US Justice Department hits Visa with antitrust lawsuit over its debit-card business

• The US Department of Justice filed a lawsuit accusing Visa of engaging in anticompetitive behavior.
• Prosecutors say the financial giant's monopolistic actions affect "the price of nearly everything."
• Visa called the lawsuit "meritless" and said it would defend itself vigorously.

Visa is in the antitrust crosshairs.

The US Department of Justice filed a lawsuit on Tuesday arguing that the payment-processing giant illegally maintained a monopoly with anticompetitive behavior and imposed unfair costs on customers and merchants.

"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. "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."

"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," Visa's general counsel, Julie Rottenberg, said in a statement to Business Insider, adding: "We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable. This lawsuit is meritless, and we will defend ourselves vigorously."

American consumers use debit cards to complete transactions — estimated to be worth more than $4 trillion a year — in which funds are transferred directly from their bank accounts to a merchant's account.

The payment method is especially popular among younger shoppers and people with lower incomes who may not have a credit card or prefer not to use one, prosecutors said.

With each electronic payment processed over its network, whether in a store or online, Visa collects a small fee.

In the complaint, filed in the Southern District of New York, prosecutors said Visa handled more than 60% of US debit transactions, earning the company more than $7 billion in fees a year.

Prosecutors said Visa's use of "generous monetary incentives and threatening punitive additional fees" enabled the company to maintain an illegal monopoly in the debit-card-processing market.

The lawsuit alleges that one way that Visa protects its dominant position is by entering into contracts with potential competitors that prevent them from becoming actual competitors — a move that is illegal under the Sherman Antitrust Act.

"Visa has expressed fear that its self-described 'frenemies' in Big Tech would launch technology that competes with Visa by enabling payment directly from consumers' bank accounts," Garland said, referring in particular to Square.

The suit follows a yearslong investigation started after Visa's attempted $5.3 billion acquisition of the fintech company Plaid, which the Department of Justice sued to block in 2020. The companies abandoned the deal the following year.

Visa acknowledged in a 2021 filing with the Securities and Exchange Commission that the Department of Justice was planning to investigate its US debit-card business.

A key issue under scrutiny is the use of security tokens, which can be used to block the routing of payments to other networks. Visa's rival Mastercard settled a similar matter with the Federal Trade Commission in 2022.

While the scrutiny of Visa predates the Biden administration, this latest action is one of several crackdowns on middlemen companies that the White House argues are raising costs for American consumers.

"Visa is a classic example of a middleman that takes advantage of its role as gatekeeper to stamp out competition," said Benjamin Mizer, the principal deputy associate attorney general, adding: "More and more we are seeing these kinds of intermediaries gain control in a broad range of industries, from healthcare to online advertising to live music to housing."