U.S. Justice Department Accuses Visa of Illegal Monopoly, Alleging Broad Impact on Consumer Prices

New York — In a significant escalation of the federal government’s ongoing antitrust crackdown, the U.S. Justice Department on Tuesday filed a lawsuit against Visa, one of the world’s largest payment processors, accusing the company of maintaining an illegal monopoly in the U.S. debit card market. The lawsuit claims Visa has leveraged its dominant position to block competition and artificially inflate the cost of debit transactions, imposing financial burdens on consumers nationwide.

The lawsuit, filed in federal court in New York, asserts that Visa has engaged in anti-competitive practices for over a decade. According to the Justice Department, Visa has used its overwhelming market control to prevent businesses from using rival payment networks and thwart new entrants into the debit market.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what would be possible in a competitive market,” U.S. Attorney General Merrick Garland said in a statement. “The costs of Visa’s conduct are passed on to consumers, raising prices or reducing the quality of goods and services. Visa’s actions are not isolated; they affect the price of nearly everything people buy on a daily basis.”

Visa immediately responded to the accusations, calling the lawsuit “meritless” and vowing to vigorously defend itself in court. The company maintained that it faces increasing competition, particularly in online payments, from a variety of growing fintech firms and alternative payment platforms.

“Anyone who has purchased something online or checked out in-store knows there are now numerous options available for paying for goods and services,” said Julie Rottenberg, Visa’s General Counsel. “Today’s lawsuit ignores the fact that Visa is only one player in a constantly evolving and expanding debit market. We will contest these allegations in court.”

Long-standing concerns about Visa’s market power

At the heart of the lawsuit is the allegation that Visa controls more than 60% of the debit card transactions in the U.S., giving it undue power over both merchants and consumers. Visa is accused of charging billions of dollars in processing fees each year — fees that are then passed down to consumers by merchants, either through higher prices or reductions in service quality.

One of the Justice Department’s key complaints is Visa’s imposition of exclusivity agreements with merchants and banks. These agreements prevent businesses from processing debit transactions through alternative networks, further cementing Visa’s hold on the market and shielding the company from competition. The lawsuit claims that Visa has made a deliberate effort to neutralize potential competitors by offering them lucrative partnerships, thus preventing these rivals from entering the debit space independently.

“Visa induces potential competitors to partner with them rather than compete, offering monetary incentives while imposing steep penalties for those that try to use rival systems,” the Justice Department stated. “The company effectively co-opted competition out of fear of losing market share or being displaced by more innovative debit networks.”

A broader crackdown on corporate monopolies

The lawsuit against Visa is part of a broader campaign by the Justice Department to rein in corporate monopolies, particularly in the tech and financial sectors. Recently, the department filed civil suits against Ticketmaster’s parent company, Live Nation, and a major real estate firm accused of artificially inflating rents. In a separate high-profile case, the Justice Department convinced a judge to declare that Google violated antitrust laws in its search engine business.

Visa itself has been on the department’s radar for years. In 2020, the Justice Department sued to block Visa’s planned $5.3 billion acquisition of the financial technology startup Plaid, citing concerns that the merger would stifle competition in the online payments market. Visa ultimately abandoned the deal under pressure from regulators, marking a significant victory for the government’s antitrust enforcement efforts.

Merchant backlash and ongoing litigation

Merchants and retailers have long voiced concerns over the high fees imposed by credit card companies like Visa. In March of this year, a group of merchants agreed to a $30 billion settlement with Visa and Mastercard after a prolonged antitrust battle in the courts. However, the National Retail Foundation, one of the largest trade groups representing American retailers, rejected the settlement, arguing that it provided insufficient relief for the vast number of businesses impacted by Visa and Mastercard’s fee structures.

The issue came to a head in June when a federal judge struck down the proposed settlement, insisting that credit card companies needed to offer more significant concessions to resolve the decades-long dispute. The judge’s decision underscored the intense legal and regulatory scrutiny that Visa, Mastercard, and other payment processors continue to face over their business practices.

A test case for antitrust policy

The Justice Department’s lawsuit against Visa could have wide-ranging implications for the debit card industry and the broader financial technology sector. Should the government succeed in curbing Visa’s market dominance, it could open the door for smaller, innovative payment platforms to gain a foothold in the U.S. market. This could lead to greater competition, lower fees, and, ultimately, more choice for consumers and merchants alike.

For now, Visa is preparing for a lengthy legal battle. With billions of dollars in processing fees and a commanding share of the debit market at stake, the case is set to be a crucial test of the government’s ability to tackle monopolistic practices in the modern financial landscape. This lawsuit highlights the growing tension between powerful corporations and government regulators determined to ensure that consumers are not unduly burdened by monopolistic practices in a fast-evolving marketplace.

Share This to: