Feds sue Visa, saying the company raises card costs for businesses and consumers – East Bay Times

By Mae Anderson | Associated Press

The U.S. Department of Justice has filed an antitrust lawsuit against Visa, alleging that the financial services giant is using its size and dominant position to limit 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.

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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.