The Justice Department has filed a lawsuit against Visa, alleging monopolistic practices in the debit card market. The announcement was made by Principal Deputy Assistant Attorney General Doha Mekki, who detailed the department's concerns about Visa's dominance in processing debit transactions.
"This afternoon, the Justice Department filed a monopolization lawsuit about a financial network we do not see but cannot escape," Mekki stated. She highlighted that Visa processes 157 billion debit transactions annually and emphasized that this infrastructure has been around since the 1970s.
Mekki pointed out that Visa's slogan, "everywhere you want to be," reflects its pervasive presence. She argued that this dominance is not due to innovation or consumer choice but rather through exclusion and penalization. "Visa’s conduct is unlawful, and today, we filed suit to stop it," she said.
According to Mekki, more than 60% of debit transactions in the U.S. run on Visa’s network, generating over $7 billion in fees each year. These fees come under various names such as domestic service fee, data processing fee, and network acquirer fee.
"Regardless of what they are or who pays them, these fees add up to billions in hidden costs and tolls that must be borne by businesses, working families and the U.S. economy more broadly," she noted.
Mekki explained that Visa's dominance stems from its extensive use by both consumers' banks and merchants. She referred to this as an "enormous moat" protecting Visa's monopoly.
In the early 2010s, legislative changes and technological innovations posed competitive threats to Visa’s monopoly. Congress required banks issuing debit cards to include at least two routing options on their cards to foster competition. Simultaneously, new technologies allowed merchants and consumers to connect directly with fewer intermediaries like Visa.
In response, Visa developed strategies to maintain its monopoly power by extracting agreements from major merchants and banks. These agreements forced merchants into choosing between using Visa or facing high fees on every transaction.
Mekki also mentioned potential fintech competitors like Apple, PayPal, and Square as threats that Visa sought to neutralize by turning them into partners under conditions that prevented them from developing competing products. "As Visa’s then-chief financial officer (CFO) explained in 2023, Visa makes 'it worth their while to partner with us,'" she added.
The Justice Department aims to challenge these practices through this lawsuit as part of its long-standing effort against anticompetitive behavior in financial markets. Mekki concluded her remarks by acknowledging the efforts of attorneys and staff involved in bringing forth this case: "I am proud every day to be their colleague but especially today."