WATCH LIVE: Garland expected to file antitrust lawsuit against Visa

NEW YORK (AP) — The U.S. Justice Department has filed an antitrust lawsuit against Visa, alleging that the financial services company is using its size and dominance to stifle competition in the debit card market, costing consumers and businesses billions of dollars.

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The lawsuit, filed Tuesday, says Visa penalizes merchants and banks that do not use Visa’s own payment processing technology to process debit transactions, even though alternatives exist. Visa receives an additional fee for each transaction processed through its network.

According to the Justice Department’s lawsuit, 60 percent of all debit transactions in the United States are processed through Visa’s debit network, allowing the company to charge more than $7 billion in fees annually to process those transactions.

“We allege that Visa has unlawfully amassed the power to charge fees that far exceed what it could charge in a competitive market,” Attorney General Merrick B. Garland said in a statement. “Merchants and banks pass these costs on to consumers, either by raising prices or by degrading quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of almost everything.”

The Biden administration has aggressively targeted U.S. companies it sees as middlemen, such as Ticketmaster parent Live Nation and real estate software company RealPage, accusing them of burdening Americans with ridiculous fees and anti-competitive behavior. The government has also accused tech giants like Apple and Google of monopolistic behavior.

According to the Justice Department’s complaint, filed in the U.S. District Court for the Southern District of New York, Visa uses the massive number of transactions on its network to impose volume obligations on merchants and their banks and debit card-issuing financial institutions. That makes it difficult for merchants to use alternatives, such as lower-cost or smaller payment processors, instead of Visa’s payment processing technology without incurring what the Justice Department called “disloyalty penalties” from Visa.

The US Department of Justice said Visa also hinders competition by paying money to enter into partnership agreements with potential competitors.

In 2020, the U.S. Department of Justice filed suit to block the company’s purchase of financial technology startup Plaid for $5.3 billion, calling it a monopolistic takeover of a potential competitor to Visa’s ubiquitous payments network. However, the deal was later canceled.

Visa had previously announced that the Department of Justice was investigating the company in 2021 and said in a regulatory filing that it was cooperating with a Department of Justice investigation into its debit practices.

Since the pandemic, more consumers around the world have been purchasing goods and services online, meaning more revenue for Visa in the form of fees. Even traditionally cash-intensive businesses such as bars, hairdressers and cafes now accept credit or debit cards as a means of payment, often via smartphones.

Visa processed $3.325 trillion in transactions through its network in the quarter ended June 30, up 7.4 percent from a year earlier. U.S. payments grew 5.1 percent, faster than U.S. economic growth.

There was no immediate comment from Visa, based in San Francisco.