The U.S. Justice Department has taken legal action against Visa, accusing the financial giant of engaging in anticompetitive practices in the debit card market. The lawsuit alleges that Visa leverages its dominant position to suppress competition, resulting in higher costs for consumers and businesses.
According to the complaint, Visa imposes penalties on merchants and banks that do not use its payment processing technology for debit transactions, despite the presence of alternative options. This allows Visa to earn substantial fees from every transaction processed on its network. The DOJ claims that Visa’s control over 60% of debit transactions in the U.S. enables it to generate over $7 billion in fees annually.
Attorney General Merrick B. Garland stated that Visa’s actions lead to inflated costs for consumers, as merchants and banks pass on these fees through higher prices or reduced quality of service. The lawsuit is part of the Biden administration’s efforts to combat anticompetitive behavior in various industries, including technology and finance.
The DOJ complaint outlines how Visa uses its transaction volume to enforce agreements with merchants and financial institutions, making it challenging for them to opt for alternative payment processors. Additionally, Visa is accused of stifling competition by entering into partnerships with potential rivals.
In response to the lawsuit, Visa disclosed that it was under investigation by the Justice Department in 2021 and is cooperating with the probe. The company’s revenue has seen a boost from the shift towards online shopping during the pandemic, with even cash-centric businesses adopting card payments.
Analysts predict that any financial impact on Visa from the lawsuit would be limited, given that U.S. debit revenue constitutes a small fraction of its overall revenue. The legal battle could extend for years if a settlement is not reached.
Despite the lawsuit, Visa continues to process trillions of dollars in transactions on its network, with U.S. payments outpacing economic growth. The company’s shares fell following the announcement of the antitrust lawsuit.
Visa, headquartered in San Francisco, has yet to comment on the legal proceedings.
