US sues Visa for ‘monopolising debit card market’

The United States (US) department of justice (DoJ) has filed a lawsuit against Visa, accusing the company of illegally monopolising the debit card market.

In a statement on Tuesday, the justice department said the monopolisation violates Sections 1 and 2 of the Sherman Act, adding that the lawsuit was filed in the US district court for the southern district of New York.

The DoJ alleged that Visa illegally maintains a monopoly over debit network markets by using its dominance to thwart the growth of its existing competitors and prevent others from developing new and innovative alternatives.

“According to the complaint, more than 60 percent of debit transactions in the US run on Visa’s debit network, allowing it to charge over $7 billion in fees each year for processing those transactions,” the justice department said.

“The complaint further alleges that Visa illegally maintains its monopoly power by insulating itself from competition.

“For example, Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks.

“These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.

“In so doing, the complaint alleges, Visa locks up debit volume, insulates itself from competition, and smothers smaller, lower-priced competitors.

“Visa 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.

“As the complaint alleges, Visa coopted the competition because it feared losing share, revenues, or being displaced by another debit network altogether.”

‘CUSTOMERS PAID THE PRICE FOR VISA’S MONOPOLY’

Also, Merrick Garland, US attorney-general, alleged that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market.

“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,” Garland said.

Benjamin Mizer, principal deputy associate attorney-general, said anticompetitive conduct by corporations like Visa leaves the American people and the entire economy worse off.

“Today’s action against Visa reminds those who would stifle competition rather than competing on price or investing in innovation that the Justice Department will never hesitate to enforce the law on behalf of the American people,” Mizer said.

Doha Mekki, principal deputy assistant attorney-general of the DoJ’s antitrust division, said Visa fears competition and innovation, opting instead for unlawful cooperation and monopolisation.

Mekki said the lawsuit holds Visa accountable for its conduct in a market that forms the backbone of American commerce.

“Visa abuses its power over its customers and buys off would-be rivals at the expense of American consumers, merchants, banks, and the competitive process itself,” Mekki said.

‘WE SEEK TO RESTORE COMPETITION TO MARKET THROUGH LAWSUIT’

The justice department said Visa’s practices have led to billions of dollars in additional fees for American consumers and businesses while slowing innovation in the debit payment market.

DoJ said through the lawsuit, it seeks to restore competition to the market on behalf of the American public.

“Visa maintains 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 what it refers to as an “enormous moat” around its business,” the department said.

“When faced with the possibility that smaller debit networks or new technology entrants would threaten that position, Visa 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.”

In 2020, the justice department filed a civil antitrust lawsuit to stop Visa from acquiring Plaid, a technology company that powers fintech apps developing disruptive options for online debit payments.

The companies abandoned their planned $5.3 billion merger.