USA accuses Visa of debit card monopoly

The United States has filed a lawsuit against Visa, accusing the financial giant of illegally suppressing competition in order to maintain its monopoly on the debit card market.

Visa punished companies that wanted to use alternative payment networks and bribed potential competitors to maintain its market position, it said.

The Justice Department said the measures had slowed innovation and resulted in significant additional costs for American consumers and businesses.

Visa said the allegations were “unfounded” and that the company would defend itself in court.

Julie Rottenberg, Visa's general counsel, said businesses and consumers chose Visa because of its “secure and reliable network.”

“Today's lawsuit ignores the fact that Visa is just one of many competitors in a growing debit sector that is filled with new entrants,” she said.

“This lawsuit is without merit and we will defend ourselves vigorously.”

The lawsuit against Visa is the latest antitrust lawsuit filed by the Biden administration, which is more aggressive in addressing monopoly concerns (known in the U.S. as antitrust) than previous administrations.

The company has also been the subject of lawsuits and scrutiny by traders and competition authorities in other parts of the world, including Europe and Australia, over its business practices.

The Justice Department began investigating Visa in 2021.

According to the lawsuit, the company processes more than 60% of debit transactions in the United States, generating $7 billion in fees annually. In 2022, its debit card business was larger in revenue than its credit card division and highly profitable.

According to Attorney General Merrick Garland, Visa's dominant market position allowed it to charge fees that far exceeded those possible in a “competitive market.”

“Merchants and banks pass these costs on to consumers by either raising prices or reducing quality or service,” he said. “As a result, Visa's illegal conduct affects not just the price of one thing, but the price of almost everything.”

The company's shares fell more than 5%.

The lawsuit, filed in federal court in New York, alleges that Visa used a “web of contracts” that required companies to route a certain volume of transactions through the Visa network or face higher fees – effectively creating illegal “exclusive contracts.”

The company began making such deals after a new law was passed in 2012 to increase competition in the debit card market. The law required banks to make their debit cards usable in at least two competing payment networks.

The US Department of Justice said Visa also used its market dominance to threaten technology companies such as PayPal with heavy fines if they did not sign contracts requiring them to process payments through the company.

The court asked the plaintiff to declare that Visa had a monopoly and to enjoin the company from continuing its alleged “anti-competitive” practices.

George Alan Hay, a professor at Cornell Law School and an expert on antitrust law, said the case was not radical but would still pose a challenge to the government.

One of the sore points is the question of how the debit card market is defined – and whether 60 percent is enough to create a monopoly position, he said.

“It will be difficult,” he said.

He added that after decades of being under regulators' scrutiny, Visa had anticipated litigation when setting its fees.

“They will have answers,” he said. “It's not like this came as a total surprise to them.”