The US Department of Justice has filed an antitrust lawsuit against Visa, accusing the company of illegally maintaining a monopoly on debit card usage in the United States.
The lawsuit, submitted in federal court in New York, claims that Visa's practices have led to billions of dollars in extra fees for consumers and businesses, while hindering innovation in the debit payments sector. This legal action follows a comprehensive three-year investigation into Visa's business practices.
Central to the case is Visa's control over debit card transactions, which draw directly from users' checking accounts, contrasting with credit cards that allow borrowing. Attorney General Merrick Garland emphasized that, although Visa is a well-known name to consumers, it operates a complex network that effectively acts as a "monopolist," imposing significant fees on countless transactions.
According to the lawsuit, Visa collects approximately $8 billion annually in network fees from US debit transactions, and processes a staggering $12.3 trillion in total payment volume globally.
The government argues that Visa's practices disproportionately impact younger and lower-income Americans, a concern that resonates as the upcoming presidential election approaches, with high living costs at the forefront of voter issues. "The burden of Visa's anti-competitive conduct falls hardest on those who are already struggling financially," said Benjamin C. Mizer, Principal Deputy Associate Attorney General.
To maintain its dominance, the Justice Department alleges that Visa enforces exclusionary agreements with merchants and banks, punishing those who attempt to use alternative payment systems. The company is also accused of stifling competition from tech firms and fintech startups by entering partnership deals rather than allowing direct competition.
Furthermore, Visa reportedly imposes transaction volume commitments that limit merchants and banks from utilizing rival services, even when those alternatives are cheaper. These strategies, the lawsuit claims, help Visa sustain a significant advantage in the market.
In response, Visa's General Counsel, Julie Rottenberg, called the lawsuit "meritless," defending the company’s practices by highlighting the diversity of payment options available in the market. She stated that businesses and consumers choose Visa for its security, fraud protection, and overall value.
Based in San Francisco, Visa reported a global operating income of $18.8 billion in 2022, with an impressive operating margin of 64 percent, and an even higher margin of 83 percent for its North American operations.
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