Earlier today, the Department of Justice filed a lawsuit against Visa, alleging violations of Sections 1 and 2 of the Sherman Antitrust Act. Attorney General Merrick B. Garland announced the lawsuit, accusing Visa of monopolizing the debit transaction markets and inflicting significant harm on American consumers and businesses.
"Visa operates the largest debit network in the United States," Garland stated. He explained that a debit network facilitates electronic fund transfers from a consumer’s bank account to a merchant’s bank account during retail transactions. Millions of Americans use debit transactions, especially lower-income consumers without credit cards.
In the U.S., over $4 trillion in debit card transactions occur annually, with more than 60% routed through Visa's network. According to Visa's calculations, it faces little competition for 75-80% of debit transactions initiated with its branded cards.
"We allege that, to maintain this monopoly power, Visa deploys a web of unlawful, anticompetitive agreements to penalize merchants and banks for using competing payment networks," Garland said. He added that Visa coerces potential market entrants into agreements not to compete by threatening high fees or promising large payoffs.
Garland noted that this conduct allows Visa to extract fees exceeding what could be charged in a competitive market. These costs are passed on to consumers through higher prices or reduced quality or service.
"When a bank issues a debit card, it chooses which electronic payment networks will process the card’s transactions," Garland explained. However, he alleged that Visa has virtually eliminated this choice by structuring contracts to disincentivize merchants and banks from using competitor networks.
"Visa knows it is a 'must carry' network for banks and merchants alike," Garland said. This leverage enables Visa to impose "volume requirements" on banks and merchants, forcing them to direct many transactions through its network or face higher fees.
As a result, merchants cannot choose the lowest-priced or best offering network for each transaction due to the threat of exorbitant fees if they do not meet Visa's volume requirements. Today, Visa collects over $7 billion annually in network fees on U.S. debit transactions, partly due to its alleged illegal conduct.
The complaint also alleges that Visa uses its monopoly power to discourage potential rivals like technology companies from entering the market. For instance, contracts with Square (operator of CashApp) allegedly prevent aggressive competition against Visa.
Garland expressed gratitude towards the Department’s Antitrust Division for their work on this case over three years. "Today’s lawsuit against Visa is only the latest example of the Justice Department’s work to enforce antitrust laws and hold accountable companies that undermine competition and harm the American people."
He concluded by highlighting that while some antitrust enforcement actions have visible impacts like higher prices for air travel or smartphones, "the harmful effects of Visa’s alleged anticompetitive conduct are less visible but no less harmful."
Principal Deputy Associate Attorney General Ben Mizer was then invited to speak further on the matter.