The Justice Department is suing Visa for allegedly using exclusionary agreements and its massive scale to illegally monopolize the debit card market.
Visa violated antitrust law by imposing a “web of exclusionary agreements” that penalize merchants who use alternative payment processors, the Justice Department said. The Visa monopoly harms consumers because the merchant fees are ultimately passed along through higher prices across myriad purchases, attorney general Merrick Garland argued.
“Visa’s unlawful conduct affects not just the price of one thing – but the price of nearly everything,” Garland said in a Tuesday press release.
The company said Tuesday that it could not comment until it sees the formal antitrust complaint. But it has known about the federal investigation for years; Visa disclosed in a March 2021 securities filing that it was informed of a Justice Department probe into its debit business.
The business at the center of the federal lawsuit charges fees to merchants when customers use debit or credit cards, or other Visa-branded products. Visa’s payment systems underpin trillions of dollars in transactions every year, including more than 60 percent of U.S. debit transactions, while amassing at least $7 billion in annual fees from merchants, according to the Justice Department.
Visa in its most recent quarter reported $8.9 billion in revenue, a 10 percent increase year-over-year as it saw strong growth in cross-border transactions.
The company uses agreements with vendors to press for terms that prevent other payment processors from developing the scale necessary to compete with Visa, the Justice Department said. Visa requires “volume commitments” from merchants and their financial institutions that force them to use Visa for most of their card transactions, regulators said.
“These agreements are priced so that, unless all or nearly all debit volume runs over Visa’s payment rails, large disloyalty penalties can be imposed on all Visa transactions,” the Justice Department said.
Visa also partnered with new entrants into the payments space rather than competing with them, effectively paying off any company that could offer a better or cheaper product, the Justice Department said.
Tuesday’s announcement is not the first legal action against Visa. In 2020 the Justice Department cited antitrust concerns in blocking Visa’s planned $5.3 billion acquisition of Plaid, a financial technology company that connects bank data to mobile apps and other systems.
Also, Visa and Mastercard since 2005 have been facing a class-action lawsuit over their card swipe fees. It was partially resolved through a $5.6 billion settlement last year, while a $30 billion settlement was rejected by a federal judge in June.
(c) Washington Post