The US Jus­tice De­part­ment (DOJ) has filed an an­ti-trust law­suit against Visa, al­leg­ing that the fi­nan­cial ser­vices be­he­moth us­es its size and dom­i­nance to sti­fle com­pe­ti­tion in the deb­it card mar­ket, cost­ing con­sumers and busi­ness­es bil­lions of dol­lars.

The com­plaint filed yes­ter­day says Visa pe­nalis­es mer­chants and banks who don’t use Visa’s own pay­ment pro­cess­ing tech­nol­o­gy to process deb­it trans­ac­tions, even though al­ter­na­tives ex­ist. Visa earns an in­cre­men­tal fee from every trans­ac­tion processed on its net­work.

Ac­cord­ing to the DOJ’s com­plaint, 60 per cent of deb­it trans­ac­tions in the Unit­ed States run on Visa’s deb­it net­work, al­low­ing it to charge over US$7 bil­lion in fees each year for pro­cess­ing those trans­ac­tions.

“We al­lege that Visa has un­law­ful­ly amassed the pow­er to ex­tract fees that far ex­ceed what it could charge in a com­pet­i­tive mar­ket,” said At­tor­ney Gen­er­al Mer­rick B Gar­land in a state­ment. “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.”

The Biden ad­min­is­tra­tion has ag­gres­sive­ly gone af­ter US com­pa­nies that it says act like mid­dle­men, such as Tick­et­mas­ter par­ent Live Na­tion and the re­al es­tate soft­ware com­pa­ny Re­al­Page, ac­cus­ing them of bur­den­ing Amer­i­cans with non­sen­si­cal fees and an­ti-com­pet­i­tive be­hav­ior. The ad­min­is­tra­tion has al­so brought charges of mo­nop­o­lis­tic be­hav­iour against tech­nol­o­gy gi­ants such as Ap­ple and Google.

Ac­cord­ing to the DOJ com­plaint, filed in the US Dis­trict Court for the South­ern Dis­trict of New York, Visa lever­ages the vast num­ber of trans­ac­tions on its net­work to im­pose vol­ume com­mit­ments on mer­chants and their banks, as well as on fi­nan­cial in­sti­tu­tions that is­sue deb­it cards. That makes it dif­fi­cult for mer­chants to use al­ter­na­tives, such as low­er-cost or small­er pay­ment proces­sors, in­stead of Visa’s pay­ment pro­cess­ing tech­nol­o­gy, with­out in­cur­ring what DOJ de­scribed as “dis­loy­al­ty penal­ties” from Visa.

The DOJ said Visa al­so sti­fled com­pe­ti­tion by pay­ing to en­ter in­to part­ner­ship agree­ments with po­ten­tial com­peti­tors.

In 2020, the DOJ sued to block the com­pa­ny’s US$5.3 bil­lion pur­chase of fi­nan­cial tech­nol­o­gy start­up Plaid, call­ing it a mo­nop­o­lis­tic takeover of a po­ten­tial com­peti­tor to Visa’s ubiq­ui­tous pay­ments net­work. That ac­qui­si­tion was even­tu­al­ly lat­er called off.

Visa pre­vi­ous­ly dis­closed the Jus­tice De­part­ment was in­ves­ti­gat­ing the com­pa­ny in 2021, say­ing in a reg­u­la­to­ry fil­ing it was co­op­er­at­ing with a DOJ in­ves­ti­ga­tion in­to its deb­it prac­tices.

Since the pan­dem­ic, more con­sumers glob­al­ly have been shop­ping on­line for goods and ser­vices, which has trans­lat­ed in­to more rev­enue for Visa in the form of fees. Even tra­di­tion­al­ly cash-heavy busi­ness­es like bars, bar­bers and cof­fee shops have start­ed ac­cept­ing cred­it or deb­it cards as a form of pay­ment, of­ten via smart­phones.

KBW an­a­lyst San­jay Sahrani said in a note to in­vestors that he es­ti­mates that US deb­it rev­enue is like­ly at most about ten per cent of Visa rev­enue.

“Some sub­set of that may be lost if there is a fi­nan­cial im­pact,” he said. Visa’s “US con­sumer pay­ments busi­ness is the slow­est grow­ing piece of the ag­gre­gate busi­ness, and to the ex­tent its con­tri­bu­tion is af­fect­ed, it is like­ly to have a very lim­it­ed im­pact on rev­enue growth.”

He added the law­suit could stretch out for years if it isn’t set­tled and goes to tri­al.

Visa processed US$3.325 tril­lion in trans­ac­tions on its net­work dur­ing the quar­ter end­ed June 30, up 7.4 per cent from a year ear­li­er. US pay­ments grew by 5.1 per cent, which is faster than US eco­nom­ic growth.

Visa, based in San Fran­cis­co, did not im­me­di­ate­ly have a com­ment. Visa shares fell US$13.53, or 4.7 per cent, to US$275.10 in af­ter­noon trad­ing. (AP)