The U.S. Department of Justice (DOJ) is preparing to file a major antitrust lawsuit against Visa Inc., accusing the leading payment card company of unlawfully dominating the debit card sector. Sources indicate that the complaint could be lodged in federal court as soon as Tuesday, as reported by Bloomberg News.
This lawsuit is anticipated to allege that Visa used anticompetitive practices to secure its market position, including forging exclusive agreements that stifle competition and blocking tech firms from entering the space.
This legal challenge follows a lengthy investigation into Visa that began after the company’s failed bid to acquire financial technology firm Plaid Inc. in 2021, which raised concerns over potential monopolistic behavior.
In reaction to the news, Visa’s stock fell by nearly 2% in after-hours trading, signaling investor anxiety about the lawsuit’s possible impact.
A notable focus of the DOJ’s claims will be Visa’s tokenization technology, which enhances payment security by replacing card numbers with unique tokens for specific merchants or devices. Investigators are looking closely at how Visa charges merchants who choose not to utilize its proprietary tokenization service.
This scrutiny isn’t exclusive to Visa; Mastercard faced a similar situation last year when it settled allegations from the Federal Trade Commission (FTC) regarding its tokenization practices, allegedly blocking merchants from accessing alternative payment networks in violation of the Durbin Amendment.
Since its launch in 2014, Visa has introduced over 4 billion tokens, with more than 13,000 merchants on board, including Netflix and Microsoft. The company argues that its tokenization service significantly bolsters payment security while streamlining transactions.
Recently, Visa informed merchants about upcoming changes to their fee structures. This has renewed DOJ interest, especially since the revised rates differentiate between tokenized and non-tokenized payments, potentially benefiting those using Visa’s tokenization technology.
The forthcoming antitrust lawsuit comes amid heightened regulatory scrutiny over Big Tech and financial institutions. The Biden administration has signaled its determination to tackle perceived monopolistic practices across different sectors.
The case against Visa parallels another antitrust effort by the administration, which last month initiated a trial against Google for allegedly monopolizing the nearly $300 billion U.S. digital ad market. A federal judge determined that Google illegally maintained its monopoly in online search.
Attorney General Merrick Garland hailed the victory against Google as “a historic win for the American people,” emphasizing that no company is above the law and reinforcing the DOJ’s commitment to enforcing antitrust regulations.
The actions against Visa and Google highlight the administration’s dedication to antitrust enforcement as a key economic strategy, with future initiatives possibly hinging on the outcome of the 2024 presidential election.
Ohio Senator JD Vance has voiced support for tighter merger regulations and suggested a need for antitrust solutions regarding large tech behaviors. Meanwhile, some Democratic megadonors, like Barry Diller and Reid Hoffman, hope for a shift in focus under a potential Vice President Kamala Harris presidency, indicating a division in perspectives on antitrust policy reforms.