Visa Faces Antitrust Lawsuit from US Justice Department
The US Justice Department has taken legal action against Visa (V) through a federal antitrust lawsuit, alleging that the company has unlawfully utilized the size of its extensive card processing network to hinder competition. At the core of the issue is Visa’s ownership and control of the largest debit card processing network in the United States, which manages over 60% of the nation’s debit card transactions.
The DOJ contends that Visa has exploited its network of consumers, banks, and merchants to disadvantage merchants who opt for an alternative debit network. This alleged behavior has resulted in additional fees being charged to American consumers and businesses, and has impeded innovation within the debit payments ecosystem.
According to the complaint, Visa established a “web of contracts” with major banks and merchants that obligated merchants to select Visa’s network or face heightened fees for sales transactions. In 2022 alone, Visa generated $7 billion in revenue from debit processing fees, with its stock declining by over 5% in response to the lawsuit.
US Attorney General Merrick Garland indicated that Visa’s actions have deterred potential competitors, particularly fintech companies like Square’s CashApp, from entering the debit processing market. Garland emphasized the hidden toll that Visa imposes on trillions of transactions, collectively amounting to billions of dollars in fees imposed annually on American consumers and businesses.
Furthermore, the DOJ specified that Visa has maintained monopolies in two specific markets: the debit network services market and the card-not-present debit network services market. This behavior has stifled competition and hindered the entry of new players into the market.
Visa’s general counsel, Julie Rottenberg, has pushed back against the allegations by highlighting the expanding array of companies offering payment solutions to consumers. However, experts like Alden Abbott suggest that the legal landscape, particularly the Dodd-Frank Act’s cap on debit card fees, should be considered in the antitrust analysis of Visa’s practices.
In response to the lawsuit, the DOJ is seeking to prohibit Visa from engaging in the alleged harmful contracts and from bundling credit services or incentives with debit network services. Additionally, the DOJ aims to prevent Visa from implementing pricing incentives for using its network.
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