The US Department of Justice has filed a lawsuit against Visa (NYSE: V) for the violation of antitrust law by means of competitor suppression, high-fee threat on vendors, and discharging rivals via payoffs.
Visa, arguably the largest player in the payment networks, has processed over 60% of all debit card transactions in the US, accumulating over USD 7 billion in fees each year. The company has been maintaining its monopolistic power through contractual agreement with card commissioners, vendors and competitors, alleged the Justice Department prosecutor.
The Biden administration’s attempt at lowering the consumer prices includes the addressing of swipe fees, also known as interchange fees, which is also a major issue in the coming election.
The prosecutor noted that Visa has entered into agreements with the would-be fintech competitors to prevent them from releasing any products in competition against Visa, such competitors include Apple (Nasdaq: AAPL), PayPal (Nasdaq: PYPL), and Square (NYSE: SQ).
Under the lawsuit, Visa was also accused of imposing “staggering financial penalties” on any vendors who refused to route their transactions through its network. Prosecutors are seeking an order to prohibit Visa from pricings that discourage its competitors, as well as buying off the competition.
As a consequence, Visa stocks took a nosedive and closed down at -5.49% or -15.85 USD. Concurrently, PayPal declined to comment while Apple and Square remained unresponsive to the media.
Merrick Garland, the 86th US Attorney General, stated that Visa’s practice has affected the price of almost everything as consumers bear the burden of payment network costs passed on by vendors and banks.
Nonetheless, the Antitrust Division has carried out its investigation of Visa and Mastercard (NYSE: MA) since 2021. Both entities have been trialed for their card-dominance for almost twenty years. Visa and Mastercard previously paid USD 5.6 billion in settlement to US vendors, pursuant to damages claims in a class action lawsuit against their practices.
Visa’s Julie Rottenberg claimed that competition is rampant and the lawsuit filed by the Justice Department was baseless, promising to challenge to the very end. “When businesses and consumers choose Visa, it is because of our secure and reliable network, world-class fraud protection, and the value we provide,” said Rottenberg.
For the time being, Visa has reserved around USD 1.6 billion for potential settlements in light of this development.
