Justice Department Accuses Visa of Stifling Competition in the Debit Card Business

The Justice Department sued Visa on Tuesday, accusing the company of illegally monopolizing the debit card market and therefore driving up prices for businesses and consumers.

The lawsuit, filed in the Southern District of New York, says Visa handles more than 60% of debit card transactions in the U.S. and collects more than $7 billion in annual processing fees. The company allegedly used its market power to stifle competition and keep fees artificially high, according to the suit.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” 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 — but the price of nearly everything.”

Since late 2011, banks that issue debit cards have been required to allow multiple payment networks to handle the transactions. But Visa — and to a lesser extent Mastercard — continues to dominate the market. The Justice Department says Visa prices its services in a way that makes it prohibitively expensive for merchants to use rival networks and also pays would-be competitors to stay out of the market.

Retailers, who have long complained about excessive costs for processing both debit and credit card payments, welcomed the DOJ action.

“You can mandate competition,” says Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. “But if what’s happening behind the point-of-sale is inhibiting that, then you don’t actually have competition.”

“There’s no question that it affects consumers as well,” Martz added. “You’re paying for these cards in the form of higher prices.”