Government claims firm stifles competition by threatening merchants with high fees and pays off potential rivals<\/p>\n\n\n\n
The US Department of Justice has sued Visa, accusing one of the world\u2019s largest payment networks of antitrust violations that affect \u201cthe price of nearly everything\u201d.<\/p>\n\n\n\n
The financial giant has suppressed competition by threatening merchants with high fees and paying off potential rivals, according to the complaint, filed in US district court for the southern district of New York.<\/p>\n\n\n\n
The lawsuit alleges that Visa makes it difficult for merchants to use alternatives, like lower-cost or smaller payment processors, instead of its own payment processing technology, without incurring what prosecutors described as \u201cdisloyalty penalties\u201d.<\/p>\n\n\n\n
Some $3.3tn in transactions were processed on Visa\u2019s sprawling financial network in the latest quarter.<\/p>\n\n\n\n
The firm processes more than 60% of debit transactions in the US, bringing it $7bn each year in fees collected when transactions are routed over its network, the justice department said. The company protects that dominance through agreements with card issuers, merchants and competitors, prosecutors allege.<\/p>\n\n\n\n
The attempt to tackle such fees, sometimes known as swipe fees or interchange fees, is part of the Biden administration<\/a>\u2019s efforts to combat rising consumer prices, which have been a key issue on the presidential election campaign<\/a> trail.<\/p>\n\n\n\n \u201cWe allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,\u201d said the US attorney general, Merrick Garland, in a statement. \u201cMerchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service.<\/p>\n\n\n\n \u201cAs a result, Visa\u2019s unlawful conduct affects not just the price of one thing \u2013 but the price of nearly everything.\u201d<\/p>\n\n\n\n Visa described the complaint as \u201cmeritless\u201d and vowed to \u201cvigorously\u201d defend itself. \u201cAnyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,\u201d Julie Rottenberg, the firm\u2019s general counsel, said. \u201cToday\u2019s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.\u201d<\/p>\n\n\n\n The San Francisco-based company is valued at more than $500bn on the stock market. Its shares dropped by almost 5% following reports of the lawsuit.<\/p>\n\n\n\n Visa\u2019s alleged anticompetitive conduct began around 2012, as competing companies entered the payments space following reforms that required card issuers to accommodate unaffiliated networks, a senior justice department official said.<\/p>\n\n\n\n The lawsuit seeks to have a judge in Manhattan impose requirements that would restore competition for services to process debit payments both online and at physical stores.<\/p>\n\n\n\n The justice department\u2019s antitrust division began investigating Visa over its debit card practices in 2021, the same year it blocked the credit card company\u2019s acquisition of the financial technology company Plaid. Its rival Mastercard said in April it was being investigated by the justice department as well.<\/p>\n\n\n\n Both companies have been in litigation for nearly two decades over their dominance in the cards market, and agreed in 2019 to pay US merchants $5.6bn to settle damages claims in a class-action lawsuit accusing them of anticompetitive practices.<\/p>\n\n\n\n Jon Donenberg, deputy director of the White House national economic council, said: \u201cWe do not have a comment on this DoJ lawsuit, but the Biden-Harris administration has been clear that the American economy thrives when there is real competition. This administration has also taken on credit card late fees and banking overdraft fees, and will continue working to take on other unfair junk fees on everyday transactions.\u201d<\/p>\n\n\n\n