Antitrust expert on Visa case: ‘It’s not enough to be big, you have to be bad’

The Department of Justice filed a federal antitrust lawsuit against Visa Tuesday, Sept. 24. The suit alleges the payments processor took part in anticompetitive practices in the debit card market that hurt merchants and consumers alike.

“Visa deploys a web of unlawful anti-competitive agreements to penalize merchants and banks for using competing payment networks,” Attorney General Merrick Garland said Tuesday. “At the same time, it coerces would-be market entrants into unlawful agreements not to compete by threatening high fees if they do not cooperate and promising big payoffs if they do.”

The government’s complaint centers around allegations that Visa makes deals with vendors to prevent them from using other processors. The DOJ claims this practice hinders other issuers from scaling up their business. Meanwhile, if a merchant doesn’t adhere to Visa’s “volume commitments” to use it for most of their transactions, they will reportedly incur fees. 

“Attaining a monopoly by itself is not illegal under antitrust laws,” said Bill Kovacic, a former FTC commissioner and Global Competition Professor of Law and Policy at George Washington University. “It’s not enough to be big. You have to be bad as well.”

Garland pointed to a situation where Visa had a contract with Square, the operator of Cash App, to stop it from becoming a competitor. The attorney general cited an email where a Visa executive said, “We’ve got Square on a short leash.”

“The essential argument is that you buy off rivals to stay out of the way and that you impose exclusivity arrangements in your own contracts that make it harder for existing rivals to gain broader scale,” Kovacic said. “Those arguments have been arguments that the DOJ has used with considerable success.”

Visa, which knew it was being investigated as early as 2021, said it will challenge the lawsuit. 

“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” Visa’s General Counsel Julie Rottenberg said in a statement emailed to Straight Arrow News. 

“Visa gets a chance to contest whether or not it is so powerful,” Kovacic said. “But second, to present evidence that saying, ‘Everything we do is good for our users. We give users a better experience. It’s good for the merchants in our network. It’s good for the end users, the consumers. So to the extent that we’ve succeeded, we have only succeeded by doing things that make our merchant partners and our consumers better off.'”

The Justice Department said more than 60% of debit transactions in the U.S. are done on Visa’s network. As a result, the company makes more than $7 billion annually in fees. 

“Visa’s unlawful conduct affects not just the price of one thing, but the price of nearly everything,” Garland said as the DOJ claimed those fees are passed on to consumers. 

The Justice Department did not offer any remedies for Visa if it were to be ruled against.

“The logical step would be first to prohibit the specific conduct that they’re complaining about, which would be to dissolve contractual provisions that create exclusivity that tends to dampen the competitive significance of rivals,” Kovacic said.  “And the second might be to challenge or forbid the payments that are being made to other potential significant market players, to say, ‘The partnerships that you are pointing to are partnerships to suppress rivalry, rather than to increase it. You can’t do that anymore.'”

The lawsuit comes months after Capital One announced a $35 billion acquisition of Discover in February 2024. That deal, which would create the sixth-largest bank by assets, still faces regulatory approval. Capital One and Discover argue joining forces will allow it to better compete with Visa.