Wednesday, September 25, 2024
The civil lawsuit, filed in U.S. District Court for the Southern District of New York, alleges Visa illegally maintains a monopoly over debit network markets, using its dominance to thwart the growth of existing competitors and preventing other companies from developing new and innovative alternatives. The court filing grew out of a three-year investigation, Attorney General Merrick Garland said.
"Today's action against Visa reminds those who would stifle competition rather than compete on price or investing in innovation that the Justice Department will never hesitate to enforce the law on behalf of the American people," said Deputy Associate Attorney General Benjamin Mizer.
Speaking at a press conference, Deputy Assistant Attorney General Doha Mekki referenced Visa's tag line – we're everywhere you want to be. "One could easily add whether you want us or not," Mekki said.
Garland noted that more than 60 percent of debit transactions in the United States run on Visa's debit card network, generating over $7 billion in yearly processing fees. And he pointed to a "web of unlawful anti-competitive agreements" Visa has with merchants and banks to support that revenue flow.
Visa is alleged to exert leverage based on large numbers of transactions that must run over its payment rails, or risk higher fees – what the DOJ referred to as "disloyalty penalties" to force merchants and their acquiring banks to keep transactions off smaller competing networks that offer lower per-transaction fees.
The card giant also induces would be competitors to become partners instead of entering the market as competitors by offering generous monetary incentives and threatening punitive additional fees if they decline to partner.
"For example," Garland said, "in the case of Square, the company that operates a digital wallet known as CashApp, Visa has entered into a series of contracts that discourage Square from competing aggressively against Visa. Or, as a Visa executive stated, 'we've got Square on a short leash.'"
Garland continued, stating, "Entering into contracts with would-be competitors to prevent them from becoming actual competitors is an unlawful agreement not to compete that violates Section 1 of the Sherman Antitrust Act. And leveraging monopoly power to limit competitors' ability to gain market share violates Section 2 of that Act."
The DOJ, in its complaint, said over $4 trillion of debit transactions take place every year, and over 60 percent of those transactions (70 percent of online debit transactions), are routed through Visa.
Garland spoke of how millions of Americans prefer to use debit cards; in fact they are often the only option available to lower income consumers who don't possess credit cards, he said.
The DOJ said in a press release that Visa has enormous scale on both sides of the debit market – with merchants and their banks and with consumers and their banks – and the complaint alleges that Visa's exclusionary practices extend, deepen and protect an "enormous mote" around its business.
"Visa fears competition and innovation, and instead chooses unlawful cooperation and monopolization" Mekki said.
"We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it would charge in a competitive market," Garland stated. "Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality of service. As a result. Visa's unlawful conduct affects not just the price of one thing – but the price of nearly everything."
The DOJ has had Visa on its radar for several years. Back in 2020, the department filed a civil antitrust lawsuit to stop Visa from acquiring Plaid, a financial technology company that builds APIs that enable financial applications to connect with users' bank accounts. The two companies abandoned the plan rather than face off with the DOJ in court. 
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