The US Department of Justice (DOJ) has filed an antitrust lawsuit against Visa, one of the world's largest credit card companies, accusing it of monopolistic practices that have harmed both consumers and businesses.
The lawsuit, announced on Tuesday (September 24), alleges that Visa has abused its dominant position in the debit card market to prevent competition, leading to billions of dollars in extra fees for Americans.
Visa Allegedly Inflated Debit Card Fees
At the heart of the case is the claim that Visa's control over more than 60% of debit transactions in the US has allowed the company to charge inflated fees.
According to the DOJ, these fees are passed on by merchants to consumers, resulting in higher prices for goods and services across the country.
Attorney General Merrick B. Garland explained, "Visa's actions affect not just one product but the cost of almost everything, as businesses are forced to raise prices to cover these excessive fees."
The lawsuit highlights Visa's exclusionary agreements with banks and merchants, which penalize businesses that attempt to use other, potentially cheaper, debit networks. This suppression of competition, the DOJ argues, has stifled innovation and prevented consumers from accessing more affordable payment options.
Visa has also been accused of discouraging merchants from promoting alternative debit systems by implementing penalties that deter the use of competing payment networks.
Visa, however, has dismissed the lawsuit as unfounded. Julie Rottenberg, Visa's general counsel, stated that the company operates in a competitive market with many new players and innovative payment solutions.
She argued that the DOJ's case overlooks the fact that Visa is just one of many companies offering debit card services, suggesting that the market is far from monopolized.
This lawsuit is not the first time Visa has faced legal challenges over its market dominance. In 2020, the DOJ blocked Visa's attempt to acquire Plaid, a financial technology company specializing in online debit payments, over concerns that the acquisition would further reduce competition.
This latest legal action reflects the Biden administration's tougher stance on enforcing antitrust laws, particularly against large corporations accused of exploiting their power to limit competition and inflate costs for consumers.
Anti-Competitive Practice
Visa is not the only company under scrutiny in the payments industry. Mastercard, another major player, has also faced similar accusations. Last year, Mastercard settled a complaint with the Federal Trade Commission (FTC), which accused it of restricting competition by blocking rival payment networks.
In the current lawsuit, the DOJ claims that Visa's market control has led to increased costs for American consumers, estimating that the company collects over $7 billion in fees annually from debit card transactions. Businesses, in turn, pass these fees on to customers, either by raising prices or cutting back on the quality of products and services.
Despite the strong case laid out by the DOJ, it remains uncertain whether this lawsuit will lead to significant changes for everyday shoppers. Legal experts predict that even if the DOJ wins the case or reaches a settlement, the impact on consumer prices at the checkout counter may be minimal.
The outcome of the case will depend largely on Visa's defense. According to Rebecca Haw Allensworth, a law professor at Vanderbilt Law School, Visa may argue that its agreements with merchants and competitors benefit consumers by providing secure and efficient payment processing.
Meanwhile, the National Retail Federation (NRF), a trade group representing merchants, has welcomed the DOJ's lawsuit, calling it a crucial step toward addressing the long-standing issues in the debit and credit card markets, said CBS News.
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