The U.S. Department of Justice on Tuesday pursued Visa (V) with a federal antitrust lawsuit, accusing the company of illegally exploiting the scale of its vast card processing network to stifle competition.
Visa owns and manages the largest debit card processing network in the United States, processing more than 60% of the nation’s debit card transactions.
According to the Department of Justice, Visa leveraged its consumer, bank, and merchant ecosystem to penalize merchants for choosing alternative debit networks.
“Overall…Visa’s systematic efforts to limit competition in debit transactions have resulted in significant additional fees being imposed on U.S. consumers and businesses and slowing innovation in the debit payments ecosystem,” the complaint says. states.
Visa credit and debit cards are seen in this photo illustration taken on August 2, 2022. (Reuters/Benoit Tessier/File photo) (Reuters/Reuters)
According to the Department of Justice, Visa has a “web of contracts” with major banks and merchants that force merchants to choose Visa’s network or charge Visa high fees for sales transactions. asked to pay.
In 2022, Visa debit processing fees boosted the company’s revenue by $7 billion. Visa stock fell more than 5% on Tuesday.
U.S. Attorney General Merrick Garland said Visa’s misconduct prevented potential rivals, particularly fintech companies such as Square-owned CashApp, from entering the debit processing market.
“Visa is the first name many debit card users see when they pull out their card to make a purchase, but they don’t realize the role Visa plays behind the scenes,” Garland said. said.
“It manages a complex network of retailers, financial institutions, and consumers… that imposes hidden fees on each of trillions of transactions that collectively cost U.S. consumers and businesses annually. Billions of dollars in fees are being levied.”
Specifically, Visa illegally holds monopolies in two markets: debit network services used to withdraw funds directly from consumers’ bank accounts, and card-not-present debit network services. said the Department of Justice.
The latter is a narrow market within a broader services market that includes traditional debit card transactions and fintech transactions.
At a news conference Tuesday, Attorney General Merrick Garland (center) is flanked by Deputy Attorney General Doha Mekki (left) and Deputy Attorney General Benjamin Mizer (right). (AP Photo/Mark Schiefelbein) (ASSOCIATED PRESS)
Julie Rottenberg, Visa’s general counsel, said the lawsuit ignores Visa’s “many competitors” in the growing debit space.
“Anyone who has ever purchased something online or checked out in a store knows that more and more companies are offering new ways to pay for goods and services,” Rottenberg said. he said.
Alden Abbott, a fellow at the Mercatus Center and former general counsel at the Federal Trade Commission, said the Visa case is unique among antitrust cases because the Dodd-Frank Act caps debit card fees. said.
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Mr. Abbott said that when analyzing antitrust laws on visa arrangements, the impact of the law must be taken into account, noting that the impact of the law could deter competitors from entering the market and He said it could have weakened other companies and led to fewer poor Americans owning debit cards.
“It is certainly possible that Visa’s increase in debit card market share is due to this legal price cap rather than anti-competitive conduct by Visa,” Abbott said.
The Justice Department is asking the U.S. District Court in Manhattan to enjoin Visa from using allegedly harmful contracts and from bundling credit services or credit incentives with debit network services.
It also asked the court to prevent Visa from imposing pricing incentives on the use of its network.
Alexis Keenan is a legal reporter at Yahoo Finance. Follow Alexis on X @alexiskweed.
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