US Department of Justice files antitrust suit against Visa over monopoly concerns

The US Department of Justice has filed an antitrust lawsuit against visaand alleges that the debit card company is exploiting its dominant position in the industry to operate an illegal monopoly on debit card payments, costing businesses and customers billions of dollars.

The lawsuit, filed in the Southern District of New York, also accuses Visa of (V) to use its superiority to block the growth of its competitors and prevent other companies from developing “new and innovative alternatives”, according to a Statement from the Ministry of Justice.

“(The Justice Department) alleges 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.”

In the lawsuit, the Justice Department alleges that Visa imposed “exclusionary” and “anti-competitive” regulations on its partners and forced emerging companies out of the market. The lawsuit also states that more than 60% of debit transactions in the country are processed through Visa's network, allowing the company to charge over $7 billion in fees each year to process those transactions.

The lawsuit further alleges that Visa illegally maintains its monopoly position by sealing itself off from competition. The lawsuit says that Visa convinced potential competitors to become partners by offering them financial incentives and threatening them with punitive surcharges.

In response to the lawsuit, the Justice Department wants to impose requirements that would restore competition to the card issuer and allow debit payments to be processed both online and in physical stores.

Visa's long-standing monopoly problems date back to 2012, when the company raised prices for merchants and stifled competition from newer financial technology companies like Apple. (AAPL) and PayPal (PYPL).

In June rejected a $30 billion settlement reached between Visa and Mastercard and U.S. merchantsas a nearly two-decade-long battle over so-called swipe fees continues. The agreement settled a 2005 lawsuit that claimed merchants were forced to pay “excessive fees” to accept Visa and Mastercard. (MA) Credit cards.