According to the U.S. Department of Justice (DOJ), credit card giant Visa is monopolizing the market on debit cards nationally and the DOJ is ready to sue over it. The information comes from unnamed sources within the DOJ. The suit was filed in federal court on September 24.
The government is expected to argue that Visa struck up exclusive deals with other companies specifically to keep competition out of the debit card market, especially new technology companies. The government has been investigating Visa for years; what kicked off the interest of regulators was a deal that fell through 12 years ago. At that time, Visa was trying to buy the smaller money-transfer platform Plaid, and regulators started to pay attention to what they suspected was anti competitive moves by Visa.
As word about the suit leaked out, investors took it out on Visa’s shares, which dropped 1.95 percent after the market closed on Monday, September 23.
The suit will likely focus on something called “tokenization” technology used by Visa. This is a security step that gets rid of the traditional credit/debit card number and replaces it with a unique digital “token.” This token can only be used on specific individual electronic devices, which is said to provide more security in transactions. DOJ staff have been probing Visa’s use of the technology, and have concerns that the company may be charging merchants more if they will not agree to use the tokenization system.
The DOJ is not the only one concerned about tokenization, and Visa is not the only company that uses it. Last year the Federal Trade Commission took action against Visa’s biggest competitor, Mastercard, for the way it used tokens. According to the FTC, Mastercard used its token technology to block merchants from using other payment neworks. These moves were in violation of the 2010 “Dodd-Frank” legislation, said the FTC, which requires banks (Visa and Mastercard qualify as banks) to include at least two competing money transfer networks on their debit cards for customer and merchant use. Mastercard settled with the FTC.
This case against Visa is similar to another big antitrust push by the Biden administration. Last month, the DOJ began a trial in Virginia against Google, accusing the company of monopolizing the digital advertisement market, which is worth $300 billion annually in the U.S. The government won its case, with the presiding judge writing that “Google is a monopolist.”
