit “meritless,” adding that the payments ecosystem is evolving rapidly with new competitors emerging.
“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” said Rottenberg. “We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable.”
Visa’s position in the payments industry, alongside its smaller rival Mastercard, has grown immensely over the last two decades. The shift from cash to digital payments, driven by the rise of e-commerce and contactless transactions, has helped Visa expand its influence. Both companies have benefitted from the increasing ubiquity of debit and credit card use, becoming essential intermediaries between consumers, merchants, and financial institutions.
However, this dominance has attracted scrutiny. In 2020, the DOJ successfully blocked Visa’s attempted $5.3 billion acquisition of fintech company Plaid, citing concerns over how the merger would further entrench Visa’s market power.
More recently, in March 2023, Visa and Mastercard agreed to a settlement that capped their fees and allowed merchants to impose surcharges on customers who use credit cards, a move that retailers said could save them $30 billion over five years. However, a federal judge later rejected the deal, arguing that the companies could afford to pay even more in concessions.
The DOJ’s lawsuit outlines several ways in which Visa has allegedly stifled competition. Central to its case are contracts Visa has with merchants and their banks, which the DOJ says impose “punitive rates” if a significant portion of debit transactions are processed by competitors. These arrangements, according to the DOJ, protect Visa’s market share and make it difficult for emerging rivals to break through.
“Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the DOJ said in its complaint.
In one of the more striking claims, the DOJ alleges that Visa has paid hundreds of millions of dollars to competitors to prevent them from developing innovative technologies that could disrupt Visa’s monopoly. The lawsuit accuses Visa of employing these tactics to “cut off competition and prevent rivals from gaining the scale, share, and data necessary to compete.”
Visa has also allegedly struck agreements with key tech companies such as Apple and PayPal, ensuring that they remain partners rather than competitors. For instance, Visa reportedly inked a deal with a predecessor of Square (now Block, Inc.) to prevent the company from expanding into a greater threat to Visa’s debit business.
The complaint includes a telling quote from a Visa manager, who said the company had Square “on a short leash,” a statement reflecting Visa’s deliberate strategy to suppress potential competitors.
While Visa has firmly rejected the DOJ’s claims, the lawsuit marks a significant escalation in the regulatory scrutiny facing the company. The case comes amid broader efforts by the Biden administration to clamp down on corporate monopolies and challenge industry giants whose dominance may hurt consumers.
Information for this briefing was found via CNBC and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
