 "What's wrong with Visa? US justice department files antitrust case")
An antitrust lawsuit has been filed by the US Department of Justice against Visa accusing America’s biggest payments network of unfairly monopolising the debit card market and stifling potential competition by using its dominant position.
The lawsuit against Visa marks the latest competition case from the Biden administration, which has adopted a more assertive stance on monopoly issues — known as antitrust — in the US compared to previous administrations.
Details on US Department of Justice’s complaint against Visa
The antitrust lawsuit against Visa has been filed in Manhattan federal court on Tuesday.
The Department of Justice alleged that Visa “insulates itself from competition” in the debit card market and to do so, it has been imposing a “web of exclusionary agreements” on merchants and banks that penalise customers, companies and businesses that wanted to use alternative payment networks.
The complaint said that Visa had allegedly used a “web of contracts” that required businesses to commit to routing a certain volume of transactions to the Visa network or face higher fees - effectively creating illegal “exclusive deals”.
The Justice Department further alleged that Visa also entered into agreements with technology companies including PayPal Holdings Inc., Apple Inc. and Block Inc., which were developing products that would have challenged its stranglehold over payment networks, paying them hundreds of millions of dollars to stay out of the market.
“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.
Impact Shorts
More Shorts“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 – but the price of nearly everything,” Garland further said.
According to a senior Justice Department official, Visa’s alleged anti-competitive conduct began around 2012, as competing companies entered the payments space following reforms that required card issuers to accommodate unaffiliated networks.
As per the civil complaint, Visa processes more than 60 per cent of debit transactions in the US, bringing in $7 billion in fees annually. It further said that as of 2022, its debit card business was bigger by revenue than its credit card unit and highly profitable.
‘Visa induces competitors to become partners’
The Justice Department also alleged that “Visa induces would-be competitors to become partners instead of entering the market as competitors by offering generous monetary incentives and threatening punitive additional fees.”
Why Visa was doing this
The complaint by the US Justice Department alleges that “Visa coopted the competition because it feared losing share, revenues, or being displaced by another debit network altogether.”
Visa pays a heavy price
Following the anti-trust lawsuit, Visa Inc’s stock price fell 5.5 per cent on Tuesday to close at $272.78. This was the steepest daily decline this year.
Visa calls lawsuit ‘meritless’
Soon after this, Visa issued a statement calling the lawsuit against it “meritless”. It further said that there was “an ever-expanding universe of companies offering new ways to pay for goods and services” and that the Department of Justice case “ignores the reality that Visa is just one of many competitors in a debit space that is growing with entrants who are thriving,"
“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” Julie Rottenberg, Visa’s general counsel, said in a statement
“When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide,” she further said.
With inputs from agencies
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