The United States Department of Justice (DOJ) has initiated legal action against Visa, accusing the company of maintaining an illegal monopoly over debit network markets.
The lawsuit alleges that Visa is using tactics to hinder competition from other firms, including fintech firms such as PayPal and Square, thereby passing high costs to the consumers. The case follows a years-long probe by the federal regulators, which Visa first revealed in 2021.
Visa dominates over 60% of the debit transactions in the US
Visa dominates more than 60% of debit transactions in the United States, a leading position that the DOJ accuses the company of having obtained through co-opting agreements with banks and companies. The DOJ has argued that Visa’s power lets it charge merchants overly high fees, which are then passed on to consumers.
US Attorney General Merrick Garland also noted that Visa’s conduct impacts not only the price of the particular goods but nearly everything since the merchants adjust the price to incorporate the extra charges for the transaction fees.
“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market. As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
US Attorney General Merrick
The DOJ also outlined how Visa tried to eliminate potential rivals. The lawsuit claims that Visa sought to exclude smaller debit networks as well as new entrants from the financial technology industry. Internal documents show that executives at Visa saw Apple as a major competitor. This points to the company’s efforts to curtail competition from other players in the payment processing industry.
Visa’s previous antitrust battles
This is not the first time Visa has been in trouble over allegations of antitrust violations. In 2020, the DOJ filed another lawsuit to block Visa’s $5.3 billion acquisition of Plaid, a fintech company that offers an innovative payment solution.
The DOJ claimed that Visa was trying to eliminate a rival that threatened its control of the debt market. After the DOJ stepped in, Visa and Plaid had to call off the acquisition by 2021.
Given that it is the world’s largest payment platform, Visa has a significant role in controlling the entry to online financial services. In 2020, both Visa and Mastercard pulled out their services from Pornhub over cases of illegal content on the site.
The following year, OnlyFans, another content-sharing platform, had plans to prohibit explicit content due to concerns that payment processors might withdraw their services. Such events show how powerful Visa and other large payment gateways are within the Internet economy.
Source: https://www.cryptopolitan.com/doj-files-antitrust-lawsuit-against-visa/