Visa Faces Antitrust Lawsuit for Allegedly Suppressing Competition
The U.S. Department of Justice filed a lawsuit against Visa for alleged antitrust violations, accusing the payment network of stifling competition by imposing high fees on merchants and engaging in anti-competitive practices. Visa, which processes over 60% of debit transactions in the U.S. and collects $7 billion annually in fees, is accused of using its dominant position to maintain control over the market.
The Justice Department claims that Visa has agreements with card issuers, merchants, and competitors that prevent competition and result in higher costs for consumers. The lawsuit aims to address the issue of swipe fees, also known as interchange fees, which have been a point of contention in the Biden administration’s efforts to tackle rising consumer prices.
Attorney General Merrick Garland stated that Visa’s actions impact not just the price of one product but the price of nearly everything, as merchants and banks pass on payment network costs to consumers. The alleged anticompetitive conduct by Visa dates back to around 2012, when new players entered the payments industry following regulatory reforms.
The lawsuit seeks to establish requirements that would promote competition in debit payment processing services, both online and in physical stores. This legal action is part of a broader investigation by the Justice Department into Visa’s practices, which began in 2021 and resulted in the blocking of Visa’s acquisition of Plaid, a financial technology company.
Visa’s rival, Mastercard, is also under scrutiny by the Justice Department for similar practices. The two companies have been embroiled in legal battles for nearly two decades over their market dominance. In 2019, Visa and Mastercard agreed to pay $5.6 billion to settle a class-action lawsuit alleging anticompetitive behavior.
However, a federal judge rejected a proposed settlement in June that aimed to reduce swipe fees by $30 billion over five years and lift restrictions on merchants charging customers for card usage. Visa has set aside $1.6 billion for potential settlements in other U.S. cases related to interchange fees.
The outcome of the antitrust lawsuit against Visa could have significant implications for the payment processing industry and consumer prices. As the legal proceedings unfold, the focus remains on promoting competition and ensuring fair practices in the marketplace.