DOJ Files New Lawsuit Against Visa

This week, we are taking a second to learn about the latest legal news to touch our industry: the recent civil antitrust suit brought by the U.S. Department of Justice (DOJ) against Visa.  

This is not the first time Visa has been in the hot seat recently. In 2020, the DOJ filed a suit against them to block the acquisition of a company called Plaid. And as recently as March, both Visa and Mastercard agreed to limit their credit card fees to a $30 billion settlement. This time, the DOJ is alleging a violation of the Sherman Act (antitrust law) as it relates Visa’s dealings in the debit transaction space.  

Why Was the Suit Brought? 

The DOJ claims in their suit that Visa is monopolizing the industry and engaging in other unlawful conduct within the debit network markets in direct violation of Sections 1 and 2 of the Sherman Act. The 71-page complaint filed in the U.S. District Court for the Southern District of New York alleges a myriad of claims including that Visa has illegally maintained a monopoly and actively tried to quash others attempts to innovate offerings in the debit market.  

Furthermore, the complaint states that Visa penalizes credit unions and other financial institutions who do not use Visa’s payment processing technology when processing debit transactions. The DOJ’s stated in their press release that they believe the actions taken by Visa have cost financial institutions, merchants and consumers alike billions of dollars.  

What is the Sherman Act? 

The Sherman Act was created in the 1980s with the goal of promoting fair competition and preventing monopolies in the United States. The penalties for violating the Sherman Act can be severe and are enforceable against both businesses and individuals based on their conduct.   

What is the Likely Outcome? 

The court will ultimately have to decide whether or not they believe that Visa has engaged in the alleged behaviors. If they decide that Visa has engaged in actions that violate the Sherman Act, there will likely be recourse in the form of injunctive and/or compensatory (monetary) damages. It is important to note that this decision by the U.S. District Court could be appealed by either party to the U.S. Court of Appeals which means that a final outcome is not likely to be known for quite some time.  

In the event the final decision finds for the DOJ and against Visa, there is a potential that this could lead to lessening of fees imposed by Visa related to debit transactions. According to the DOJ, currently $7 billion in processing fees are charged by Visa annually.  

To sum it up, there is still much to be uncovered as this suit progresses through the legal process. The outcome of which could lead to some relief for financial institutions, consumers and merchants. How this will ultimately impact the debit market remains to be seen.  

As always, this article is intended for general information only and does not constitute legal advice. If you have any questions about this topic and/or the possible implications, you should contact your attorney for advice. 

Hope to see you next time when we take a second to discuss another legal topic in the financial services industry!  

« Return to "Take a Second CU Legal Insights"