A visa monopoly? Justice Department files antitrust lawsuit

The Justice Department has filed an antitrust lawsuit against Visa, accusing the company of operating a debit card monopoly and imposing billions of dollars in additional fees on American consumers and businesses.

The lawsuit, filed Tuesday, accuses Visa of stifling competition and charging fees beyond what the company could charge in a competitive market. More than 60 percent of U.S. debit transactions are processed through Visa's debit network, allowing the company to charge more than $7 billion in fees annually, according to the lawsuit.

While Visa's fees are paid by merchants, the costs are passed on to consumers in the form of higher prices or lower quality, according to the Justice Department.

“As a result, Visa's unlawful conduct affects not just the price of one thing, but the price of almost everything,” Attorney General Merrick Garland said in a press release.

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Visa argues that the company is “just one of many competitors” in the growing debit sector and calls the lawsuit “meritless.”

“When businesses and consumers choose Visa, it's because of our secure and reliable network, our best-in-class fraud protection and the value we provide,” said a statement from Julie Rottenberg, Visa's general counsel. “We are proud of the payments network we have built, the innovation we drive and the economic opportunities we enable.”

What the Justice Department claims

The litigation is the latest in a series of lawsuits against monopolistic behavior filed during the Biden administration. The Justice Department filed antitrust suits against Ticketmaster and Apple earlier this year, and Google lost an antitrust suit against the department last month.

In its lawsuit against Visa, the Justice Department alleges that Visa established a monopoly position by encouraging potential competitors to become partners through “generous” amounts of money and the threat of fines.

The ministry also accuses the company of having exclusion agreements with merchants and banks that penalize customers who attempt to conduct transactions through another company's system.

The complaint follows a 2020 Justice Department lawsuit that blocked Visa's plans to acquire financial technology company Plaid. The department said at the time that the deal would allow Visa to “maintain its monopoly position and above-average pricing for online debit cards.”

Mastercard, another major player in the debit card sector, is also under scrutiny from regulators. The company settled a Federal Trade Commission complaint last year that accused it of hindering rival payment networks.

What does this mean for the consumer?

The Justice Department alleges that Visa's activities have slowed innovation in the debit payments ecosystem and resulted in “significant additional fees” for Americans.

“Anti-competitive behavior by companies like Visa harms the American people and our entire economy,” Deputy Attorney General Benjamin Mizer said in the department’s statement.

However, Americans should not expect any drastic changes to payment processes as a result of this lawsuit.

If the Justice Department settles or wins this case, it could open the door to more competition in the debit card market and lead to lower prices, according to Douglas Ross, a professor at the University of Washington School of Law. But the cost savings could be too small for consumers to notice.

“If we create more competition here, we will see significant cumulative savings across the economy. But that will not be directly noticeable to consumers,” he said. “That's not to say it doesn't hurt consumers – a penny here and a penny there across millions of transactions adds up to a whole lot of money.”

The outcome will also depend on the defense of visas, says Rebecca Haw Allensworth, law professor at Vanderbilt Law School in Nashville, Tennessee.

“I think to really know how a victory in such a case will affect consumers (and merchants) it depends on what Visa has to say about the reasons why it is doing so,” she said in an email. “They will likely argue that their deals with merchants and competitors are good for cardholders, and the case will largely depend on how strong those arguments are.”

What the Justice Department claims

What does this mean for the consumer?

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