Payment card service corporation Visa has been accused of using unlawful tactics to achieve and keep a monopoly in the debit card market by the US Justice Department. The company’s stock dipped more than 5% after the news went public.
According to the Department of Justice’s antitrust lawsuit, Visa has achieved a dominant status in the debit card market by making deals with card issuers, its rivals, and merchants. It is accused of bullying businesses to use its network with a threat of penalties as a result of exclusive agreements as well as stopping competitors from getting a sizable slice of the market by entering a partnership-type of deals with them.
It is estimated that around 60% of transactions that use debit cards in the United States are processed by Visa’s network. This allows the company to earn about $7 billion in transaction fees.
“We 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.”
Visa, on the other hand, denied accusations, saying that it would defend itself in court.
The shares of Visa dipped by 5.49% on Tuesday to close at $272.78 per share. The company’s stock is currently 5.37% up year-to-date.