Justice Department prepares major antitrust case against Visa debit empire

The U.S. Department of Justice (DOJ) is poised to launch a major antitrust lawsuit against Visa Inc., accusing the payment card giant of having an illegal monopoly on the country’s debit card market, sources familiar with the matter said, Bloomberg News reported.

The lawsuit, expected to be filed in federal court as early as Tuesday, will reportedly allege that Visa engaged in anti-competitive practices to maintain its dominant position in the debit card market.

Among the government’s expected allegations were accusations that Visa entered into exclusivity agreements to stymie the expansion of rival networks and that it thwarted attempts by technology companies to enter the market.

The legal action is the culmination of a multi-year investigation into Visa’s business, which initially stemmed from the company’s failed acquisition of financial technology infrastructure company Plaid Inc. in 2021, which raised concerns about potential anticompetitive conduct.

As news of the impending lawsuit emerged, Visa shares fell 1.95% in after-hours trading Monday, reflecting investor concerns about the potential fallout from the case.

Newsweek We reached out to the Department of Justice via an online form and to a Visa press representative via email on Monday for comment.

One key area of ​​contention in the DOJ case is likely to be Visa’s practices regarding “tokenization” technology. This security measure replaces sensitive card numbers with unique tokens that can only be used on specific devices or with specific merchants, making payments more secure.

The Justice Department has been investigating Visa’s pricing structure for the technology, sources said, particularly how it charges fees to merchants who choose not to use Visa’s proprietary tokenization service.

Scrutiny of tokenization practices isn’t unique to Visa. Mastercard last year settled a separate enforcement action brought by the Federal Trade Commission (FTC) over its tokenization technology procedures. The FTC alleged that Mastercard used its tokenization system to block merchants from using alternative payment networks, potentially violating the Durbin Amendment—a part of the 2010 Dodd-Frank Act that requires banks to include two competing networks on their debit cards.

Visa launched its tokenization service in 2014 and has since issued more than 4 billion tokens, and more than 13,000 merchants have adopted the technology, including major players like Netflix, Microsoft, and Alphabet’s Fitbit. The company has long maintained that tokenization significantly increases payment security and reduces friction in the payment process.

In recent weeks, as part of its normal fee adjustment schedule, Visa and its partners have informed merchants of upcoming changes to some rates. The measure reportedly sparked renewed interest from the Department of Justice in tokenization. The new rates include different prices for tokenized versus non-tokenized payments, with merchants using Visa’s tokenization technology potentially paying lower fees.

The antitrust case comes amid heightened regulatory scrutiny of Big Tech and financial services companies. The Biden administration has made no secret of its intention to crack down on perceived monopolistic practices across sectors of the economy.

The case against Visa comes on the heels of another high-profile antitrust action by the Biden administration. Last month, the Justice Department began a lawsuit against Google in Virginia, accusing the tech giant of illegally monopolizing the nearly $300 billion U.S. digital advertising market. A federal judge ruled that Google violated U.S. antitrust law by acting illegally to maintain a monopoly on online search.

“Google is a monopoly and operates like a monopoly to maintain its monopoly,” Judge Amit P. Mehta of the U.S. District Court for the District of Columbia said in his 277-page ruling.

Attorney General Merrick Garland said in a statement: “This victory over Google is a historic victory for the American people.” He continued: “No company — no matter how large or influential — is above the law. The Department of Justice will continue to vigorously enforce our antitrust laws.”

The Visa and Google cases underscore the Biden administration’s commitment to antitrust enforcement as a pillar of its economic policy. The future of antitrust enforcement could hinge on the outcome of the 2024 presidential election.

Ohio Sen. J.D. Vance, Trump’s Republican vice presidential nominee, has expressed support for tougher merger rules and suggested in an interview with CNBC this month that “there should be an antitrust solution” to some of the behavior of big tech platforms. Vance also praised FTC Chair Lina Khan, who has led the Biden administration’s push to increase competition and address high prices and low wages.

Some prominent Democratic megadonors have a different vision: Billionaires Barry Diller and Reid Hoffman have publicly expressed hope that Vice President Kamala Harris, if elected, would replace Khan as FTC chair, signaling a potential shift in the Biden administration’s aggressive antitrust stance.