DOJ Files Antitrust Suit Against Visa
Visa announced back in January it would spend $5.3 billion to acquire fintech company Plaid, which provides the backbone to allow consumers to share their financial information with some of the most popular financial apps and services.
"We are extremely excited about our acquisition of Plaid and how it enhances the growth trajectory of our business," Visa CEO and chairman Al Kelly said of the deal.
With one in four people with a U.S. bank account having used Plaid to connect to more than 11,000 financial institutions, U.S. regulators have decided to take a look at the planned acquisition.
The U.S. Department of Justice filed an antitrust lawsuit yesterday to block Visa's acquisition of Plaid, calling Visa "a monopolist in online debit transactions." The suit says Kelly called the deal an "insurance policy" to neutralize a "threat to our important U.S. debit business."
"By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers," the DOJ's complaint read.
The lawsuit notes Visa's 70% share of the U.S. debit card market and pointed to the inability of Mastercard to "gain significant share" and "restrain Visa's monopoly."
"Visa rarely faces any significant threats to its online debit monopoly. Plaid is such a threat," the lawsuit read.
Plaid declined to comment on the lawsuit while Visa said it disagrees with the DOJ and that the move to block its acquisition of Plaid is "legally flawed and contradicted by the facts."
"This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates," Visa said in a statement.
The deal was approved in August by the UK’s Competition and Markets Authority (CMA), which acknowledged Plaid would have been a threat to Visa but declined to block it citing a handful of "payment initiation services" that possess "similar, or stronger, competitive capabilities than Plaid."
"On this basis, the CMA concluded that in the UK Visa would continue to face sufficient competition from PIS-enabled payments, and other types of services enabling consumer-to-business payments, after the merger," the CMA said.
All eyes will now be on the DOJ to see if Visa can pull off the $5 billion+ fintech deal.
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