US sues Visa for monopoly on debit-card use

WASHINGTON

The U.S. Department of Justice filed an antitrust lawsuit against Visa on Sept. 24, alleging the company illegally maintains a monopoly over the use of debit cards in the United States.

According to the lawsuit, filed in a federal court in New York, Visa's practices have resulted in billions of dollars in additional fees for American consumers and businesses while slowing innovation in the debit payments ecosystem.

The lawsuit comes after a wide-ranging three-year probe by the U.S. antitrust enforcers into Visa's business practices.

The case focuses on Visa's debit card business that allows users to only spend money from their checking account, unlike a credit card that enables purchases on borrowed funds that must be repaid later.

"While Visa is the first name many debit card users see when they take out their card to make a purchase, they do not see the role that Visa plays behind the scenes," Attorney General Merrick Garland told reporters.

"There, it controls a complex network of merchants, financial institutions and consumers" and behaves as a "monopolist" that "is charging a hidden toll on trillions of transactions," he added.

Visa, according to the lawsuit, charges roughly $8 billion in network fees on U.S. debit volume annually. Globally, Visa processes $12.3 trillion in total payment volume.

"The burden of Visa's anti competitive conduct falls disproportionately on Americans who are less well off and who feel the impact of high prices most painfully," said Benjamin C. Mizer, the Principal Deputy Associate Attorney General.

To maintain its dominance, the Justice Department claims Visa imposes exclusionary agreements on merchants and banks, penalizing customers who route transactions through different networks or alternative payment systems.

It also claims that Visa sought to neutralize potential threats from technology companies and fintech startups by entering into partnership agreements rather than allowing them to compete head-on.