The U.S. Department of Justice (DOJ) is preparing to file a lawsuit against Visa, the world's largest payment network operator, accusing the company of monopolistic practices in the U.S. debit card market. The lawsuit, which could be filed as early as this week, claims that Visa has engaged in anti-competitive behaviors that have stifled competition and maintained its dominant position in the multibillion-dollar debit card industry.
According to sources cited by Bloomberg News, the DOJ's antitrust division is targeting Visa for allegedly taking measures to prevent rivals from challenging its dominance. These measures reportedly include exclusive agreements with merchants, penalties imposed on fintech companies, and coercion to limit competitors' access to the market. The DOJ has been investigating Visa's business practices since 2021, seeking documents and information about its dealings within the debit card market.
The lawsuit represents a significant escalation in the DOJ's scrutiny of Visa's operations, as regulators continue to examine the payment giant's influence over the industry. Visa has long been a dominant force in the U.S. payments landscape, and the DOJ appears ready to challenge the company's position in an attempt to encourage greater competition.
The DOJ's investigation into Visa stems from concerns that the company has been unfairly using its market power to obstruct competition, leading to higher fees for merchants and less choice for consumers. This follows a similar lawsuit filed earlier this year against Visa by Discover Financial Services' Pulse Network, which accused Visa of obstructing competition in the debit card network services market. That case, which was settled in Texas, alleged that Visa's practices led to increased fees for merchants, further fueling concerns about the company's market behavior.
Visa has consistently denied engaging in anti-competitive practices, stating that its operations comply with applicable laws. The company previously disclosed that it was under investigation by the DOJ's antitrust division, and in 2021, Visa said it was confident that its practices were lawful. However, this new lawsuit suggests that the DOJ has found sufficient evidence to press forward with its claims.
The DOJ's case against Visa could reshape the U.S. debit card market if it is successful. Visa's rival Mastercard has faced similar antitrust investigations related to its debit card program and competition with other payment networks. The DOJ's lawsuit, however, could push the payment industry to open up to more competitors, especially fintech firms that have sought to disrupt traditional payment systems but often face hurdles imposed by dominant players like Visa.
Visa's market power in the debit card space is significant, with the company processing billions of transactions annually. The DOJ's lawsuit will likely focus on Visa's business practices, particularly the alleged exclusive agreements and penalties that have restricted the ability of merchants and fintech companies to choose alternative networks for processing payments.
In a similar case, the DOJ sued Visa in 2020 to block its acquisition of fintech startup Plaid. The DOJ argued that the merger would have allowed Visa to eliminate a competitive threat in the rapidly growing financial technology sector. That lawsuit ultimately led Visa to abandon the $5.3 billion acquisition of Plaid. The upcoming lawsuit could further test Visa's market influence and the DOJ's ability to curb monopolistic behavior in the payment sector.
In response to the looming lawsuit, Visa's shares dropped by around 3.5% in early trading, signaling investor concern over the potential impact of the legal challenge. Visa has not yet commented on the specifics of the DOJ's allegations, but the company is expected to mount a robust defense against the charges.
The lawsuit against Visa also comes amid broader efforts by the Biden administration to tackle monopolistic practices across various sectors. The DOJ has ramped up its antitrust enforcement under Attorney General Merrick Garland, particularly targeting technology and financial services companies that hold significant market power. This focus aligns with the administration's goal of promoting competition and reducing consumer costs.
