Key points:

  • The U.S. Department of Justice accuses Visa of abusing its dominant position in the U.S. debit card market.
  • The company faces a significant fine and other restrictive measures.
  • Visa shares have dropped significantly after the lawsuit was made public.

Following the filing of a lawsuit by the U.S. Department of Justice accusing Visa of anti-competitive practices, including suppressing competition, imposing unjustifiably high fees on merchants, and corruptly influencing potential competitors, Visa’s stock prices dropped during Tuesday’s trading.

Visa shares closed down by about 5.5% on Tuesday.

What happened?

The U.S. Department of Justice has filed a lawsuit against Visa, one of the world’s leading payment systems, accusing the company of monopolistic practices. According to the lawsuit, Visa, which controls more than 60% of debit transactions in the U.S. and generates $7 billion annually from fees, is abusing its dominant market position. Prosecutors claim that Visa systematically suppresses competition by signing exclusive agreements with card issuers, merchants, and potential competitors such as Apple, PayPal, and Square.

These agreements, according to the Department of Justice, are aimed at preventing the development of new payment systems and preserving Visa’s monopoly. Additionally, the lawsuit alleges that Visa imposes significant financial penalties on merchants who attempt to use alternative payment methods. This behavior, according to regulators, harms consumers and stifles innovation in the payments industry.

Visa has faced antitrust accusations for years

In response to the antitrust lawsuit filed by the Department of Justice, Visa reaffirmed its commitment to fair competition. The company’s general counsel emphasized that consumers choose Visa for the high level of security and reliability its payment system offers.

Meanwhile, representatives of the Department of Justice argue that Visa’s monopoly raises the cost of payment services for merchants and, ultimately, for consumers. This lawsuit is part of the Biden administration’s broader campaign to combat rising prices, a key issue in the recent presidential election.

“Visa’s illegal conduct affects not just the price of one thing but the price of almost everything,” said Attorney General Merrick Garland in a statement, noting that merchants and banks pass on payment network costs to consumers.

Since 2021, the U.S. Department of Justice has been conducting a comprehensive antitrust investigation into Visa’s activities, focusing on its practices in the debit card sector. This investigation began the same year the department blocked Visa’s acquisition of Plaid, a financial technology company. A similar investigation is also underway against Mastercard.

Visa and Mastercard have been facing antitrust lawsuits for years related to their dominant positions in the payment card market. In 2019, both companies reached a settlement with U.S. merchants, paying substantial compensation over accusations of anti-competitive practices. However, in June 2023, a federal court rejected a subsequent settlement that proposed lowering transaction fees and removing certain restrictive rules.