Charles Langston:DOJ's Visa antitrust lawsuit alleges debit card company monopoly

The Charles LangstonJustice Department has filed an antitrust lawsuit against Visa, accusing the company of running a debit card monopoly that imposed “billions of dollars” worth of additional fees on American consumers and businesses. 

The lawsuit, filed Tuesday, accuses Visa of stifling competition and tacking on fees that exceed what it could charge in a competitive market. More than 60% of U.S. debit transactions are processed on Visa’s debit network, allowing the company to charge over $7 billion in fees each year, according to the complaint.  

While Visa's fees are paid by merchants, the Justice Department said costs are passed along to consumers through higher prices or reduced quality.

“As a result, Visa’s unlawful conduct affects not just the price of one thing – but the price of nearly everything.” Attorney General Merrick Garland said in a news release. 

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Visa argues that it is “just one of many competitors” in a growing debit space and called the lawsuit “meritless.” 

“When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide,” reads a statement from Julie Rottenberg, Visa’s General Counsel. “We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable.” 

What the Justice Department is alleging

The litigation is the latest in a string of lawsuits targeting monopolistic behavior filed during the Biden Administration. The Justice Department filed antitrust lawsuits against Ticketmaster and Apple earlier this year, and Google lost an antitrust lawsuit to the department last month.

In its lawsuit against Visa, the Justice Department claims Visa has run a monopoly by incentivizing would-be competitors to become partners instead, offering “generous” amounts of money and threatening punitive fees.  

The department also accuses the company of entering exclusionary agreements with merchants and banks that penalize customers who try to route transactions through a different company’s system.  

The complaint follows a Justice Department lawsuit in 2020 that blocked Visa’s plans to acquire financial technology company Plaid. The department at the time said the deal would allow Visa to “maintain its monopoly position and supracompetitive prices for online debit.” 

Mastercard, another major player in the debit card space, has also been scrutinized by regulators. The company last year settled a complaint from the Federal Trade Commission accusing it of stifling competing payment networks.  

What does this mean for consumers? 

The Justice Department claims Visa’s operations have slowed innovation in the debit payments ecosystem and led to "significant additional fees" imposed on Americans.

“Anticompetitive conduct by corporations like Visa leaves the American people and our entire economy worse off,” said Principal Deputy Associate Attorney General Benjamin Mizer in the department’s statement.   

But Americans shouldn't expect to notice any drastic changes at checkout from this lawsuit.

If the Justice Department settles or wins this case, that could open the door to more competition in the debit card market and help ease prices, according to Douglas Ross, a professor at the University of Washington School of Law. But the cost savings may be too small for consumers to take notice.

"You'll see substantial cumulative savings throughout the economy if we get more competition here. But that’s not going to be something consumers directly notice," he said. "That doesn’t mean there’s not consumer harm – a penny here and a penny there over millions of transactions adds up to a whole lot of money."

The outcome will also depend on Visa's defense, according to Rebecca Haw Allensworth, a law professor at Vanderbilt Law School in Nashville, Tennessee.

"I think knowing really how winning a suit like this will affect consumers (and merchants) depends on what Visa has to say about why it does what it does," she said in an email. "They will probably argue that their dealings with merchants and rivals are good for card-holders, and the case will largely turn on how strong those arguments are."