Antitrust Law Daily Wrap Up, ANTITRUST NEWS: U.S. accuses Visa of monopolizing debit card markets, (Sep 24, 2024)

By Jeffrey May, J.D.

Visa maintains its monopoly by insulating itself from digital payment platforms, such as Apple, Square, and PayPal, the government alleges. Visa purportedly had strategy to “partner with emerging players before they become disruptors.”

The Department of Justice Antitrust Division on September 24 filed a civil lawsuit against Visa, Inc.—the operator of the largest debit network in the United States—for engaging in monopolization and other unlawful conduct in debit network markets in violation of Sections 1 and 2 of the Sherman Act. More specifically, Visa allegedly monopolized or attempted to monopolize in violation of Section 2 of the Sherman Act two relevant markets related to debit transactions in the United States: (1) the market for general purpose card-not-present debit network services; and (2) the market for general purpose debit network services. Further, Visa allegedly entered into agreements with competitors and potential competitors, as well as with merchants and banks, to unreasonably restrain trade in those same markets in violation of Section 1 of the Sherman Act. The lawsuit follows a three-year investigation, said Attorney General Merrick Garland at a press conference announcing the action (U.S. v. Visa Inc., No. 1:24-cv-7214 (S.D.N.Y. Sept. 24, 2024)).

Relevant market. According to the complaint, Visa is a monopolist in the proposed relevant markets, with a 60 percent share of the U.S. general purpose debit network services market and 65 percent share of the U.S. general purpose card-not-present debit network services market, by payment volume. In other words, more than 60 percent of debit transactions in the United States run on Visa’s debit network, resulting in $7 billion in fees each year for processing those transactions, according to the Justice Department. The second largest debit network in the United States, MasterCard, processes less than 25% of debit transactions in either relevant market, it was alleged.

Anticompetitive, exclusionary conduct. The Justice Department alleged that Visa engaged in exclusionary and anticompetitive conduct to maintain its high share of debit transactions. The company was accused of “preventing competitors from gaining the necessary scale to challenge Visa and by co-opting would-be competitors.” For instance, according to the complaint, fearing competition from digital platforms Apple, Square, and PayPal, Visa adopted a strategy to “partner with emerging players before they become disruptors.” The complaint quoted Visa’s CFO as saying: “[E]veryone is a friend and a partner. Nobody is a competitor.” The government also contended that Visa leans on merchants and banks with “volume” agreements that “penalized industry participants that seek to use alternative debit networks.”

Focus on “middlemen” in a variety of industries. Speaking at the press conference, Principal Deputy Associate Attorney General Benjamin Mizer described Visa as “a classic example of a middleman that takes advantage of its role as gatekeeper to stamp out competition.” Mizer added that “these kinds of intermediaries gain control in a broad range of industries—from healthcare to online advertising to live music to housing” and warned that the Justice Department remains “dedicated to stopping these middlemen from exploiting their power to increase their profits while consumers get harmed.”

Earlier merger challenge to Visa/Plaid combination. In November 2020, the Trump Administration's Justice Department sued Visa to block the company’s planned $5.3 billion acquisition of Plaid Inc. The government alleged that the acquisition would eliminate the nascent but significant competitive threat posed by the San Francisco-based fintech start-up, which at the time was developing a payments platform that would challenge Visa’s monopoly in online debit. Visa was alleged to control approximately 70 percent of the online debit transactions market, and the complaint included a Sherman Act, Section 2 count. Faced with the suit, the parties abandoned the deal in January 2021.

FTC settlement with MasterCard over debit payment processing practices. Separately, the FTC been investigating competition in debit card processing. In a 2023 settlement, Mastercard Inc. agreed not to require merchants to route debit card payments through its payment network. It also agreed not to block the use of competing debit payment networks. The settlement resolved allegations that MasterCard violated the provisions of the 2010 Dodd-Frank Act, known as the Durbin Amendment (Regulation II), by setting policies to block merchants from routing ecommerce transactions using Mastercard-branded debit cards saved in e-wallets to alternative payment card networks, including networks that may charge lower fees than Mastercard. According to the Justice Department’s complaint, Visa understood the competitive threat raised by the Durbin Amendment and took action to limit competition from rivals offering lower fees.

Companies: Visa Inc.; Plaid Inc.; Mastercard Inc.; Apple, Inc.

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