DOJ accuses Visa of monopoly that affects prices of “almost everything”

The US Department of Justice sued on Tuesday visathe world's largest payments network, saying it was supporting an illegal monopoly on debit payments by imposing “exclusion agreements” on partners and stifling emerging businesses.

Visa's years-long actions resulted in American consumers and merchants paying billions of dollars in additional fees, according to the U.S. Department of Justice, which filed a civil antitrust lawsuit in New York alleging “monopolization” and other illegal conduct.

“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 Justice Department press release.

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

Visa and its smaller rival MasterCard have skyrocketed over the past two decades, reaching a combined market capitalization of around $1 trillion as consumers began using credit and debit cards instead of paper money to make in-store and e-commerce purchases. They are essentially toll collectors that process payments between merchants' banks and cardholders.

More than 60 percent of all debit transactions in the United States are processed through Visa, which helps the company collect more than $7 billion in processing fees annually, according to the U.S. Department of Justice lawsuit.

But the dominance of payment networks is increasingly attracting the attention of regulators and retailers.

In 2020, the U.S. Department of Justice filed an antitrust lawsuit to block Visa from acquiring fintech company Plaid. The two companies initially said they would fight the lawsuit, but soon abandoned the $5.3 billion acquisition.

In March, Visa and Mastercard agreed to cap their fees and allow merchants to charge fees for credit card use. The retailers said the deal would save them $30 billion over five years. A federal judge later rejected the settlement, saying the networks could afford a “substantially higher” deal.

““Visa leverages its dominance, massive size and central position in the debit ecosystem to impose a web of exclusion agreements on merchants and banks,” the Justice Department's press release said. “These agreements penalize Visa customers who transact through another debit network or alternative payment system.”

In addition, in light of the threats, Visa “engaged in deliberate and escalating conduct designed to eliminate competition and prevent competitors from obtaining the scale, market share, and data necessary to compete,” the Justice Department said.

The move comes in the final months of President Joe Biden's administration, during which regulators such as the Federal Trade Commission and the Consumer Financial Protection Bureau have sued middlemen over drug pricing and pushed back against so-called junk fees.

In February, credit card provider Capital One announced the acquisition of Discover Financiala $35.3 billion deal that relies in part on Capital One’s ability to strengthen Discover’s payments network, which ranks fourth behind Visa, MasterCard and American Express.

Capital One said that after the transaction closes, the company will transfer all of its debit card volume and, over time, a growing portion of its credit card volume to Discover, making it a more serious competitor to Visa and Mastercard.

This story is developing. Please check back later for updates.