Justice Department files antitrust suit against Visa over debit card business: NPR

Visa controls more than 60 percent of the debit card processing market in the United States. The Justice Department accuses the company of abusing its market power to illegally squeeze out competition and keep fees artificially high, increasing costs for both merchants and consumers.

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The Justice Department filed suit against Visa on Tuesday, accusing the company of illegally monopolizing the debit card market and thereby driving up prices for businesses and consumers.

The lawsuit, filed in the Southern District of New York, alleges that Visa processes more than 60 percent of debit card transactions in the United States and collects more than $7 billion in processing fees annually. The company allegedly abuses its market power to stifle competition and keep fees artificially high, the lawsuit says.

“We allege that Visa has unlawfully amassed the power to charge fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said in a statement. “Merchants and banks pass these costs on 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 almost everything.”

Since 2012, banks that issue debit cards have been required to allow transactions to be processed across multiple payment networks. Yet Visa – and to a lesser extent Mastercard – continue to dominate the market. The Justice Department says Visa prices its services at a level that makes it prohibitively expensive for merchants to use competing networks and pays potential competitors to stay out of the market.

Traders welcome the lawsuit

Retailers, who have long complained about excessive costs for processing debit and credit card payments, welcomed the Justice Department's move.

“You can mandate competition,” says Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. “But if what happens behind the counter hinders that competition, then there is no real competition.”

“There's no doubt it affects consumers as well,” Martz added. “They pay for these cards in the form of higher prices.”

Mastercard has also been accused of using illegal tactics to limit competition in the debit card market. The company settled a Federal Trade Commission complaint last year.

Tuesday's lawsuit is not the first time Visa has clashed with the Justice Department. Four years ago, the government filed suit to block Visa from acquiring fintech company Plaid.

The lawsuit alleged that Visa viewed the $5.3 billion acquisition as an “insurance policy” to prevent Plaid from interfering with its lucrative debit card business. The companies abandoned the planned purchase the following year.