The U.S. Department of Justice filed a lawsuit on Tuesday (September 24th) local time, accusing the financial giant Visa of illegally monopolizing the debit card market and stifling competition among peers, leading to American consumers and businesses paying a large amount of additional fees.

"The service fees charged by Visa far exceed what it should charge in market competition. Merchants and banks pass on these costs to consumers, and this behavior affects the prices of almost all goods," said U.S. Attorney General Merrick Garland in a statement.

In the indictment submitted to the Federal Court in New York, the U.S. Department of Justice stated that more than 60% of debit card transactions in the United States are conducted through Visa's network, from which Visa can earn more than $7 billion in transaction fees.

In response to the charges, Visa said that these allegations are "baseless" and stated that they will defend themselves in court.

The indictment details Visa's "crimes"

This lawsuit is the latest in a series of antitrust lawsuits filed by the Biden administration. Earlier this year, the Department of Justice filed antitrust lawsuits against Ticketmaster and Apple, and Google lost a lawsuit filed by the Department of Justice last month.

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In the indictment against Visa, the Department of Justice stated that Visa achieved its monopoly by incentivizing potential competitors to become partners, providing "generous" rebates, and threatening punitive fees.

The Department of Justice also accused Visa of signing exclusive agreements with merchants and banks, punishing customers who try to conduct transactions through other company systems.

Before the lawsuit on Tuesday, the Department of Justice had filed a lawsuit against Visa in 2020, which blocked Visa's plan to acquire the financial technology company Plaid. The Department of Justice said at the time that the transaction would allow Visa to "maintain its monopoly position and strong competitiveness in debit cards."

In addition to Visa, another major player in the U.S. debit card field, Mastercard, has also been under regulatory scrutiny. Last year, Mastercard settled with the Federal Trade Commission over allegations that it suppressed competitive payment networks.Douglas Ross, a professor at the University of Washington School of Law, believes that introducing more competition into the U.S. debit card market may help reduce the cost of transaction fees. "If we have more competition in this area, the entire economy can save a substantial amount of money, but consumers may not directly notice the savings," Ross said. "This does not mean that consumers are not currently being harmed; a penny here, a penny there, millions of transactions add up to a significant amount of money."

Rebecca Haw Allensworth, a professor at Vanderbilt Law School in Nashville, Tennessee, stated that the outcome of this lawsuit will still depend on how Visa defends itself. "I think to really understand how winning such a lawsuit will affect consumers (and merchants) depends on how Visa explains itself," Allensworth said. "They might argue that their deals with merchants and competitors are beneficial to cardholders, and the case will largely depend on the persuasiveness of these arguments."

How Visa Explains Itself

Visa argues that in the growing debit card field, it is "just one of many competitors" and calls the lawsuit "meritless." 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."

Rottenberg stated that the lawsuit "ignores the fact that Visa is just one of many competitors in the growing debit card field, with new entrants also thriving." The Department of Justice's complaint filed on Tuesday did not ask for specific remedial measures from Visa. However, the regulatory agency is seeking an injunction to stop certain pricing and contract rules.

The Department of Justice's complaint alleges that Visa uses agreements with suppliers to force other payment processors "not to reach the scale needed to compete with Visa." Law enforcement agencies say that Visa requires merchants and their financial institutions to make "multiple commitments," forcing them to use Visa for most card transactions or face higher fees.White House National Economic Council Deputy Director John Donenberg did not comment on the lawsuit, but stated that the Biden administration "has made it clear that the U.S. economy will thrive only with genuine competition."

"The current administration has also taken action on credit card late fees and bank overdraft fees, and will continue to work hard to combat other unfair junk fees in everyday transactions," Donenberg said.