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The U.S. Department of Justice (DOJ) has filed an antitrust lawsuit against Visa, claiming the company is monopolizing debit card transactions and penalizing industry participants that want to use alternative debit networks.
Annually, Americans—including many who lack easy access to credit—spend more than $4 trillion on debit cards, according to the lawsuit filing. Visa owns and controls the debit network connecting consumers’ with the merchants’ banks, with more than 60% of debit transactions running on Visa’s debit network. Through its debit network, Visa charges over $7 billion in fees each year.
The lawsuit claims that Visa does not compete on a level playing field and uses its size, scale and centrality to penalize those who would switch to a different debit network. The DOJ asserts that Visa’s majority stake in the debit card network limits the growth of existing competitors and deters others from developing new and innovative alternatives.
According to the lawsuit, “As Visa’s internal documents make clear, Visa feared a future where newer, better or cheaper alternatives would force Visa to compete harder to win customers’ business or, worse, displace Visa with alternatives to its debit network. 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 lack of competition and the burden of large swipe fees in the debit network directly impacts independently owned businesses, and in response to the DOJ filing, the Small Business Rising coalition and the Institute for Local Self-Reliance released a statement, applauding the action to rein in Visa’s predatory monopoly tax on debit card transactions and protect small businesses across the country.
“For far too long, powerful financial middlemen, including Visa, have abused their market power to extract sky-high fees from merchants and consumers,” says Lauren Gellatly, senior advocacy and campaigns manager of the Institute for Local Self-Reliance and spokesperson for Small Business Rising. “This should not be the cost of doing business.”
Gellatly says the organization is encouraged by the DOJ’s action to rein in Visa’s monopoly over the debit card market and address anticompetitive behavior that allows Visa to extract 83% margins while small businesses and consumers struggle to make ends meet.
“Additionally, we call on Congress to immediately pass the bipartisan Credit Card Competition Act (CCCA) to inject much needed competition into the monopolistic credit card payments industry and lower exorbitant swipe fees. Swipe fees are a top pain point for the small businesses in our network,” Gellatly says. “While the lawsuit makes its way through the judicial process, Congress has the power to take action now. With a problem of this scale, we need all our branches of government working to heed the calls of the small business community for a fair and competitive market to do business.”
For more information on the CCCA and how credit card swipe fees impact independent retailers, check out these stories:
Visa, Mastercard Settlement Only Temporary Fix Say Small Business Groups
