On September 24, 2024, the Justice Department alleged in a federal complaint filed in Manhattan that Visa punished merchants and their banks for sending debit card payments to competing networks. DOJ said Visa used contractual commitments and pricing penalties to protect its debit business from lower-priced rivals. Its claim was not simply that Visa charged high fees. It was that choosing someone cheaper could trigger a larger Visa bill.
The record supports a precise economic mechanism. A lower fee on the payment moved elsewhere can be overwhelmed by higher charges on payments that remain with Visa. The complaint supplies DOJ’s descriptions and selected contract terms, not a judicial finding or a complete merchant-by-merchant cost audit.
What choice did Congress protect?
Congress addressed debit routing in 15 U.S.C. § 1693o-2. The statute directs the Federal Reserve to prohibit restrictions that prevent merchants from choosing among networks capable of processing a debit transaction. It also requires rules against limiting a card to 1 network, or to affiliated networks alone.
Regulation II implements those instructions. Under 12 C.F.R. § 235.7, issuers must enable at least 2 unaffiliated networks. Payment card networks and issuers cannot inhibit a merchant’s ability to direct a transaction over an available network.
The Federal Reserve’s October 3, 2022, final-rule announcement clarified that the network requirement also applies to card-not-present transactions, including online purchases. That clarification took effect July 1, 2023.
The distinction matters. Having another network available establishes a technical choice. It does not establish that exercising the choice leaves the rest of the merchant’s bill unchanged.
Which fee are we discussing?
An interchange fee is not the same thing as Visa’s charge for network services. Regulation II defines interchange as compensation received by the debit card issuer for its involvement in a transaction. Visa’s published interchange schedule describes payments between acquiring and issuing financial institutions.
Under 12 C.F.R. § 235.3, the base interchange ceiling for covered issuers is $0.21 plus 0.05% of the transaction’s value, before any permitted fraud-prevention adjustment. That ceiling is not a general cap on everything a merchant pays to accept debit cards.
Visa’s public rules separately describe the obligations of participants in its payment system. Its interchange schedule therefore cannot, by itself, establish the full cost of choosing one processing network over another.
DOJ’s complaint targets that separate routing calculation. The relevant comparison is not simply the issuer’s interchange fee. It includes Visa’s network prices, contractual discounts and consequences for sending volume elsewhere.
What did the contracts require?
The September 24, 2024, complaint describes agreements with merchants and acquirers, the financial institutions that provide merchants with access to payment processing. Those agreements tied favorable Visa pricing to commitments concerning the volume or share of debit transactions sent to Visa.
A volume commitment is not automatically exclusionary. A supplier can offer a lower unit price in return for more business. DOJ’s objection concerns how Visa allegedly combined those commitments with the transactions merchants could not readily move to competing networks.
According to the complaint, Visa used that necessary business to influence where merchants sent transactions that rivals could process. A merchant considering an alternative therefore had to evaluate more than the savings on the payments it could move.
The contractual unit was the broader Visa relationship. The competitive opportunity might be only a portion of it. That mismatch is central to DOJ’s account of why a cheaper rival could still lose the business.
Where does the penalty appear?
The complaint describes pricing arrangements with thresholds. Crossing a threshold could change the price applied to a much larger body of Visa transactions, rather than merely remove a discount from the transactions diverted to a rival.
That is the significance of the complaint’s cliff-pricing allegations. The competing network offers savings on the volume it receives. Visa can offset those savings through the price charged on volume the merchant continues sending to Visa.
The same calculation applies when an acquirer makes the routing decision across merchant accounts. DOJ alleges that Visa’s acquirer arrangements discouraged alternative routing through financial consequences attached to routing commitments. The entity choosing the route could face costs beyond the individual payment being assigned.
A comparison of posted transaction prices would miss that effect. The merchant’s relevant cost includes both the alternative network’s charge and any additional Visa charges caused by making the switch.
Which transactions could move?
The complaint distinguishes transactions for which Visa faces practical routing competition from transactions merchants still need Visa to process. Its account includes the development of PINless debit, which allows competing debit networks to process eligible purchases without requiring the customer to enter a PIN.
That development matters to the transaction examples. An eligible payment can have an alternative route even though other payments in the merchant’s business do not. DOJ alleges that Visa’s contracts connected those otherwise separate groups through pricing commitments.
The online purchase presents the same distinction. Regulation II’s card-not-present requirement addresses whether an issuer enables competing networks. Visa’s alleged financial restrictions address whether the merchant or acquirer can use that alternative without losing favorable pricing elsewhere.
DOJ also alleges that restricting available transaction volume hindered competing networks’ ability to grow. The immediate consequence was a routing decision. The claimed longer-term consequence was a smaller rival with fewer transactions over which to spread its costs.
Does a large market share prove the case?
No. In its September 24, 2024, announcement, DOJ said Visa processed more than 60% of U.S. debit transactions and collected more than $7 billion annually in processing fees. Those figures explain why access to Visa could matter so much to merchants. They do not establish that any particular contract unlawfully excluded a competitor.
Section 2 of the Sherman Act prohibits monopolization. It does not impose a general maximum price for payment processing. DOJ therefore needs the contractual mechanism, not merely the revenue figure.
Visa’s fiscal 2024 Form 10-K disclosed the lawsuit and said the company believed it lacked merit and would defend itself vigorously. That denial belongs beside the allegations. But it does not supply a competing transaction-level calculation showing that merchants could redirect eligible payments without the pricing consequences DOJ describes.
The disputed issue is whether Visa won the routable payment on its own terms or protected it by attaching financial consequences to the business merchants still needed Visa to handle.
What is the verdict?
Yes, in the arrangements DOJ describes. Visa did not have to make a competing network’s posted fee higher. It could make choosing that network more expensive by withdrawing favorable prices on the Visa business a merchant still needed. That is a concrete allegation of obstructed competition, not merely a complaint that Visa charged too much.
