Justice Department antitrust lawsuit against Visa accuses debit card company of monopoly

The Justice Department has filed an antitrust lawsuit against Visa, accusing it of operating a debit card monopoly that imposed “billions of dollars” in fees on American consumers and businesses.

The lawsuit, filed Tuesday, accuses Visa of stifling competition and charging fees that exceed what it could charge in a competitive market. More than 60% of U.S. debit transactions are processed on Visa’s debit network, allowing the company to collect more than $7 billion in fees annually, according to the lawsuit.

While Visa’s fees are paid by merchants, the Justice Department found that these costs are passed on to consumers in the form of higher prices or lower quality.

“As a result, Visa’s unlawful conduct affects not just the price of one thing – but the price of almost everything,” Attorney General Merrick Garland said in a news release.

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Visa says it is “just one of many competitors” in the growing debit card market and called the lawsuit “meritless.”

“When businesses and consumers choose Visa, it’s because of our secure and reliable network, world-class fraud protection and the value we deliver,” said Julie Rottenberg, Visa’s general counsel, in a statement. “We’re proud of the payments network we’ve built, the innovation we’re driving and the economic opportunities we’re enabling.”

What the Department of Justice is alleging

It’s the latest in a series of antitrust lawsuits filed during the Biden administration. The Justice Department filed antitrust lawsuits against Ticketmaster and Apple earlier this year, and Google lost an antitrust lawsuit against the department last month.

In its lawsuit against Visa, the Justice Department alleges that the company exerts a monopoly by enticing potential competitors to become partners by offering “generous” amounts of money and threatening financial penalties.

The department also accuses the company of entering into exclusion agreements with traders and banks under which customers who attempt to make transactions through another company’s system are penalized.

The complaint follows a 2020 Justice Department lawsuit that blocked Visa’s plans to acquire financial technology company Plaid. The department said at the time that the deal would allow Visa to “maintain its monopoly position and supra-competitive pricing for online debit.”

Mastercard, another major player in the debit card space, has also come under scrutiny from regulators. The company last year settled a Federal Trade Commission complaint accusing it of stifling competing payment networks.

What does this mean for consumers?

The Justice Department says Visa’s activities have slowed innovation in the debit payments ecosystem and led to “significant additional fees” imposed on Americans.

“The anticompetitive behavior of corporations like Visa is making Americans and our economy worse off,” Assistant Attorney General Benjamin Mizer said in a department statement.

However, Americans should not expect drastic changes in the way they shop as a result of this lawsuit.

If the Justice Department settles the case or wins it, it could open the door to more competition in the debit card market and help lower prices, according to Douglas Ross, a professor at the University of Washington School of Law. But the savings may be too small for consumers to notice.

“If there’s more competition here, we’ll see significant cost savings across the economy. But it’s not something that consumers will see directly,” he said. “That doesn’t mean there’s no harm to consumers — a penny here and a penny there over millions of transactions adds up to a lot of money.”

The outcome of the case will also depend on Visa’s defense, according to Rebecca Haw Allensworth, a law professor at Vanderbilt Law School in Nashville, Tennessee.

“I think knowing how winning a lawsuit like this will affect consumers (and merchants) depends on what Visa has to say about why it’s doing what it’s doing,” she said in an email. “They’ll likely argue that their dealings with merchants and rivals are good for cardholders, and the case will largely hinge on how strong those arguments are.”

This article originally appeared on USA TODAY: Visa monopoly? Justice Department files antitrust lawsuit