Visa under fire: Justice Department goes after its monopoly

The US Department of Justice sued Visa for alleged monopolistic practices in the debit card market. This lawsuit represents another step in the government's fight against unfair business practices by the giants in the payments industry. Visa is accused of using its dominant position to stifle competition and artificially raise prices for consumers.

The U.S. Department of Justice on Tuesday filed a lawsuit against Visa $V accusing it of illegally monopolizing the debit card market. According to the lawsuit, Visa abused its dominant position for more than a decade to force businesses to use its network exclusively, while blocking new competitors from entering the market.

"Visa has illegally amassed power that allows it to charge fees far in excess of what it could charge in a competitive environment," said Attorney General Merrick Garland. These increased costs are then passed on to consumers in the form of higher prices or reduced quality and service. According to the lawsuit, such conduct impacts the prices of nearly all goods.

Visa, however, has objected to the allegations and says the lawsuit is without merit. The company argues that it is facing increasing competition, particularly in online payments. "Anyone who shops online or in a store today knows that there are a number of companies in the marketplace offering new ways to pay," said Julie Rottenberg, Visa's general counsel.

The lawsuit is one of a number of high-profile legal actions the Justice Department has taken recently. It also recently filed lawsuits against a company involved in artificially inflating rents and against Ticketmaster's parent company, Live Nation. As well, the court found that Google violated antitrust laws in its search business.

This new lawsuit comes three years after the State Department blocked Visa's planned $5.3 billion merger with fintech startup Plaid. The merger was cancelled and the lawsuit subsequently dropped.

According to the new filing, which was made in federal court in New York, more than 60% of debit transactions in the US are conducted through Visa's network. This allows the company to collect more than $7 billion in fees for processing these transactions. Visa maintains its position through exclusive agreements that penalise businesses and banks that wish to transact through other systems, effectively preventing competition.

The DOJ also alleges that Visa incentivizes potential competitors to partner with it instead of competing with it through financial incentives and the threat of additional fees. These actions, according to the DOJ, are aimed at protecting Visa's market share and profits.

Merchants and retailers have long criticized the high fees that companies like Visa charge. In March, a group of merchants reached a $30 billion settlement with Visa and Mastercard that was supposed to end a long-running antitrust dispute. However, the National Retail Federation opposed the settlement, arguing that the compensation to stores was too small. In June, a federal judge rejected the deal and ordered Visa and Mastercard to make larger concessions.

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Source: CNN, Reuters.