On Tuesday, the U.S. Department of Justice filed a lawsuit against Visa for allegedly violating antitrust laws in the debit card market.
According to reports from Bloomberg and the Financial Times (FT), the Department of Justice claimed in a filing submitted to the U.S. District Court for the Southern District of New York that Visa attempted to maintain its monopolistic position by stopping alternative networks.
The DOJ’s filing in the U.S. District Court for the Southern District of New York claims that Visa imposed an anticompetitive pricing structure, charging additional fees to merchants who did not process transactions through its network. Visa reportedly incentivizes merchants with significant fee reductions for processing high transaction volumes exclusively through its system, effectively creating a barrier that pushes merchants to choose Visa even when competitors offer lower rates.
The lawsuit traces Visa’s alleged anticompetitive practices back to the early 2010s, coinciding with the Dodd-Frank Act, which mandates that card issuers provide at least two independent debit payment networks to foster competition. The DOJ noted that Visa views competitors like PayPal and Apple Pay as “existential threats” due to their growing popularity among merchants.
According to the filing, Visa operates over 60% of the debit transaction market in the U.S., with more than $7 billion in processing fees annually. Merrick Garland said, “We allege that Visa has unlawfully amassed the power to extract fees far exceeding what it could charge in a competitive market. Merchants and banks pass those costs to consumers by raising prices or reducing quality or service.”
Following the lawsuit, Visa’s stock closed down 5.5% on the New York Stock Exchange.
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