DOJ sues Visa for monopolizing debit card market
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The U.S. Justice Department on Tuesday sued Visa for allegedly monopolizing the debit card market, which has led to higher prices.
Why it matters: Debit cards are America's most prevalent payment method, used more than twice as much as credit cards.
- This case could result in the market being opened up for more players, depending on what remedy DOJ seeks.
By the numbers: DOJ alleges that Visa controls over 60% of debit transactions, helping it earn over $7 billion in fees each year.
- Using that ubiquity as leverage, DOJ claims that Visa effectively forced merchants to send almost all of their payments through its network, by imposing "large disloyalty penalties" should they fail to hit certain volumes.
- That discouraged the use of cheaper and smaller competitors.
- Visa also allegedly kneecapped the ambitions of tech rivals like Apple, PayPal and Square, by entering into agreements for the secret purpose of slowing or stopping their development.
- For example, a Visa exec allegedly said: "We've got Square on a short leash and our deal structure was meant to protect against disintermediation."
What they're saying: "Visa's systematic efforts to limit competition for debit transactions have resulted in billions of dollars in additional fees imposed on American consumers and businesses," DOJ said in a press release.
- "This lawsuit is meritless, and we will defend ourselves vigorously," Visa General Counsel Julie Rottenberg said in a statement. Shares of the company were down 4% in mid-day trading.
What's next: The department is asking that Visa be blocked from using pricing and contracts that discourage the use of a competitor.
- It is also asking that Visa no longer be alowed to mention its rivals, explicitly or implicitly, in contracts.
Context: In 2021, DOJ sued to block Visa's $5.3 billion acquisition of Plaid, a startup whose technology threatened to eat into its all-important cards business.
- The deal fell apart two months later. But Visa didn't give up — it later bought Europe-based Tink and began its own foray into the market that could eventually cannibalize its own card business.
What we're watching: How this could impact Capital One's deal to acquire Visa competitor Discover. Capital One plans to move all of its debit business onto Discover's Pulse network, should the deal go though.
This story has been updated with comment from Visa.
Read the complaint:
