Visa hit with DOJ lawsuit
The U.S. Department of Justice has filed a lawsuit against Visa alleging that some of its debit card practices are anticompetitive and violate federal antitrust law.
Industry groups representing retailers welcomed the news.
The NLBMDA fights the fees
The National Lumber and Building Material Dealers Association has been an active member and leader of the Merchant Payments Coalition, a robust group of organizations working together to fight excessive swipe fees.
NLBMDA has been a fierce advocate of recent legislation that would prevent rising credit card swipe fees on LBM dealers. NLBMDA is lobbying Congress to pass the Credit Card Competition Act (H.R.3881/S.1838), landmark banking reform that will limit big banks from increasing credit card swipe fees on LBM dealers by allowing retailers to access more credit card payment network options outside of Visa and Mastercard.
“Over the last decade, LBM dealers across the country have been hit with exorbitant increases in credit card swipe fees that serve as a direct tax on their bottom line,” said NLBMDA President & CEO Jonathan Paine. “NLBMDA applauds this key legislation, which will significantly improve conditions for the LBM industry and the small business community.”
Click here for more on the NLBMDA's effort
“This is further evidence that Visa has regularly blocked competition in the debit card market,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “Visa has relentlessly flouted the law to maintain a monopoly over setting fees for transactions made with cards issued under its brand and for processing those transactions. While this case is focused on debit cards, it shows how we desperately need competition over credit card swipe fees, which currently face no competition at all.”
The DOJ’s lawsuit alleges that a number of Visa’s practices relating to debit cards have violated the Sherman Antitrust Act. The government says Visa made exclusive agreements that hindered expansion of competing networks and also that it blocked efforts by technology companies to enter the market.
The move follows reports in 2021 that the DOJ was investigating whether Visa had limited merchants’ ability to route debit card transactions over competing networks. Visa confirmed in a filing with the Securities and Exchange Commission that year that the DOJ “has informed Visa of its plans to open an investigation into Visa’s U.S. debit practices.” In 2023, DOJ was reportedly investigating whether Visa charged higher fees to merchants unless they used its proprietary tokenization technology for debit cards.
The allegations show the efforts that Visa made to block the ability of unaffiliated debit card networks like Star, NYCE or Shazam to compete for market share. The competing networks have lower fees and better security.
In spite of Visa’s violations of antitrust laws, debit card fees have some competition that benefits Main Street small businesses and their customers because Congress passed legislation known as the Durbin Amendment in 2010 to ensure such competition existed by allowing debit transactions to be routed over competing networks.
On credit cards, however, Visa and Mastercard each price-fix swipe fees charged by banks that issue credit cards under their brands, and completely block transactions from being processed over other networks. The CCCA would require banks with over $100 billion in assets to enable cards to be processed over at least two unaffiliated networks, similar to the Durbin Amendment requirement for debit cards. That would make networks compete over fees, security and service, saving merchants and consumers $16 billion a year.
Credit and debit card swipe fees totaled a record $172 billion in 2023, according to the Nilson Report, and are most merchants’ highest operating cost after labor. The fees are too high to absorb, especially for small merchants, and drive up consumer prices by an estimated $1,100 a year for the average family. A recent report by payments consulting firm CMSPI estimated the cost at $224 billion with an impact of $1,700 a year per family.
