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The Department of Justice has filed an antitrust lawsuit against Visa, alleging that the financial services firm has an illegal monopoly over debit network markets and has attempted to unlawfully crush competitors, including fintech companies like PayPal and Square. The lawsuit, which was first rumored by Bloomberg, follows a multiyear investigation of Visa, which the company disclosed in 2021.
"We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market," US Attorney General Merrick Garland said in a statement. "Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa's unlawful conduct affects not just the price of one thing โ but the price of nearly everything."
"Visa's unlawful conduct affects not just the price of one thing โ but the price of nearly everything"
Visa makes more than $7 billion a year in payment processing fees alone, and more than 60 percent of debit transactions in the United States run on Visa's network, the complaint claims. The government alleges that Visa's market dominance is partly due to the "web of exclusionary agreements" it imposes on businesses and banks. Visa has also attempted to "smother" competitors, including smaller debit networks and newer fintech companies, the complaint alleges. Visa executives allegedly feel particularly threatened by Apple, which the company has described as an "existential threat," the DOJ claims.
According to the complaint, Visa entered into paid agreements with potential competitors as part of an effort to fend off competition from newer entrants into the payment processing industry. These practices have allowed Visa to build what it has referred to as an "enormous moat" around its business, the complaint alleges.
For example, after Square launched Square Cash โ now called CashApp โ in 2013, Visa worried the new service would threaten Visa's payment volume by facilitating person-to-person transactions. Instead of allowing Square to compete with it, Visa "entered into a series of contracts that discourage Square from competing aggressively against Visa โ or as a Visa executive stated, 'We've got Square on a short leash,'" Garland said at a Tuesday press conference.
The government alleges that Visa's stance toward would-be competitors โ one in which, as one executive put it, "everyone is a friend and a partner. Nobody is a competitor" โ violates antitrust laws.
The DOJ's suit "ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving," Julie Rottenberg, Visa's general counsel, said in an emailed statement. "This lawsuit is meritless, and we will defend ourselves vigorously."
Regulators have had their eyes on Visa for a while. In 2020, the DOJ filed a civil antitrust lawsuit to stop Visa's $5.3 billion acquisition of Plaid, a fintech company, arguing that Visa was attempting to snuff out a "payments platform that would challenge Visa's monopoly." Acquiring Plaid, the DOJ's complaint claimed, was Visa's "insurance policy" to protect against a "threat to our important US debit business." Visa and Plaid scrapped their plans for a merger in 2021 as a result of the DOJ's lawsuit.
Payment processors are a ubiquitous part of Americans' lives, and they're increasingly powerful internet gatekeepers. In 2020, Visa and Mastercard stopped processing payments on Pornhub after reports of illegal content on the site. The following year, OnlyFans announced (before ultimately abandoning) a ban on "explicit sexual content," citing payment processors' reticence to work with the website because of its reputation as a porn platform. But the DOJ argues that Visa didn't come by this dominance fairly, and it's taking steps to stop it.
Comment: Coincidentally:
The hag has been at it for decades.