Justice Department accuses Visa of debit card monopoly that affects price of ‘almost everything’

The U.S. Department of Justice on Tuesday sued Visa, the world’s largest payments network, alleging the company maintained an illegal monopoly on debit payments by imposing exclusion agreements on partners and stifling new businesses.

Visa’s actions over the years have caused U.S. consumers and merchants to pay billions of dollars in extra fees, according to the Justice Department, which filed a civil antitrust lawsuit in New York, alleging monopoly and other unlawful conduct.

“We allege that Visa unlawfully amassed the authority to charge fees that far exceeded what it could have charged in a competitive marketplace,” Attorney General Merrick Garland said in a Justice Department statement.

“Retailers and banks pass on these costs to consumers, either by raising prices or by reducing quality or service,” Garland said. “As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of almost everything.”

Visa and its smaller rival MasterCard have grown rapidly over the past two decades to a combined market capitalization of about $1 trillion as consumers use credit and debit cards for in-store purchases and e-commerce instead of paper money. They are essentially toll collectors, shuffling payments between merchant banks and cardholders.

According to a Justice Department complaint, more than 60% of U.S. debit transactions are made through Visa cards, causing the company to collect more than $7 billion annually in transaction processing fees.

However, the dominance of payment networks has attracted increasing attention from 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 lawsuit but soon withdrew their $5.3 billion acquisition.

In March, Visa and Mastercard agreed to cap their fees and let merchants charge customers for using their credit cards, a move that retailers said was worth $30 billion in savings over half a decade. A federal judge later threw out the settlement, saying the chains could afford to pay for a “significantly larger” deal.

″Visa leverages its dominance, massive scale, and centrality in the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the Justice Department said in a statement. “These agreements penalize Visa customers who route transactions to another debit network or alternative payment system.”

Moreover, in the face of threats, Visa “took deliberate and amplified actions designed to shut out competition and prevent rivals from gaining the scale, share, and data necessary to compete,” the Justice Department found.

The decision comes in the final months of President Joe Biden’s term in office, during which regulators including the Federal Trade Commission and the Consumer Financial Protection Bureau have sued brokers for inflating drug prices and pushed back against so-called junk fees.

In February, credit card lender Capital One announced its acquisition of Discover Financial, a $35.3 billion deal based in part on Capital One’s ability to bolster Discover’s payments network, which ranks a distant fourth behind Visa, MasterCard and American Express.

Capital One said that once the deal closes, the company will transfer all of its debit card volume and a growing share of its credit card business to Discover, making it a more viable competitor to Visa and Mastercard.

This is a developing story. Please check back for updates.