The U.S. Department of Justice has filed an antitrust lawsuit against Visa, accusing the company of maintaining a debit card monopoly that has resulted in “billions of dollars” in additional fees for American consumers and businesses.
The lawsuit, filed on Tuesday, alleges that Visa has restricted competition, allowing it to charge fees that are higher than they would be in a more competitive market. According to the complaint, Visa processes more than 60% of U.S. debit transactions, enabling it to collect over $7 billion in fees annually.
Although these fees are initially paid by merchants, the Justice Department argues that they are ultimately passed on to consumers through higher prices or lower quality.
“Visa’s unlawful practices affect not just the cost of one product, but nearly everything,” Attorney General Merrick Garland stated in a press release.
Visa, in response, contends that the lawsuit is “without merit,” maintaining that it is “just one of many competitors” in the expanding debit card industry.
“When businesses and consumers choose Visa, it’s because of our secure and reliable network, advanced fraud protection, and the value we offer,” said Julie Rottenberg, Visa’s General Counsel. “We are proud of the network we’ve built, the innovations we drive, and the economic opportunities we create.”
This lawsuit is part of a broader series of legal actions during the Biden Administration aimed at tackling monopolistic practices. Earlier this year, the Justice Department brought antitrust lawsuits against Ticketmaster and Apple, and it won a case against Google in the previous month.
In its case against Visa, the Justice Department claims that Visa has maintained its monopoly by converting potential competitors into partners through large financial incentives and the threat of punitive fees. It also accuses Visa of entering into exclusionary agreements with merchants and banks, penalizing customers who attempt to use other payment systems.
The current complaint follows a 2020 lawsuit in which the Justice Department blocked Visa’s acquisition of financial tech company Plaid, arguing the deal would have allowed Visa to “preserve its monopoly and sustain inflated prices for online debit transactions.”
Mastercard, another key player in the debit market, has also faced regulatory scrutiny. Last year, Mastercard settled a complaint with the Federal Trade Commission, which accused the company of undermining rival payment networks.
For consumers, the Justice Department argues that Visa’s practices have hindered innovation in the debit payments industry and led to “significant additional fees” for Americans.
“Anticompetitive behavior from companies like Visa leaves both consumers and the broader economy worse off,” said Principal Deputy Associate Attorney General Benjamin Mizer in a statement.
However, Americans are unlikely to see any immediate changes from the lawsuit at checkout. If the Justice Department wins or settles the case, it could pave the way for greater competition in the debit card market and potentially lower costs, according to Douglas Ross, a professor at the University of Washington School of Law. Still, he noted, the savings might be too small for consumers to notice directly.
“There could be considerable savings across the economy if competition increases, but it’s not something that will be obvious to individual consumers,” Ross said. “Even a small fee reduction across millions of transactions adds up.”
Rebecca Haw Allensworth, a law professor at Vanderbilt Law School, emphasized that the case’s impact on consumers and merchants will depend largely on Visa’s defense.
“Understanding the real impact on consumers will hinge on Visa’s justification for its practices,” Allensworth said. “Visa will likely argue that its agreements with merchants and rivals benefit cardholders, and the strength of those arguments will play a key role in the case.”
