“Visa went to war with the forces of competition and merchants and consumers lost,” a senior Justice Department official said on a call previewing the case to reporters.
Officials on the call described Visa’s conduct as both harmful to merchants, particularly small businesses, and to consumers who struggle to access credit, making debit cards their primary payment option.
The pending lawsuit was previously reported by POLITICO.
The case centers on Visa’s role as the dominant middleman between consumers, merchants, and banks for billions of debit card transactions. The lawsuit focuses on the fees that Visa charges merchants to use its massive debit card network — which are separate from the swipe fees pocketed by banks that have long sparked their own political fights.
Debit cards are the primary way that Americans pay for goods and services without cash — with the number of transactions far eclipsing credit cards each year. And they’re a central component of Visa’s business. According to the DOJ, Visa controls about 60 percent of the U.S. debit card market, allowing it to charge more than $7 billion in network fees each year.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said in a statement. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
Visa pushed back on the lawsuit, calling it “meritless” and vowing to vigorously defend itself in court.
“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,” Julie Rottenberg, Visa’s general counsel, said in a statement. “When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide.”
The Justice Department and the Federal Trade Commission have taken an aggressive stance against what they view as monopolistic conduct under President Joe Biden’s administration, and the Visa case is just the latest in a string of lawsuits. The DOJ has cases against Apple, Ticketmaster, Google and RealPage, and is investigating UnitedHealthcare, the largest U.S. healthcare company.
The department makes two high-level accusations in its case against Visa: Through pricing structures including volume discounts and prohibitions on the use of competing networks, Visa impedes the ability of its smaller rivals to gain market share. And the company has entered into agreements with financial technology companies like PayPal and Square that also allegedly block their ability to take business from Visa, the DOJ said.
According to the complaint, Visa’s agreements with banks are structured so that unless nearly all payment volume is processed on its networks, the company imposes “large disloyalty penalties,” making merchants unable to afford lower-priced competitors
And according to Visa’s internal documents, it aimed to neutralize up-and-coming fintech companies through partnerships, with its former CEO saying. “Everybody is a friend and partner. Nobody is a competitor,” according to the complaint.
Visa feared that potential fintech competitors like Apple, PayPal and Square may have “network ambitions” that would threaten its dominance, the Justice Department wrote in its complaint. DOJ said Visa viewed Apple Pay as an “existential threat” to its debit business.
Visa started taking these actions more than a decade ago as it faced growing competitive threats, the DOJ said. Congress, as part of the 2010 Dodd-Frank Act, required banks that issue debit cards to allow transactions to move across at least two different payment networks, with the idea of increasing choices for merchants.
“In the years immediately following the passage of the Durbin Amendment, Visa recognized that smaller debit networks and ‘outspoken merchants’ would use the legislation to shift share away from Visa,” according to the complaint. Because of that, “Visa set out to systematically deny this scale on both sides of the market to its debit rivals and frustrate the Durbin Amendment.”
Visa’s conduct has “resulted in billions of dollars in additional fees imposed on American consumers and businesses and slowed innovation in the debit payments ecosystem,” the DOJ said in a statement. The company’s scale with both issuing and merchant banks enables it to build an “‘enormous moat’ around its business,” the DOJ said.
The payments industry has long been the subject of antitrust scrutiny over the array of fees that are extracted from the use of debit and credit cards. The charges that Visa assesses for the use of its network are the subject of DOJ’s lawsuit, but it’s only one component of the massive fight over fees.
Other processing fees, known as interchange fees or swipe fees, have sparked furious political fights in Washington, generally pitting merchants that have to pay them against the card networks that set them and the banks that collect them. A federal judge in New York recently rejected a settlement in a private antitrust case against Visa and MasterCard, the second such setback in nearly 20 years of litigation.
As for what changes to Visa’s business the government is seeking, they are not yet outlining any specific ask, with a DOJ official on the call Tuesday saying they will first seek to prove Visa violated antitrust law followed by whatever fixes a judge deems necessary.
The probe was launched in part after Visa abandoned its takeover of payments company Plaid following a DOJ lawsuit challenging the deal in early 2021. The government argued that Visa was planning to bury a rival technology company. Visa’s competitor, MasterCard, settled a separate enforcement action in late 2022 over its own tokenization practices with the FTC.
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