DOJ Lawsuit Against Visa Is Proof We Need the Credit Card Competition Act

COMMENTARY

The Department of Justice recently announced it is taking long overdue antitrust action against Visa for obstructing competition in the debit card industry. Despite existing laws to reduce fees and drive competition in the debit space, Visa continues to flout those laws, fearing no repercussions until now.

With a lawsuit underway, Visa and its fellow bad actor Mastercard have also found themselves under increased scrutiny for similar practices in the credit card sector. 

While the DOJ’s suit is certainly a positive step forward, what Visa does to dominate credit cards and hold back innovation is even worse than what it does with debit cards. It is clear that only through strong action from Congress we will level the playing field.

Lawmakers should move swiftly to pass the Credit Card Competition Act this year.

The DOJ announced on Sept. 24, 2024, that it had filed an antitrust lawsuit against Visa in the Southern District of New York. The suit alleges that Visa used its dominance of the debit card market to effectively create a monopoly and “thwart the growth of its existing competitors and prevent others from developing new and innovative alternatives.” Visa is accused of violating the Sherman Antitrust Act by making exclusive agreements to prevent the growth of competitor debit card networks, while also blocking tech companies like Apple, Square and PayPal from competing with Visa. 

It’s not surprising given Visa has used even more heavy-handed tactics in the credit card sector, where Visa and Mastercard combine to control more than 80% of the market share. This control has allowed the two companies to box out competition in the payments sector, as they form de facto exclusivity deals with major banks. The banks they work with agree to set schedules of swipe fee rates to avoid competing with each other, allowing cartel-style price fixing by Visa and Mastercard.

This anticompetitive environment has seen swipe fees rise exorbitantly, nearly quadrupling on Visa and Mastercard credit cards since 2010. These fees are charged to businesses by credit card networks for processing transactions, totaling over $100 billion last year for Visa and Mastercard fees alone. These sky-high profits come at the expense of both small businesses and consumers across the country.

The CCCA would allow merchants and retailers to choose between a minimum of two different credit card networks for processing transactions, meaning Mastercard and Visa would have to lower swipe fees to a reasonable rate and improve other services if they hope to compete. 

Visa and Mastercard fear a competitive environment in which their massive profit margins are not just handed to them in an unfair market, but earned through innovation and exceptional service. That’s largely why the credit card industry has spent a combined $80 million over the last year to lobby against the CCCA.

Many voters have seen through the paid effort to diminish the CCCA, and understand the bill will help American businesses save significant amounts of money, allowing them to lower prices, raise wages and expand their businesses. Only 7% of Americans oppose the CCCA, while a large majority of likely voters support the bill.

The DOJ’s lawsuit against Visa is a strong first step toward fair competition in the debit space, but to truly eliminate antitrust concerns, lawmakers must pass the CCCA. If not, Visa and Mastercard will continue to squeeze merchants and consumers via excessive credit card swipe fees — and American families will keep shelling out more than $1,100 per year to pay for it all.

Ric Wasserman is the treasurer of Athens County, Ohio, and the owner of The Pigskin Bar and Grille. He can be reached on LinkedIn.