US Justice Department accuses Visa of illegal monopoly that adds to the price of ‘nearly everything’
By Hannah Rabinowitz, CNN
New York (CNN) — The US Justice Department filed a lawsuit Tuesday accusing Visa of illegally monopolizing the debit card market.
For more than a decade, the department alleges, Visa has abused its dominant positionin the debit card market to force businesses to use Visa’s network instead of competitors’, and to stop new alternatives from entering the market.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said 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 said in a statement that the lawsuit is meritless and it will defend itself in court. The company said it faces growing competition, particularly online.
“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” said Julie Rottenberg, Visa’s general counsel, in a statement. “Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.”
The antitrust suit is one of several major actions taken by the Justice Department recently. The department also recently filed civil suits against a real estate company that allegedly helped to artificially inflate rents across the country and another against Ticketmaster’s parent company Live Nation, and convinced a judge to declare that Google violated antitrust laws with its search business.
It also comes just three years after the Justice Department sued to block Visa from merging with financial technology startup Plaid. The $5.3 billion-dollar merger agreement was scrapped, and the lawsuit was dropped.
According to the new complaint against Visa, which was filed in federal court in New York, more than 60% of debit transactions in the country take place on Visa’s debit network. Visa, in turn, is able to charge more than $7 billion in processing fees on those transactions, the department says.
To keep that control, Visa imposes exclusivity agreements that penalize vendors and banks who want to run transactions through different systems, effectively insulating the company from competition.
“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,” the Justice Department said in a press release. “As the complaint alleges, Visa coopted the competition because it feared losing share, revenues, or being displaced by another debit network altogether.”
Merchants and retailers have long complained about credit card companies like Visa charging what they describe as exorbitant fees. A group of merchants agreed in March to settle with Visa and Mastercard for $30 billion following a decades-long antitrust battle in court.
However, the National Retail Foundation, a trade group representing retailers, fought to block the settlement, arguing it offered too little compensation to stores using Visa and Mastercard’s payment terminals. In June, a federal judge rejected the settlement, arguing the credit card companies had to make more concessions to resolve the dispute.
The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.
