Justice Department Files Antitrust Lawsuit Against Visa Over Debit Card Dominance

The U.S. Department of Justice has filed an antitrust lawsuit against Visa, alleging that the financial services giant is using its size and dominance to stifle competition in the debit card market, costing consumers and businesses billions of dollars.

The DOJ complaint, filed in the U.S. District Court for the Southern District of New York, accuses Visa of penalizing merchants and banks that don't use Visa's own payment processing technology for debit transactions, even though alternatives exist.

"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 B. Garland 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."

According to the DOJ, Visa controls 60% of debit transactions in the United States, allowing it to charge over $7 billion in fees each year for processing those transactions. The lawsuit claims Visa leverages the vast number of transactions on its network to impose volume commitments on merchants and their banks, as well as on financial institutions that issue debit cards.

This makes it difficult for merchants to use alternatives, such as lower-cost or smaller payment processors, without incurring what the DOJ described as "disloyalty penalties" from Visa. The DOJ also alleges that Visa has stifled competition by paying to enter into partnership agreements with potential competitors.

The Biden administration has been aggressive in targeting companies that it says act as middlemen, burdening Americans with unnecessary fees and engaging in anticompetitive behavior. This lawsuit against Visa is the latest in a series of antitrust actions brought by the Justice Department, including cases against technology giants like Apple and Google.

The DOJ's filing comes after it previously sued to block Visa's $5.3 billion acquisition of financial technology startup Plaid in 2020, calling it a monopolistic takeover of a potential competitor to Visa's payments network. That acquisition was eventually called off.

The lawsuit underscores the government's ongoing scrutiny of the power wielded by dominant players in the financial services industry, particularly as the shift towards digital payments has accelerated during the COVID-19 pandemic. Visa now faces the prospect of a prolonged legal battle as it seeks to defend its business practices.

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