The U.S. Department of Justice (DOJ) is poised to launch a significant antitrust lawsuit against Visa Inc., accusing the payment card services giant of illegally monopolizing the nation’s debit card market, according to sources familiar with the matter, per Bloomberg News.
The lawsuit, set to be filed in federal court as early as Tuesday, will reportedly allege that Visa engaged in anticompetitive conduct to maintain its dominance in the debit card market.
Among the government’s expected claims are accusations that Visa forged exclusive agreements to hinder expansion of rival networks and thwarted efforts by technology companies to enter the market.
This legal action represents the culmination of yearslong investigations into Visa’s operations. The probe initially stemmed from the company’s failed acquisition of financial technology infrastructure firm Plaid Inc. in 2021, which raised red flags regarding potential anticompetitive behavior.
As news of the impending lawsuit broke, Visa’s shares tumbled by as much as 1.95 percent in after-hours trading on Monday, reflecting investor concerns about the potential ramifications of the case.
Visa credit and debit cards in a black leather wallet are pictured on May 22, 2021. The U.S. Justice Department is reportedly poised to file suit accusing Visa Inc. of illegally monopolizing the U.S. debit card market, according to Bloomberg News. (Credit: Getty Images)
Newsweek contacted the DOJ via online form and Visa’s press contact via email on Monday for comment.
One key area of contention in the DOJ’s case is expected to be Visa’s practices surrounding “tokenization” technology. This security measure replaces sensitive card numbers with unique tokens that can only be used on specific devices or with particular merchants, enhancing payment security.
The Justice Department has reportedly been examining Visa’s pricing structure for this technology, particularly how it charges merchants who opt not to use Visa’s proprietary tokenization service.
The scrutiny of tokenization practices is not unique to Visa. Mastercard last year settled a separate enforcement action brought by the Federal Trade Commission (FTC) over its tokenization technology procedures. The FTC alleged that Mastercard had been using its tokenization system to block merchants from using alternative payment networks, potentially violating the Durbin Amendment—part of the 2010 Dodd-Frank law that requires banks to include two competing networks on their debit cards.
Visa introduced its tokenization service in 2014, and has since issued more than 4 billion tokens, with over 13,000 merchants adopting the technology, including major players like Netflix, Microsoft and Alphabet‘s Fitbit. The company has long maintained that tokenization significantly enhances payment security and reduces friction in the payment process.
In recent weeks, as part of its normal schedule for adjusting fees, Visa and its partners informed merchants of coming changes to some of its rates. The measure reportedly sparked renewed interest from the Justice Department pertaining to tokenization. The new rates include different pricing for tokenized payments versus non-tokenized payments, with merchants using Visa’s tokenization technology potentially paying lower fees.
The antitrust case arrives amid increased regulatory focus on Big Tech and financial service companies. The Biden administration has made no secret of its intent to crack down on perceived monopolistic practices across various sectors of the economy.
The case against Visa parallels another high-profile antitrust action by the Biden administration. The DOJ last month began its trial against Google in Virginia, accusing the tech giant of illegally monopolizing the nearly $300 billion U.S. market for digital ads. A federal judge ruled that Google violated U.S. antitrust laws by acting illegally to maintain a monopoly in online searches.
“Google is a monopolist, and it has acted as one to maintain its monopoly,” Judge Amit P. Mehta of the U.S. District Court for the District of Columbia said in his 277-page ruling.
Attorney General Merrick Garland said in a statement, “This victory against Google is an historic win for the American people.” He continued, “No company—no matter how large or influential—is above the law. The Justice Department will continue to vigorously enforce our antitrust laws.”
The Visa and Google cases underscore the Biden administration’s commitment to antitrust enforcement as a pillar of its economic policy. The future of antitrust efforts could depend on the outcome of the 2024 presidential election.
Ohio Senator JD Vance, former President Donald Trump‘s running mate on the Republican presidential ticket, has expressed support for stricter rules on mergers and suggested in an interview with CNBC this month that “there should be an antitrust solution” to some behaviors of large tech platforms. Vance has also praised FTC Chair Lina Khan, who has been at the forefront of the Biden administration’s push to boost competition and address high prices and low wages.
Some prominent Democratic megadonors have a completely different vision. Billionaires Barry Diller and Reid Hoffman have publicly stated their hope that Vice President Kamala Harris, if elected president, would replace Khan as FTC chair, signaling a potential shift from the Biden administration’s aggressive antitrust stance.
