Justice Department sues Visa, alleging monopoly in debit card market

The U.S. Department of Justice has filed a civil antitrust lawsuit against Visa (NYSE:V) on Tuesday, accusing the payments network behemoth of maintaining an illegal monopoly in the debit card market, stifling competition and costing consumers and businesses billions of dollars.

Shares of San Francisco, California-based Visa (V) extended their intraday loss on the news, sliding 5.4% in midafternoon trading. Bloomberg had reported earlier Tuesday on the legal action, sending the stock lower at the opening bell.

The DOJ’s complaint, filed in U.S. District Court for the Southern District of New York, alleged that Visa (V) penalizes merchants and banks that opt for alternative payment processing technologies for debit transactions, despite the availability of other options. Visa, in turn, earns extra fees on each transaction processed through its network.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick B. Garland said in a statement.

“Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service,” he added. “As a result, Visa’s unlawful conduct affects not just the price of one thing – but the price of nearly everything.”

The complaint found that over 60% of debit transactions in the U.S. run on Visa’s (V) network, enabling it to charge more than $7B in fees each year for processing such transactions.

“Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the complaint said. “These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.”

This isn’t the first time the Justice Department hit Visa (V) with an antitrust suit. In 2020, the DOJ filed a suit to block the company’s $5.3B purchase of fintech startup Plaid. That acquisition eventually fell through.

A year later, the DOJ reportedly scrutinized Visa’s (V) relationship with large fintech firms, including PayPal Holdings (PYPL), Block (SQ) and Stripe (STRIP), as part of an antitrust investigation.