US Department of Justice sues Visa for allegedly suppressing competition
What's the story
The US Department of Justice (DOJ) has filed an antitrust lawsuit against global payment giant, Visa. The suit accuses Visa of maintaining an illegal monopoly in the debit network markets, and attempting to suppress competition from rivals such as PayPal and Square. This legal action follows a multi-year investigation into Visa's business practices, which was first disclosed by the company in 2021.
Market dominance
DOJ alleges Visa's monopoly inflates consumer costs
US Attorney General Merrick Garland stated that Visa has unlawfully gained the power to impose fees, significantly higher than what a competitive market would allow. He further explained that these inflated costs are passed on to consumers by merchants and banks, through increased prices or decreased service quality. The lawsuit claims that over 60% of US debit transactions are processed through Visa's network, contributing to its annual revenue of more than $7 billion from payment processing fees alone.
Business tactics
Visa's 'exclusionary agreements' under scrutiny
The DOJ alleges that Visa's market dominance is partially due to its "web of exclusionary agreements" with businesses and banks. The company has also been accused of trying to "smother" competitors, including smaller debit networks and emerging fintech firms. The lawsuit further claims that Visa executives view Apple as an "existential threat," highlighting the competitive landscape in the payment processing industry.
Legal battle
Strategic agreements with competitors questioned
The lawsuit alleges that Visa entered into paid agreements with potential competitors, to ward off competition from new entrants in the payment processing industry. These strategies have reportedly allowed Visa to build an "enormous moat" around its business. This is not the first time Visa has faced antitrust scrutiny from the DOJ, which previously filed a civil lawsuit in 2020 to prevent Visa's $5.3 billion acquisition of fintech company Plaid.
Company response
Visa refutes DOJ's allegations
In response to the lawsuit, Visa's General Counsel Julie Rottenberg has dismissed the DOJ's allegations as "meritless." She stated, "Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving." Rottenberg emphasized that when businesses and consumers choose Visa, it is due to their secure and reliable network, world-class fraud protection, and value they provide.