The US Department of Justice has confirmed that a lawsuit has been filed against finance company Visa. It is accusing the company of illegally acting against competitors to maintain a monopoly in the debit card market. The lawsuit claims that Visa ‘punished’ companies using alternative payment networks and paid off competitors. The Department of Justice issued a statement saying that Visa’s actions had resulted in American consumers and businesses facing unnecessary additional fees. The lawsuit wants a judge in Manhattan to bar Visa from pricing competitors out and to stop them from paying rivals to stay out of the market.
The Department of Justice started investigating Visa in 2021. In that same year, the company was stopped from acquiring Plaid, a financial technology company. The Biden administration is known for taking an aggressive approach to antitrust issues. This new action is part of efforts to protect the American consumer from unnecessary fees and rising prices, an issue that has become a major issue in the current election battle between Vice President Kamala Harris and Republican candidate Donald Trump. Attorney General Merrick Garland made a statement pointing out that payment network costs are passed on to the consumer by merchants and banks.
‘Visa’s unlawful conduct affects not just the price of one thing, but the price of nearly everything.’
The lawsuit alleges that Visa’s antitrust activities date back to 2012 when card issuers were forced to accommodate unaffiliated networks after reforms allowed competitors to enter the market. According to prosecutors, Apple, PayPal, and Block Inc were paid off to agree not to release products that would compete with Visa’s dominance. Merchants who do not route all or most of their viable transactions through Visa face ‘staggering financial penalties.’
Shares in Visa dropped 4.7% by the close on Tuesday afternoon. Since 2022, debit cards have brought in more revenue for the company than credit cards, processing approximately 60% of debit transactions in the US and charging more than $7 billion dollars in fees when transactions are routed over its network.
Visa has yet to comment. Visa’s main rival Mastercard claimed in April that it is also under investigation. In 2019, both companies paid a $5.6 billion settlement against a class action lawsuit over anticompetitive practices.
(Sources: bbc.co.uk, reuters.com)
