Credit: Sundry Photography.
The U.S. Department of Justice (DOJ) on Tuesday sued the worldwide digital payments behemoth Visa, alleging that the company has created illegal monopolies.
The government's case focuses on the technology Visa uses to process payments between banks and merchants during purchases. The DOJ accuses Visa of penalizing merchants and other customers when they use a Visa competitor to process payments. Prosecutors also argue that Visa further reduces competition and seizes a stranglehold on the marketplace by threatening to levy financial penalties against technology companies that decline to use their services.
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According to the 71-page suit, filed in the Southern District of New York, Visa handles more than 60 percent of debit card transactions in the United States and collects more than $7 billion in annual processing fees.
San Francisco–based Visa denied the charges, saying that its business practices are legal.
This is the latest in a string of antitrust cases that the DOJ, under Attorney General Merrick Garland, an appointee of President Joe Biden, and the Democrat-controlled Federal Trade Commission (FTC) have brought in recent months against high-profile companies. Antitrust attorneys say the Biden administration's antitrust enforcement is the most aggressive the nation has seen in 40 years.
The Visa suit is among several antitrust enforcement actions targeting corporate middlemen. The head of the DOJ's antitrust unit, Jonathan Kanter, has referred to corporate middlemen as tyrants and accused them of unnecessarily raising prices and eliminating competitors.
In May, the DOJ filed an antitrust suit against Live Nation Entertainment, the parent of Ticketmaster, accusing it of monopolizing its industry and hindering competition. The DOJ filed a similar suit in August against the property management software developer RealPage. And last week, the FTC brought an administrative complaint against three pharmacy benefit managers, alleging their "perverse" rebate programs inflated prices for insulin. Live Nation, RealPage, and the pharmacy benefit managers—Caremark, ESI, and OptumRx—have denied wrongdoing.
For years, government prosecutors have been investigating Visa's agreements with financial technology firms. This latest inquiry began in 2020, when the DOJ sued to halt Visa's $5.3 billion bid for the fledgling financial technology firm Plaid, accusing Visa of attempting to eliminate a new competitor. The two firms later called the deal off.
At the time, government officials alleged that Visa held a monopoly on the debit market and worked to reduce competition. Visa operates in more than 200 countries, among more than 14,000 financial institutions, and with an estimated 4.5 billion cards in circulation.
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