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Visa antitrust lawsuit explained: What happens next

By Sean Michael Kerner

Visa is one of the world's largest and most recognized payment card services platforms. The company provides credit card and other financial services to consumers around the world.

Visa processes more than 60% of debit transactions in the U.S. and charges more than $7 billion in fees to process them annually.

The dominance of Visa -- particularly when it comes to digital payments -- is potentially problematic in the view of the U.S. government. The U.S. Department of Justice (DOJ) filed a major antitrust lawsuit against Visa on Sept. 24, 2024. The lawsuit alleges Visa has unlawfully maintained a monopoly over debit card services, limiting competition and innovation in the payments industry, and ultimately harming American consumers and businesses.

The DOJ's complaint accuses Visa of employing various anticompetitive tactics to preserve its dominant position in the debit card market, which processes billions of transactions annually. The lawsuit aims to restore competition in the debit market and alleviate the financial burden on American consumers and businesses.

The Visa antitrust lawsuit highlights the critical role payment networks play in the modern financial system. These networks -- which include Visa, Mastercard and smaller players such as American Express and Discover -- serve as the backbone of electronic payments, facilitating transactions between consumers, merchants and financial institutions.

Details about the antitrust lawsuit

The lawsuit makes many allegations against Visa's conduct. Specifically, it alleges Visa has violated the Sherman Act by monopolizing the market for online debit card transactions. The Sherman Act of 1890 is one of the core foundational legal elements of U.S. antitrust law.

According to the complaint, Visa controls more than 60% of the online debit transactions market, enabling it to charge higher fees than would be possible in a competitive environment.

Key allegations in the lawsuit include the following:

• Illegal monopoly operations. Visa is accused of violating Sections 1 and 2 of the Sherman Act by illegally maintaining a monopoly over debit network markets. This forms the foundation of the lawsuit.
• Exclusionary practices. Visa allegedly uses its market dominance to impose exclusionary agreements on merchants and banks, penalizing those that use alternative networks or payment systems.
• Co-opting competition. The company is said to induce potential competitors to become partners rather than rivals, using monetary incentives or threats of punitive fees. This strategy allegedly prevents new entrants from challenging Visa's market position.

"Anticompetitive conduct by corporations like Visa leaves the American people and our entire economy worse off," Principal Deputy Associate Attorney General Benjamin Mizer said in the DOJ press release.

Visa has refuted the DOJ's claims.

How does this monopoly affect customers?

The alleged monopoly maintained by Visa has consequences for both consumers and businesses. The alleged Visa monopoly affects consumers in the following ways:

• Higher prices. Visa is accused of using its monopoly power to charge fees that significantly exceed competitive market rates. The DOJ's legal suit argues Visa's high profit margins -- especially in the U.S. debit market -- indicate its fees are higher than they should be. Visa charges more than $7 billion in fees annually for processing debit transactions in the U.S., with the company reporting high operating margins over 80%. These inflated costs are then passed on to consumers and businesses.
• Limited choice. By restricting competition and preventing the growth of alternative payment systems, consumers have fewer options for debit transactions. This lack of choice can lead to a less diverse payment ecosystem.
• Slowed innovation. The lawsuit alleges Visa's actions have slowed innovation in the debit payments ecosystem, preventing the development and adoption of new and potentially more efficient payment technologies.

"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 B. Garland said in the same DOJ press release. "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."

Technology companies edged out of market

The DOJ's lawsuit highlights how Visa's alleged monopolistic practices have prevented potential competitors -- particularly fintech companies -- from entering or expanding in the debit card market. One notable example mentioned in the complaint is Visa's attempted acquisition of Plaid in 2020, which was ultimately abandoned after DOJ intervention.

Other technology companies that have faced challenges in entering the payments market according to the DOJ lawsuit include the following:

• Apple. Visa viewed Apple Pay as an "existential threat" to its debit business. Visa entered into agreements with Apple that prevented Apple from developing payment functionality that could compete with Visa.
• PayPal. Visa used threats of high fees and other penalties to force PayPal to enter into agreements that limited its ability to compete with Visa.
• Square. Visa used threats of termination and high fees to prevent Square from developing its Cash App as a potential competitor to Visa's debit network.

Explaining the recent antitrust crackdown on technology companies

The Visa lawsuit is part of a broader trend of increased antitrust scrutiny of technology companies by U.S. regulators. President Joe Biden's administration in particular has made antitrust enforcement a priority.

The following are some notable recent cases:

Google

Google has faced multiple antitrust cases. In August 2024, Google lost a search monopoly case brought by the DOJ. Google now faces another antitrust case over its use of advertising technology that has allegedly been an illegal monopoly.

Apple

Apple has faced antitrust investigations related to its App Store practices and mobile ecosystem. In March 2024, the DOJ filed a lawsuit against Apple, accusing it of monopolizing the smartphone market.

Amazon

The e-commerce giant has been under scrutiny for its treatment of third-party sellers and its dual role as a platform and competitor. The U.S. Federal Trade Commission (FTC), along with 17 states, filed a lawsuit against Amazon in 2023 that claimed the company was maintaining its monopoly by exerting pressure on sellers within its marketplace and prioritizing its own service. On Sept. 30, 2024, a U.S. federal court in Seattle dismissed parts of the lawsuit.

Meta

The FTC has pursued antitrust action against Meta for its acquisitions of Instagram and WhatsApp, alleging these purchases were part of a strategy to neutralize potential competitors.

As to why there is an increased focus on antitrust enforcement in recent years, there are several potential reasons:

• Concentration of power. There's growing concern about the market power held by a small number of tech giants.
• Network effect. The nature of digital platforms often leads to winner-take-all markets where a single vendor dominates, making it difficult for new competitors to compete.
• Consumer protection. There's increasing awareness of how tech companies' practices can affect consumer privacy, choice and prices.
• Innovation concerns. Regulators worry that the dominance of big tech companies could hinder innovation by smaller competitors or startups.

Sean Michael Kerner is an IT consultant, technology enthusiast and tinkerer. He has pulled Token Ring, configured NetWare and been known to compile his own Linux kernel. He consults with industry and media organizations on technology issues.