US Government Accuses Visa of Being an Illegal Monopoly

Financial services giant Visa might be in some legal trouble with the U.S. federal government. The Department of Justice (DOJ) is accusing the world’s largest payments network of creating an illegal monopoly.

The DOJ has filed an antitrust lawsuit against Visa, alleging the company used its power and might to suppress competition in the debit card market. The government claims Visa forced partners to sign “exclusionary” agreements, which led to both consumers and merchants paying unwarranted fees.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” wrote Attorney General Merrick Garland, per CNBC. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service.” 

According to the complaint, any bank or merchant using a payment processing system outside of Visa’s control was unfairly punished with “disloyalty penalties.” As of now, Visa processes about 60% of all debit card transactions in the U.S., which earns the company about $7 billion in annual fees.

With such a large number of transactions, Visa allegedly pushes volume commitments on merchants as well as the banks they use. The reported practice makes it nearly impossible for merchants to use any other payment processor, even some that charge lower fees.

Response to the Antitrust Lawsuit Against Visa

Visa says the DOJ’s antitrust lawsuit has no grounds. Visa is just one of numerous companies in an ever-growing industry that is introducing new ways to pay for goods and services all the time.

“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” said Visa attorney Julie Rottenberg, according to The Associated Press.

Earlier this year, both Visa and competitor Mastercard agreed to reduce fees related to credit and debit card processing. In a settlement worth $30 billion, the companies lowered their interchange rates by 0.04 percentage points for transactions in the U.S.

According to AP, Visa’s profits increased 9% in the most recent quarter, earning $4.87 billion. Every time someone swipes a debit card or credit card with the Visa logo, the company makes roughly 1%-4% of the transaction. As inflation and supply chain issues are continuing to take a toll on U.S. merchants, many have started passing the percentage onto customers by charging swipe fees.