The U.S. Department of Justice filed a civil antitrust lawsuit against Visa on Tuesday for monopolization and other unlawful conduct in debit network markets.
The complaint alleges that Visa illegally maintains a monopoly over debit network markets by using its dominance to frustrate the growth of its competitors and prevent others from developing new and innovative alternatives, per a press release.
More than 60% of debit transactions in the U.S. run on Visa’s debit network, allowing it to charge over $7 billion in fees each year for processing those transactions, according to the complaint. The complaint alleges that Visa illegally maintains its monopoly power by insulating itself from competition.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” said Attorney General Merrick B. Garland. “Merchants and banks pass along those costs to consumers, either 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 nearly everything.”
Visa general counsel Julie Rottenberg told PYMNTS the lawsuit is “meritless.”
“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” Rottenberg said. “Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.
“When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide. We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable. This lawsuit is meritless, and we will defend ourselves vigorously.”
The Wall Street Journal reports on the lawsuit against the largest card network in U.S. Here’s the start of the story:
The Justice Department sued Visa on Tuesday on allegations that it illegally monopolized the market for consumers’ payments worth trillions of dollars every year, a sweeping antitrust complaint that seeks to open the debit-card market to new competition.
Visa used carrots and sticks to keep potential competitors off its turf and to punish merchants that did business with rivals, the lawsuit said. Fearing that tech companies would deploy cheaper alternatives for sending money from bank accounts, Visa paid companies including Apple to limit their innovation and sought to undermine startups that tried to compete, the department alleged.
Visa, which operates the largest card network in the U.S., sits at the center of many consumers’ daily payments by providing the infrastructure that debit- and credit-card payments run on. The case underscores the essential nature of Visa’s platform: consumers have moved further away from cash in favor of card payments.
The complaint, filed in Manhattan federal court, alleged that Visa has monopolized the debit-card market since 2012.
To keep its share of transactions high, Visa punished merchants by levying higher fees if they routed some transactions to another card network, the Justice Department said. Consumers are also losers from the arrangement, the government said, because card fees can prompt merchants to recoup the costs by raising prices for goods and services.