Justice Department Files Suit Against Visa Over Debit Card Practices
NEW YORK — The U.S. Department of Justice (DOJ) filed an antitrust lawsuit against Visa Inc. on Sept. 24, alleging that the company stifles debit card competition using its size and dominance, ultimately costing consumers and businesses billions of dollars.
According to the DOJ's complaint, filed in the U.S. District Court for the Southern District of New York, Visa penalizes merchants and banks that do not use its payment processing technology to process debit transactions despite the existence of alternatives, reported the Associated Press.
"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 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."
[Read more: Credit & Debit Card Swipe Fees Reached $224B in 2023]
Per the lawsuit, 60% of U.S. debit card transactions run on Visa's network, earning the company an incremental fee for each transaction. The DOH alleged that Visa leverages the high number of transactions on its network to impose volume commitments on merchants and banks, along with the financial institutions that issue debit cards. Accordingly, this makes it harder for merchants to turn to alternatives such as lower-cost or smaller payment processors without incurring "disloyalty penalties" from Visa.
Visa pushed back against the complaint, stating that the lawsuit does not account for the "ever expanding universe of companies offering new ways to pay for goods and services," said Julie Rottenberg, Visa's general counsel.
The full DOJ filing is available here.
The Retail Industry Reacts
Multiple industry associations applauded the DOJ's actions, including the Merchants Payments Coalition (MPC), the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA).
"This is further evidence that Visa has regularly blocked competition in the debit card market," said Doug Kantor, MPC executive committee member and NACS general counsel. "Visa has relentlessly flouted the law to maintain a monopoly over setting fees for transactions made with cards issued under its brand and for processing those transactions. While this case is focused on debit cards, it shows how we desperately need competition over credit card swipe fees, which currently face no competition at all."
NRF welcomed the lawsuit but stressed that the full extent of Visa's anticompetitive practices have yet to be revealed.
"Visa has blocked competition over both credit cards and debit cards for years to maintain its domination of the payments market and protect the billions of dollars in profits it makes off Main Street merchants and their customers," said NRF Chief Administrative Officer and General Counsel Stephanie Martz.
"The DOJ is taking action on Visa's debit card practices but that is just the tip of the iceberg," Martz continued. "This case is a major step forward in fixing our nation's broken payments market, but it should not be the last. The courts, Congress and federal agencies each have roles to play in bringing competition to credit and debit cards and putting Main Street ahead of Wall Street."
RILA praised the DOJ and urged lawmakers to block future anticompetitive acts through legislation.
"Today's action by the Justice Department confirms what retailers have known for decades about VISA's businesses practices," said Austen Jensen, RILA's executive vice present of government Affairs. "This suit highlights the corrupt and anticompetitive behavior of one of the most powerful companies in the country. While this is a critical first step, RILA urges the DOJ to follow through with the litigation in order to ensure these business practices are permanently ended. Congress must also move forward and pass the Credit Card Competition Act to ensure the American payment system is innovative and competitive to the benefit of consumers and not monopolized by Visa or Mastercard."