The U.S. Justice Department has taken legal action against Visa, accusing the financial services giant of engaging in anticompetitive practices within the debit card market. The lawsuit alleges that Visa, based in San Francisco, leverages its dominant position to suppress competition, resulting in significant financial losses for consumers and businesses.
The complaint asserts that Visa imposes penalties on merchants and banks that do not utilize its payment processing technology for debit transactions, despite the presence of alternative options. Visa earns additional fees from every transaction processed on its network, with the DOJ highlighting that 60% of debit transactions in the U.S. flow through Visa's network, generating over $7 billion in annual fees.
Attorney General Merrick B. Garland emphasized that Visa's actions lead to inflated fees that surpass what would be seen in a competitive market. These costs are ultimately passed on to consumers through higher prices or reduced quality of services, impacting various sectors of the economy.
Visa's general counsel, Julie Rottenberg, defended the company, stating that the lawsuit overlooks the growing array of payment alternatives available in the market. Rottenberg dismissed the allegations as baseless and affirmed Visa's commitment to vigorously defending itself against the claims.
The Biden administration's pursuit of antitrust cases against companies acting as intermediaries includes Visa, Live Nation, RealPage, Apple, and Google. The DOJ's complaint against Visa, filed in the U.S. District Court for the Southern District of New York, outlines how Visa's market dominance restricts competition by imposing volume commitments on merchants and financial institutions.
Visa's acquisition of financial technology startup Plaid was previously challenged by the DOJ, citing concerns about monopolistic behavior. The ongoing investigation into Visa's debit practices has been acknowledged by the company, which has pledged cooperation with authorities.
Despite the surge in online shopping during the pandemic benefiting Visa's revenue, the lawsuit poses potential risks to the company's debit business. Analysts anticipate a prolonged legal battle if the case proceeds to trial, with Visa's shares experiencing a decline following the announcement of the lawsuit.
Visa's transaction volume continues to grow, with U.S. payments outpacing economic growth. The lawsuit's impact on Visa's revenue remains uncertain, with potential implications for the company's future financial performance.
