In a landmark lawsuit, the US Department of Justice has accused Visa, the world’s largest payment network, of maintaining an illegal monopoly over debit transactions. The DOJ alleges that Visa has used “exclusionary” agreements to stifle competition and innovation, resulting in billions of dollars in excess fees for consumers and merchants.
According to the lawsuit, Visa’s dominance has allowed it to charge exorbitant processing fees, with over 60% of debit transactions in the US running through its network. The company’s contracts with merchants and banks allegedly penalize those who route transactions to competitors, maintaining Visa’s stranglehold on the market.
The DOJ claims that Visa’s anticompetitive practices have not only harmed consumers but also stifled innovation in the payments industry. The company has allegedly paid hundreds of millions of dollars to competitors to prevent them from developing innovative technologies that could threaten its monopoly profits.
Visa has agreements with tech giants like Apple, PayPal, and Square, which the DOJ argues have turned these companies from potential rivals into partners, ultimately hurting the public. For instance, Visa’s deal with Apple prevents the tech giant from creating payment functionality that relies primarily on non-Visa payment processes.
The DOJ is seeking to prevent Visa from engaging in anticompetitive practices, including fee structures or service bundles that discourage new entrants. The lawsuit marks a significant move by regulators to crack down on monopolistic behavior in the financial industry.
In recent years, Visa and its rival Mastercard have grown to a combined market cap of over $1 trillion, as consumers increasingly rely on credit and debit cards for transactions. However, their dominance has attracted scrutiny from regulators and retailers, who argue that the companies’ fees are excessive and stifle competition.
The lawsuit comes as the Biden administration’s regulatory agencies, including the Federal Trade Commission and the Consumer Financial Protection Bureau, have taken aim at middlemen for drug prices and pushed back against so-called junk fees. The move is seen as a significant step towards promoting competition and innovation in the payments industry.
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