Justice Department files antitrust lawsuit against Visa

By MAE ANDERSON, AP Business Writer

NEW YORK (AP) — The U.S. Justice Department has filed an antitrust lawsuit against Visa, alleging that the financial services giant is using its size and dominant position to stifle competition in the debit card market, costing consumers and businesses billions of dollars.

The complaint filed Tuesday says Visa penalizes merchants and banks that don’t use Visa’s own payment processing technology to process debit transactions, even though alternatives exist. Visa charges an incremental fee for each transaction processed on its network.

According to the Justice Department complaint, 60% of debit transactions in the United States are made through Visa’s debit card network, allowing the company to collect more than $7 billion in fees each year to process those transactions.

“We allege that Visa has unlawfully amassed the authority to charge fees that far exceed what it could charge in a competitive marketplace,” Attorney General Merrick B. Garland said in a statement. “Merchants and banks pass on these costs to consumers by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of almost everything.”

The Biden administration has aggressively targeted U.S. companies it says act as middlemen, such as Live Nation, the parent company of Ticketmaster, and RealPage, a real estate software company, accusing them of charging Americans unnecessary fees and engaging in anti-competitive behavior. The administration has also brought antitrust charges against tech giants like Apple and Google.

According to the DOJ complaint filed in the U.S. District Court for the Southern District of New York, Visa uses the massive volume of transactions on its network to impose volume obligations on merchants and their banks, as well as on the financial institutions that issue debit cards. This makes it difficult for merchants to use alternatives, such as cheaper or smaller payment processors, instead of Visa’s payment processing technology without incurring what the DOJ called “disloyalty penalties” from Visa.

The Justice Department also found that Visa restricts competition by paying to enter into partnerships with potential competitors.

In 2020, the Justice Department sued the company to block its $5.3 billion purchase of financial technology startup Plaid, calling it a monopolistic takeover of a potential competitor to ubiquitous payments network Visa. That acquisition was later called off.

Visa previously disclosed that the Justice Department had opened an investigation into the company in 2021, saying in a regulatory filing that it was cooperating with the Justice Department in its investigation into the company’s debit practices.

Since the pandemic, more consumers around the world have been shopping online for goods and services, which has led to more revenue for Visa in the form of fees. Even traditionally cash-based businesses like bars, hairdressers and coffee shops have begun accepting credit or debit cards as a form of payment, often via smartphones.

KBW analyst Sanjay Sahrani said in a note to investors that he estimates that U.S. debit card revenues are, at most, about 10% of Visa’s revenue.

“Some of that could be lost if there is a financial impact,” he said. “Visa’s U.S. consumer payments business is the slowest-growing part of the combined business and to the extent its contribution is affected, it will likely have a very limited impact on revenue growth.”

He added that the case could drag on for years if it is not resolved and goes to court.

Visa processed $3.325 trillion in transactions on its network in the quarter ended June 30, up 7.4% from a year earlier. U.S. payments grew 5.1%, outpacing U.S. economic growth.

San Francisco-based Visa had no immediate comment. Visa shares fell $13.53, or 4.7%, to $275.10 in afternoon trading.

Pictured above: The Visa card is introduced on May 15, 2024, in Portland, Oregon. (AP Photo | Jenny Kane, File)