The U.S. Department of Justice’s pending antitrust lawsuit against Visa follows years of investigation into the company’s business practices. The charges, which may soon be filed, allege that Visa engaged in anti-competitive agreements and monopolistic conduct, primarily within its debit card business. Visa has been a target of the U.S. Department of Justice since at least 2021 when it disclosed in a regulatory filing that the antitrust unit had requested information on potential violations.
Visa reportedly controls about 70% of the America debit card market. In a statement to Reuters, brokerage TD Cowen noted: “The concern appears to be that Visa is using volume-based discounts to discourage merchants from diverting debit volume to other networks.”
The U.S. Department of Justice initially launched its debit card probe after Visa’s attempted takeover of Plaid in 2020. At the time, the U.S. Department of Justice said that Plaid was planning to launch an online debit product that would compete with Visa at a lower cost to merchants. The acquisition would have presumably derailed those plans.
“Plaid, a financial technology firm with access to important financial data from over 11,000 America banks, is a threat to this monopoly: it has been developing an innovative new solution that would be a substitute for Visa’s online debit services,” the U.S. Department of Justice announced at the time. “By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”
Visa dropped that acquisition in 2021, but it wasn’t enough to ease the U.S. Department of Justice’s scrutiny. Since them Visa has acquired several other fintechs, including Tink, an open banking platform and Pismo, a Brazilian cloud-native issuer processing and core banking platform.
Other Issues Arise
That’s not the U.S. Department of Justice’s only complaint against Visa. It is also investigating whether Visa used security tokens to prevent other debit cards from competing in online payments. The company reportedly charged retailers higher fees if they didn’t use Visa’s own proprietary tokenization technology. The Dodd-Frank Act requires banks to allow vendors a choice of at least two unaffiliated payment networks.
As is often the case with these charges, Mastercard recently faced a similar situation. Last year, the Federal Trade Commission successfully charged Mastercard with intentionally blocking vendors from routing transactions through third-party payment networks, such as virtual wallets.
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
