US Justice Department hits Visa with antitrust lawsuit over its debit card business

Visa did not immediately respond to Business Insider’s request for comment on the lawsuit.

American consumers use debit cards to complete transactions estimated to be worth more than $4 trillion a year in which funds are transferred directly from their bank accounts to a merchant’s account.

The payment method is especially popular among younger shoppers and low-income consumers who may not have (or may not prefer to use) a credit card, prosecutors said.

With each electronic payment processed over its network, whether in-store or online, Visa collects a small fee.

In the complaint, filed in the Southern District of New York, prosecutors said Visa handles more than 60% of US debit transactions, earning the company more than $7 billion in fees a year.

Visa’s use of “generous monetary incentives and threatening punitive additional fees” enable the company to maintain an illegal monopoly in the debit card processing market, prosecutors said.

The lawsuit alleges that one way that Visa protects its dominant position is by entering into contracts with potential competitors that prevent them from becoming actual competitors — a move that is illegal under the Sherman Antitrust Act.

“Visa has expressed fear that its self-described ‘frenemies’ in big tech would launch technology that competes with Visa by enabling payment directly from consumers bank accounts,” Garland said, referring in particular to Square.

The suit follows a yearslong investigation that followed Visa’s attempted $5.3 billion acquisition of fintech company Plaid, which the Department of Justice sued to block in 2020. The two companies abandoned the deal the following year.

Visa acknowledged that the Department of Justice was planning to investigate its US debit card business in a 2021 filing with the SEC.

A key issue under scrutiny is the use of security tokens, which can be used to block the routing of payments to other networks. Rival MasterCard settled a similar matter with the Federal Trade Commission in 2022.

While the scrutiny of Visa pre-dates the Biden Administration, this latest action is one of several crackdowns on middlemen companies that the White House argues are raising costs for American consumers.

“Visa is a classic example of a middleman that takes advantage of its role as gatekeeper to stamp out competition,” Principal Deputy Associate Attorney General Benjamin Mizer said. “More and more we are seeing these kinds of intermediaries gain control in a broad range of industries from healthcare, to online advertising, to live music, to housing.”