The U.S. Department of Justice (DOJ) is preparing a landmark antitrust lawsuit against Visa, accusing the company of monopolizing the debit card market through anticompetitive practices.
At a Glance
- The DOJ plans to sue Visa for alleged monopoly practices in the debit card market.
- The lawsuit follows a long investigation into Visa’s possible hindering of competition and raising of merchant fees.
- The DOJ’s antitrust division is expected to file the lawsuit in federal court imminently.
- The lawsuit accuses Visa of preventing competitors from challenging its dominance.
- Visa and the DOJ have not commented on the matter so far.
DOJ to Sue Visa for Debit Card Market Monopoly
The Department of Justice (DOJ) is set to file an antitrust lawsuit against Visa, accusing it of monopolizing the U.S. debit card market through anticompetitive practices. This move is part of a broader initiative by the Biden administration aimed at promoting competition and cracking down on corporate monopolies.
The lawsuit follows a three-year investigation initiated in 2021, focusing on Visa’s debit card practices. Visa is accused of various anticompetitive behaviors, including exclusive agreements that hinder rival networks and prevent technology companies from entering the market. In 2023, the DOJ issued an investigative demand to Visa for documents and information regarding these practices.
DOJ poised to sue Visa for antitrust violations https://t.co/kSFkhiJLkw
— POLITICO (@politico) September 24, 2024
Investigation into Anticompetitive Practices
The DOJ began the investigation after Visa’s failed attempt to acquire fintech company Plaid Inc. in 2021 for $5.3 billion. The proposed acquisition was blocked over anti-competitive concerns. Visa has maintained that its practices comply with applicable laws. However, the DOJ alleges that Visa’s practices have hindered competition and increased costs for merchants.
The DOJ’s case may focus on Visa’s use of volume-based discounts, which allegedly discourage merchants from using alternative networks, hindering competition. Additionally, Visa’s payment processing technology, including its “tokenization” technology, is under scrutiny for possibly penalizing customers who switch to rival processors. Visa faces significant challenges, as the DOJ’s actions reflect a broader effort to scrutinize major corporate practices and promote a fairer market environment.
Potential Impact on Visa
Visa shares dropped 2% premarket following reports of the impending lawsuit, reflecting investor concern over potential regulatory and financial penalties. Analysts suggest that the case could result in both financial penalties and conduct restrictions, although it is difficult to gauge the full impact until more details of the complaint are available. Citi analysts noted that the ongoing investigation has caused uncertainty and have shifted their network preference to MasterCard due to this development.
The broader initiative by the Biden administration to crack down on corporate middlemen and promote competition further heightens the stakes for Visa. The DOJ has already sued several other major companies, including Google, Apple, Amazon, and Meta, demonstrating its commitment to tackling anticompetitive practices across various industries. The outcome of this lawsuit against Visa could reshape the financial transaction landscape in the United States and set a precedent for antitrust enforcement.
