Credit card giant Visa has been slapped with an antitrust lawsuit by the Department of Justice on Tuesday, September 24. It alleges that Visa has negatively impacted “the price of nearly everything” by maintaining a monopoly over debit card networks and discouraging competition in numerous ways. As a result, the DOJ says that the company holds more than 60% of debit transactions in the United States. It accuses Visa for “unlawfully amassing the power to extract extra fees,” to the tune of $7 billion every year, that are pushed onto businesses and ultimately back to the consumer.
Why is Visa being sued by The Department of Justice?
The Visa antitrust lawsuit by the DOJ alleges that the company has used its monopolistic power to undermine competition in the following ways:
- Imposing “a web of exclusionary agreements” on merchants and banks that penalize Visa’s customers for using a different debit network or alternative payment system
- Inducing competitors to become partners by “offering generous monetary incentives and threatening punitive additional fees”
Specifically, the DOJ believes that the agreements Visa imposes effectively forces merchants to run most, if not all, of their debit card transactions through its payment rails or face “disloyalty penalties.”
It also accuses Visa for trying to swallow up competitors, citing that the Justice Department had filed a lawsuit against the company in 2020 to block it from acquiring the tech company Plaid.
The complaint alleges that the company feared losing revenue and potentially being replaced by another debit network. It says that internal documents from Visa show that it feared tech companies, like PayPal, Apple, and Square, would cut it out “as the middleman between merchants, consumers, and their banks by offering a better or cheaper payment product.”
In response, Visa called the lawsuit “meritless” and that it ignored the fact that the debit space is growing “with entrants who are thriving,” per Politico.
However, the DOJ’s Benjamin C. Mizer says that “corporations like Visa leave the American people and our entire economy worse off.”
In 2024, numerous retailers have either filed for bankruptcy or struggled with maintaining profits, including Big Lots, Dollar General, LL Flooring, and Bob’s. Due to rising unemployment and lower inflation, the Fed surprisingly lowered interest rates earlier in September.
