The United States Department of Justice is filing a lawsuit in a bid to halt payments giant Visa’s $5.3 billion offer to acquire Silicon Valley start-up, Plaid over antitrust concerns.
In a statement, the DOJ said Plaid, which claims to connect more than 200 million consumer accounts with 11,000 banks, is developing a payments platform that would challenge Visa’s monopoly.
To confirm its point of view, the department quoted Visa’s CEO, Alfred Kelly as saying the acquisition is an “insurance policy to protect their important US debit business.” The complaint states that Kelly further justified the deal to Visa’s board as 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.”
Unless acquired, which was set to be one of the biggest fintech deals, Visa was concerned that Plaid would pose a threat that could cut out between $300 to 500 million from US debit business by 2024.
Assistant attorney general, Makan Delrahim of the department’s antitrust division said Visa leveraged its monopolist position in online debit services to extract billions of dollar from American individuals and businesses.
Visa Describes DOJ’s Attempt as “Legally Flawed”
“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,” Delrahim added.
For its part, Visa said it strongly disagrees with these claims and described the DoJ’s attempt to block the acquisition of Plaid as “legally flawed” and “contradicted by the facts.” It added that the action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates.
“The combination of Visa and Plaid will deliver substantial benefits for consumers seeking access to a broader range of financial-related services, and Visa intends to defend the transaction vigorously,” it added.
Visa already promoted its acquisition of Plaid, which launched in 2013, as an important development in giving consumers more security and control over how their financial data is used. Beyond this, the company said it expects the takeover to increase its net revenue by at least one percent in 2021.
Plaid co-founders, Zach Perret and William Hockey said that involving the Visa brand would help their company scale its products and global footprint.
Plaid, which reportedly connects nearly a quarter of US bank accounts through an app of one of its clients, counts high-profile customers like Betterment, Venmo, Robinhood and also the top US cryptocurrency exchanges, including Coinbase and Gemini.