Visa’s $5.3bn acquisition of Plaid was supposed to be one of the biggest FinTech deals this year, but the US Department of Justice seems dead set against it and has filed a suit to stop the deal.
Visa originally announced that it had bought Plaid in January this year. While the deal seemed quite straightforward, reports have recently started to circulate that American regulators would move to prevent the acquisition from happening due to antitrust concerns.
Now, those rumours have proven to be accurate, with the DoJ filing a civil antitrust lawsuit to stop the deal.
“American consumers and business owners increasingly buy and sell goods and services online, and Visa – a monopolist in online debit services – has extracted billions of dollars from those transactions,” said Makan Delrahim, assistant attorney general of the Justice Department’s Antitrust Division.
“Now, Visa is attempting to acquire Plaid, a nascent competitor developing a disruptive, lower-cost option for online debit payments. If allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative to Visa and increase entry barriers for future innovators.”
The complaint argues that the acquisition is viewed by Visa as an “insurance policy” against the growing power of Plaid.
The argument goes that because Plaid’s technology empowers developers to plug into consumers’ various financial accounts, with consumer permission, to aggregate spending data, look up balances, and verify other personal financial data, the company could potentially leverage its connections to build a bank-linked payments network that would compete with Visa.
The DoJ cited Visa’s CEO who justified deal to Visa’s board of directors by saying that it was a “strategic, not financial” move, and noted that in part because “our US debit business i[s] critical and we must always do what it takes to protect this business.”
In other words, the regulator argued that the $5.3bn deal, which would mark the second-largest acquisition in Visa’s history, that the deal was made in order for Plaid to become a competing force in its own right or in the hands of a competitor.
The further alleged that this is nothing new, saying that “Visa has dominated online debit for years and has protected its monopoly with exclusionary tactics that have prevented rivals, including Mastercard, from expanding or entering.”
Visa responded in a statement seen by CNN that it “strongly disagrees” with the DoJ’s argument, saying “reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates.”
It said the merger would lead to “substantial benefits” for consumers and it plans to “defend the transaction vigorously.”
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