Visa’s extensive financial system handled over $3.3 trillion worth of transactions in its most recent quarter.
Visa, one the largest payment networks in the world, is being sued by the US Department of Justice for antitrust violations, which will impact almost the price of everything.
According to the complaint filed in the US federal court for the southern district of New York, the firm has suppressed competition by threatening merchants with excessive fees and paying off possible competitors.
Visa makes it impossible for retailers to switch from their payment processing technology to a different alternative, like lower cost or smaller payment processors, without facing what the prosecution calls disloyalty penalties.
Visa’s extensive financial system handled over $3.3 trillion worth of transactions in its most recent quarter.
The company handles more than 60% of the debit transactions in the USA, and it brings in $7 billion every year in fees from transactions routed through its network, according to the Justice Department. Prosecutors claim that the business is trying to maintain its supremacy by entering into agreements with card providers, merchants, and competitors.
The Biden administration is trying to address these fees, also called swipe fees or interchange fees. It is part of its measures to fight against rising consumer prices, which turned out to be a significant issue during the presidential election campaign.
Visa has illegally acquired the authority to extract money, which is more than a competitor might charge in a competitive market. Banks and retailers usually transfer those expenses onto customers by increasing prices or lowering the standard of goods or services.
According to the Justice Department, these agreements have been structured so that significant disloyalty fines may be applied to every Visa transaction unless the entire or nearly entire debit volume surpasses the payment rails of Visa.
As a result, the price of not just one thing but the price of almost everything is affected by the illegal actions of Visa.
Visa defended itself and called the complaints baseless. In the market, there is an ever-expanding number of companies offering new methods to pay for goods or services. The lawsuit fails to understand that Visa is only a part of several rivals, but numerous new entrants are successfully entering the debit market.
The San Francisco-based company is valued at more than $500 billion in the stock market. The price of the shares decreased by about 5% after the announcement of the lawsuit.
Visa was assumed to start its anticompetitive behavior in 2012 when its competitor businesses began to enter the payments market due to the regulations that require card issuers to support unaffiliated networks.
In the complaint, a Manhattan judge was requested to set conditions that would result in a recovery of competition in the market that manages debit payments for online and brick-and-mortar merchants.
In 2021, the antitrust division under the Justice Department started looking into Visa’s debit card policies. That same year, the agency ended the operation of the credit card firm by buying the financial technology startup called Plaid. In April, Mastercard, a competitor, announced that the Justice Department was also looking into it.
Due to their dominance in the card market, both businesses have been in legal disputes for almost two decades. In 2019, they settled for $5.6 billion to fulfill damages claims made by US merchants in a class-action complaint claiming anticompetitive behavior.
According to Jon Donenberg, deputy director of the White House National Economic Council, the Biden-Harris administration has made it abundantly evident that genuine competition is essential to the health of the American economy. In addition to assuming the costs of overdraft bank accounts and late credit card payments, the administration will continue to work towards removing other unnecessary fees related to daily activities.