The Justice Department’s visa allegations are a doomer for its antitrust case

“We don’t take American Express.” These five words came to mind last week as I read about the renewed Department of Justice (DOJ) antitrust case involving Visa.

To which some will respond that the Justice Department lawsuit is not about competition in the credit card market, but rather about Visa’s alleged abuse of its supposedly “dominant” position in the debit card market. This is true, but it proves the accuracy of the statement “We don’t take American Express.”

Visa has managed to gain a huge foothold in the credit card market for a number of reasons, including the fact that its transaction fees are lower than American Express. As a result, there are all kinds of businesses that will not accept an Amex card but will use a Visa card. Call it market competition at work.

Too simplistic? Maybe so, but that’s the point. The markets are very simple. And one of their key characteristics is that profits attract competition.

With respect to credit cards, a New York Fed study conducted over the summer found that Americans have collectively accumulated more than $1.15 trillion in credit card debt. Americans produce in a gigantic way, which is why they are able to take on significant amounts of debt.

As a result, American Express and Visa, but also Discover, are competing for the chance to finance part of the expenses. Thinking about Discover, how strange is it that a potential merger between Discover and Capital One is being held up at the same time that Visa is being accused of monopolistic practices?

Okay, maybe it’s not that weird. After all, it’s the government. As competitors prepare to grab a piece of the growing pie, the government sees fit to clamp down on the competition it desires. The most important thing is that where there are plenty of consumers, service providers are also looking for ways to reduce prices.

Importantly, and most importantly in relation to the baseless allegations against Visa, investors reward those who are most capable of undercutting prices. See Walmart’s market cap, see Amazon’s market cap, and when you’re done, see Alphabet and Meta as well.

When it comes to the credit card space, Visa is already experiencing enormous competition. Just as some retailers do not use American Express, some would prefer that customers not pay with Visa. Checks are cheaper, as is the use of debit cards. In many retail stores, cash is king. Which should be an “aha” moment for the antitrust team at the Justice Department.

As a reminder, Visa itself recognizes that market prices of any kind are more than historical. They compete always and everywhere to the benefit of consumers and businesses. Call the spread of debit cards another market proof of this truth. Let’s call it Visa competing with Visa.

Yet Attorney General Merrick Garland maintains that “Visa unlawfully amassed authority to charge fees that far exceed what it could charge in a competitive market.” The garland fails twice, realistically many times. First, as I write this, more and more transactions are becoming peer-to-peer (P2P) (e.g. Venmo, Zelle, Square, etc.), thus avoiding credit and debit fees altogether, especially if the seller doesn’t do it I don’t need the money right away.

Second, Garland’s gossamer-thin accusation imagines that debit cards constitute a boundary beyond which transactions will not cross. Which means Garland contradicts himself. It cannot write in one language the enormous market power that Visa has amassed and in another language say that it has an unassailable monopoly. As the evolution of transactions shows, high prices give rise to competitors who want to profit handsomely by facilitating exponentially more transactions at lower and lower prices per transaction.

In other words, if the Justice Department is concerned that Visa is too profitable, sit back and let it profit. The only cure for alleged market domination is market domination.