DOJ Sues Visa Over Alleged Monopoly on Debit Card Swipes

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Facts

  • The US Department of Justice (DOJ) has filed a lawsuit against Visa, the San Francisco-based payment network, alleging it violated antitrust law by illegally stifling competition in the debit card market.[1][2]
  • The lawsuit, filed in federal court in New York on Tuesday, claims Visa abused its dominant position to penalize merchants for using alternative payment networks and prevent potential rivals from entering the market.[3]
  • As Visa earns an incremental fee from transactions routed over its network, the DOJ says that its alleged anticompetitive and monopolistic behavior cost billions of dollars to consumers and businesses, including merchants and banks.[4][1]
  • In the fiscal third quarter, the credit card and payments giant processed $3.3T in transactions and reported a profit of $4.87B, while its US payments grew by 5.1% — faster than the country's economic growth.[5]
  • According to the DOJ, Visa processes more than 60% of debit transactions in the US, generating over $7B in debit card fees per year. Prosecutors allege that the firm imposes exclusivity agreements with card issuers and merchants to keep its hold over the market.[6][7]
  • Though Visa — valued at over $500B on the stock market — said it will defend itself in court, its shares fell by 5.5% to close at $272.94 on Tuesday. The company has reportedly set aside around $1.6B for potential settlements over its processing fees, also known as swipe fees or interchange fees.[8][7][1]

Sources: [1]Breitbart, [2]New York Times, [3]CNN, [4]BBC News, [5]Associated Press, [6]Forbes, [7]Reuters and [8]Guardian.

Narratives

  • Pro-establishment narrative, as provided by New York Times. Visa used illegal means to thwart competition and collected fees far exceeding what it could charge in a competitive market. Additionally, its unlawful conduct imposed hidden costs on American consumers and businesses. The court must rule Visa is a monopoly and prohibit its anticompetitive practices. This is necessary to restore fair pricing structures and reduce corporate middlemen's influence on competition.
  • Establishment-critical narrative, as provided by USA Today. Visa dominates the payments industry because, unlike its rivals, it has built significant consumer trust over the years, invests heavily in technology and security, and is popular with the masses. This lawsuit holds no ground as it ignores the fact that Visa is just one of many competitors in the ever-growing debit card space, and controlling 60% of the market doesn't constitute a monopoly.

Predictions