DOJ accuses Visa of price-gouging monopoly on ‘almost everything’

The US Department of Justice sued on Tuesday Visathe world’s largest payments network, saying it maintained an illegal monopoly on debit payments by imposing “exclusion” agreements on partners and stifling upstart firms.

Visa’s moves over the years have caused American consumers and merchants to pay billions of dollars in additional fees, according to the DOJ, which has filed an antitrust civil suit in New York for “monopolization” and other illegal conduct.

“We allege that Visa unlawfully amassed the power to extract fees far in excess of what it could charge in a competitive market,” Attorney General Merrick Garland said in a DOJ statement.

“Merchants and banks pass these costs on to consumers, either by raising prices or by reducing quality or service,” Garland said. “As a result, Visa’s illegal behavior affects not just the price of one thing, but the price of almost everything.”

Visa and its smaller rival MasterCard have grown over the past two decades to a combined market capitalization of about $1 trillion as consumers have used credit and debit cards for in-store purchases and e-commerce instead of paper money. They are essentially tax collectors, who mix payments between merchant banks and cardholders.

More than 60 percent of U.S. debit transactions go through Visa’s rails, helping it collect more than $7 billion annually in processing fees, according to the DOJ complaint.

But the dominance of payment networks has increasingly attracted the attention of regulators and retailers.

In 2020, the DOJ filed an antitrust lawsuit to prevent Visa from acquiring fintech company Plaid; the companies initially said they would fight the action, but soon abandoned the $5.3 billion takeover.

In March, Visa and Mastercard agreed to limit their fees and allow merchants to charge customers for using their credit cards, a deal that retailers said was worth $30 billion in savings over half a decade . A federal judge later threw out the deal, saying the networks could afford to pay for a “substantially larger” settlement.

“Visa exercises its dominance, enormous scale and centrality in the debit ecosystem to impose a network of exclusion agreements on merchants and banks,” the DOJ said in its statement. “These agreements penalize Visa customers who direct transactions to another debit network or an alternative payment system”.

Moreover, when faced with threats, Visa “engaged in deliberate and reinforcing conduct to stop competition and prevent rivals from gaining the scale, share and data necessary to compete,” the DOJ said.

In February, credit card lender Capital One announced its $35.3 billion acquisition of Discover Financial, a $35.3 billion deal based in part on Capital One’s ability to support payments network led by Discover, No. 4 distantly behind Visa, MasterCard and American Express.

Capital One said that once the deal is closed, it will switch all of its debit card volume to Discover and an increasing share of its credit card volume over time.

This story is developing. Please check back for updates.