The U.S. Department of Justice has sued Visa for anticompetitive practices in debit card networks, which it says penalize merchants that try to use alternatives. The suit, filed in the U.S. District Court for the Southern District of New York, alleges that Visa “wields its dominance, enormous scale and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks.”
The DOJ claims that Visa has violated Sections 1 and 2 of the Sherman Act and that its actions have cost consumers and business “billions of dollars” in additional fees. According to the complaint, more than 60% of U.S. debit transactions run on Visa’s debit network, for which the company charges over $7 billion in fees annually.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” said U.S. Attorney General Merrick Garland in a statement. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
Visa Accused of Thwarting Competition from Smaller Networks
According to the suit, when Visa has been faced with the possibility that smaller debit networks or new tech entrants would threaten its dominant position, the company engaged in a deliberate and reinforcing course of conduct to cut off competition and prevent rivals from gaining the scale, share and data necessary to compete for customers’ business,” according to the DOJ release.
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The suit alleges that Visa uses leverage based on the large number of transactions that must run over Visa’s payment rails to impose volume commitments on merchants and their banks, as well as on financial institutions that issue debit card. “These agreements are priced so that, unless all or nearly all debit volume runs over Visa’s payment rails, large disloyalty penalties can be imposed on all Visa transactions,” said the DOJ in its statement
Additionally, the suit said Visa’s internal documents revealed that the company feared that tech companies and fintech startups with “network ambitions” could cut Visa out as the middleman between merchants, consumers and banks by offering a better or cheaper payment product. Visa tried to stop their development by entering into agreements to pay potential competitors to partner with the company rather than innovate.
NRF Applauds Effort but says it’s ‘Just the Tip of the Iceberg’
Retailer associations welcomed the lawsuit but said it doesn’t go far enough in fighting anticompetitive practices. The National Retail Federation (NRF) has been lobbying for action in both the debit and credit card markets for many years, and cheered the June 2024 decision by a federal judge to block an antitrust settlement with Visa and Mastercard over “swipe” fees.
Discussing the debit card suit, NRF Chief Administrative Officer and General Counsel Stephanie Martz called it “just the tip of the iceberg. This case is a major step forward in fixing our nation’s broken payments market, but it should not be the last. The courts, Congress and federal agencies each have roles to play in bringing competition to credit and debit cards and putting Main Street ahead of Wall Street.”
Payment Providers in the Government’s Crosshairs
This is not the first time the DOJ has trained its sights on Visa. In November 2020 the agency sued to stop Visa’s acquisition of Plaid, a tech company that powers fintech apps. The companies abandoned their planned $5.3 billion merger in January 2021.
The Federal Trade Commission also has been pursuing a number of antitrust cases against payment providers and won a settlement from Mastercard in 2023 for unlawfully forcing merchants to route debit card payments through its network.
