Visa is sued for illegal monopoly in debit card market
The U.S. Justice Department filed a lawsuit Tuesday accusing Visa of illegally monopolizing the debit card market, a practice it claims harms every consumer.
The DOJ alleges Visa has abused its dominant position in the debit card market for over a decade, forcing businesses to use Visa's network instead of competitors.
According to the DOJ, Visa also proactively blocked 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," said Attorney General Merrick Garlandt in a statment.
"Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service.”
According to the filing, Visa controls more than 60% of debit transactions in the country, allowing it to charge over $7 billion in processing fees on those transactions.
The lawsuit alleges that Visa maintains this control through exclusivity agreements that penalize vendors and banks who want to use different systems.
The Justice Department alleges that Visa employs a carrot-and-stick approach to stifle competition.
According to the DOJ, the company offers lucrative incentives to potential rivals, persuading them to become partners rather than competitors. At the same time, Visa allegedly threatens punitive fees to those who might challenge its market position.
“Visa coopted the competition because it feared losing share, revenues, or being displaced by another debit network altogether,” the DOG indicated in a statement.
Visa shares drop while company denies allegations
As news of the lawsuit broke, Visa's shares fell 4.7% in afternoon trading. Visa strongly denied the allegations, calling the lawsuit meritless.
“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,” said Julie Rottenberg, Visa's general counsel.
"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.”
Despite the lawsuit's broad implications, industry analysts suggest its impact on Visa's overall business may be limited. KBW analyst Sanjay Sahrani estimates that U.S. debit revenue likely accounts for at most about 10% of Visa's total revenue.
DOJ cracks down on anticompetitive practices
The lawsuit against Visa marks a continued push by the Justice Department to challenge perceived monopolies across multiple industries.
This effort traces back to 2020, when the DOJ successfully blocked Visa's $5.3 billion attempt to acquire Plaid, a financial technology startup that could have threatened Visa's dominance in the payments space.
In March, Visa and Mastercard agreed to a massive $30 billion settlement with merchants following a protracted antitrust battle.
Yet even this record payout faced opposition from the National Retail Federation, which argued it inadequately compensated retailers for years of high fees.
Beyond finance, the DOJ has set its sights on other sectors.
Recent high-profile cases include suits against Google for its search business practices and Live Nation, Ticketmaster's parent company, over alleged anticompetitive behavior in the live entertainment industry.
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