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The U.S. Department of Justice has filed an antitrust lawsuit against Visa, alleging that the debit card corporation uses its dominance in the industry to conduct an illegal monopoly practice for debit card payments that costs businesses and customers billions of dollars.
The lawsuit, filed in the Southern District of New York, goes on to further accuse Visa (V) of using its superiority to block the growth of its competitors and prevent other companies from developing “new and innovative alternatives,” according to a DOJ statement.
“[The DOJ] allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” attorney general Merrick Garland said in a statement. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”
In the lawsuit, the DOJ claims Visa imposed “exclusionary” and “anticompetitive” schemes on its partners and snuffed out upstart firms. The lawsuit also states that more than 60% of debit transactions in the country run on Visa’s network, allowing for the company to charge over $7 billion in fees every year for processing those transactions.
The complaint further alleges that Visa illegally maintains its monopoly power by insulating itself from competition. The lawsuit found that Visa convinced possible competitors to become partners by offering them monetary incentives and threatening them with punitive additional fees.
As a remedy to the lawsuit, the DOJ seeks to impose requirements that would restore competition for the card issuer and have debit payments be processed both online and at physical stores.
Visa’s long issues with monopoly issues date back to 2012 when the company increased the prices it charged merchants and disconnected competition from newer financial technology companies like Apple (AAPL) and PayPal (PYPL).
In June, a federal judge rejected a $30 billion settlement that was reached between Visa and Mastercard and U.S. merchants, as a nearly two-decade battle over so-called swipe fees continues. The settlement resolved a 2005 lawsuit alleging that merchants were forced to pay “excessive fees” to accept Visa and Mastercard (MA) credit cards.
