Visa Responds to DOJ Debit Card Complaint

Following through on reports circulated Monday (Sept. 23), the U.S. Department of Justice filed an antitrust lawsuit against Visa, accusing it of stifling competition in the debit card market and suppressing alternatives.

The Tuesday (Sept. 24) complaint alleged that Visa employed exclusionary contracts and anticompetitive practices to maintain its market share dominance, resulting in higher fees for merchants and consumers.

In the complaint, filed in the U.S. District Court for the Southern District of New York, the DOJ alleged that “Visa systematically dominates debit transactions in the United States through exclusionary and anticompetitive conduct.”

Visa has monopoly power in two relevant markets: general-purpose debit network services and general-purpose card-not-present debit network services in the U.S., according to the complaint. The company processes over 60% of all debit transactions and 65% of all card-not-present debit transactions in the U.S., with market shares higher than its nearest competitor, Mastercard.

In a statement provided to PYMNTS, Visa General Counsel Julie Rottenberg said the lawsuit is “meritless.”

“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” Rottenberg said Tuesday. “Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.

“When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide. We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable. This lawsuit is meritless, and we will defend ourselves vigorously.”

The lawsuit alleged that Visa maintains market share through exclusionary and anticompetitive practices. It enters contracts with merchants and acquirers that effectively require them to route all or nearly all eligible debit transactions through Visa’s network. It also uses “cliff pricing” structures that impose penalties on merchants and acquirers if they fail to meet volume commitments to Visa.

The complaint also alleged that Visa discouraged issuers from enabling competing networks on Visa-branded debit cards and paid potential competitors, such as Apple and PayPal, not to develop alternative debit products that could threaten Visa’s dominance.

The complaint cited internal Visa documents that revealed the company’s strategy to maintain its monopoly. For example, one Visa executive was quoted as saying, “[E]veryone is a friend and a partner. Nobody is a competitor.” This approach allowed Visa to co-opt potential competitors and stifle innovation in the payments industry.

“Without intervention, Visa will continue to insulate itself from competition and subvert the competitive process in this essential industry that fuels U.S. commerce, all the while enriching itself at the expense of the American people who ultimately bear the brunt of Visa’s unlawful monopoly and the lack of competition its conduct has wrought,” the complaint stated.

The lawsuit also highlighted Visa’s response to regulatory changes, such as the Durbin Amendment, intended to increase competition in the debit market. The DOJ said Visa successfully protected its monopoly from competition despite these regulatory efforts.

Visa’s actions harmed competition, merchants and, ultimately, consumers, the DOJ argued.

“Visa profits from its monopoly by collecting a higher fraction of each debit transaction than it would if it faced competition,” the complaint stated.

The lawsuit seeks to prevent Visa from continuing its alleged anticompetitive practices and to restore competitive conditions in the affected markets. Specifically, the DOJ asked the court to prohibit Visa from:

1. Imposing contractual limitations on the use of competing payment methods.
2. Using pricing structures that discourage competition from rivals.
3. Limiting the number of back-of-card networks on Visa-branded cards.
4. Agreeing not to compete with potential rivals.

The complaint emphasized the importance of debit transactions in the U.S. economy, noting that “Americans depend on debit cards to buy more than $4 trillion worth of groceries, clothing and other goods and services” each year.