The US Department of Justice accuses Visa of monopolizing the debit card market, causing consumers to lose billions of dollars.

The U.S. Department of Justice on Tuesday filed a civil antitrust lawsuit against Visa (V.US), accusing the world's largest payment network of illegally monopolizing the debit payment market by implementing exclusive agreements and suppressing emerging companies. The lawsuit filed by the Department of Justice in New York states that Visa's actions have resulted in American consumers and businesses paying billions of dollars in additional fees. Attorney General Merrick Garland stated in a statement that Visa unlawfully gained the power to charge high fees, with fee levels far exceeding what would be under competitive market conditions. He further explained that merchants and banks pass on these extra costs to consumers by raising prices or lowering service quality, affecting the prices of almost all goods. Over the past twenty years, Visa and its competitor Mastercard (MA.US) have seen their market value soar to around $1 trillion as consumers increasingly use credit and debit cards for shopping. In response to the Department of Justice's lawsuit, Visa stated that the allegations are "baseless." Julie Rottenberg, Visa's General Counsel, emphasized that Visa is only one of many competitors in the debit card arena, which is constantly growing, with other competitors also thriving. However, the complaint from the U.S. Department of Justice shows that over 60% of U.S. debit transactions are processed through Visa, allowing Visa to collect over $7 billion in processing fees annually. Visa's dominant position has attracted attention from regulatory agencies and retailers. In 2020, the U.S. Department of Justice filed an antitrust lawsuit to block Visa's acquisition of fintech company Plaid. Despite Visa and Plaid initially stating they would fight the lawsuit, they eventually abandoned the $5.3 billion acquisition. In March of this year, Visa and Mastercard agreed to limit fees, allowing merchants to charge fees to customers using credit cards, but this settlement agreement was later rejected by a federal judge. The Department of Justice alleges in the complaint that Visa threatens merchants and banks with punitive rates if they move transactions to competitors. These contracts help Visa protect three-quarters of its debit card transaction volume from the impact of fair competition. The Department of Justice also stated that Visa took deliberate and reinforcing actions to cut off competition and prevent competitors from gaining necessary scale, share, and data. Furthermore, Visa pays competitors hundreds of millions of dollars annually to reduce the risk of developing innovative technologies that could threaten Visa's monopoly profits. Agreements reached between Visa and tech companies like Apple Inc. have turned these potential competitors into partners, damaging the public interest. For example, Visa reached an agreement with the predecessor of Cash App to ensure that the company would not pose a greater threat to Visa's debit card business. According to the complaint, a Visa executive revealed, "We have very strict control over Square, our transaction structure is designed to prevent disintermediation." The complaint also states that Visa reached an agreement with Apple Inc., under which Apple Inc. promised not to directly compete with Visa's payment network, such as by developing payment features that rely primarily on non-Visa payment processes. The Department of Justice is asking the court to stop Visa from engaging in a series of anti-competitive practices, including obstructing newcomers' fee structures or service packages. This action is being taken in the final months of President Biden's administration, as regulators have filed lawsuits against drug price middlemen and cracked down on so-called junk fees. It is worth mentioning that in February of this year, credit card lender Capital One announced the acquisition of Discover Financial Services, a $35.3 billion deal partially dependent on Capital One's ability to enhance Discover's payment network, which currently lags far behind Visa, Mastercard, and American Express Company. Capital One stated that once the deal is completed, it will gradually transfer all of its debit card business and more and more credit card business to Discover, making it a more competitive rival to Visa and Mastercard.