Plaid Co-Founder and CEO Zach Perret.
The Justice Department is looking to prevent Visa’s expected acquisition of fintech startup Plaid on the grounds that it will limit competition in the payments industry.
US attorneys for DOJ outlined the potential for the deal to extend Visa̵7;s “monopoly” over debit transactions. For antitrust reasons, the $ 5.3 billion acquisition, announced in February, “must be stopped,” according to the complaint.
“By acquiring Plaid, Visa will eliminate the emerging competitive threat that is likely to lead to significant savings and more innovative online debit services for merchants and consumers,” the Ministry of Private The law said in a complaint filed with the federal court of Northern California.
DOJ cites Visa CEO Al Kelly’s description of the agreement as an “insurance policy” intended to neutralize “the threat to our significant debit business in the United States. “. Plaid is a San Francisco-based financial technology company that uses an API to connect consumers’ bank accounts with popular financial apps like Venmo and Robinhood. It is affiliated with more than 11,000 US banks and according to the lawsuit, has been developing an alternative to Visa’s debit services.
In a statement, Visa said it “totally disagrees” with the Justice Department, “whose attempt to block Visa’s acquisition of Plaid is legally flawed and contradictory to reality.” Plaid declined to comment on the suit.
“This action reflects a lack of understanding of Plaid’s business and the highly competitive payment landscape that Visa operates in,” Visa said in a statement.
US attorneys point out that Visa holds 70% of the debit market share in the United States and that its rival is unlikely to “gain significant market share” or “curb Visa’s monopoly.” They also highlighted entry barriers in building a new debit product.
“Visa rarely faces any significant threat to its online debit monopoly. Plaid is such a threat,” according to the lawsuit. “Plaid is planning to leverage that technology, combined with its existing relationships with banks and consumers, to facilitate transactions between consumers and sellers in competition with Visa. “
DOJ raised potential concerns about the deal last week with a complaint against Bain & Company, which previously consulted on the deal. The agency said Bain is withholding documents and “obstructing” the investigation. The Wall Street Journal previously reported that the deal could face legal troubles.
Visa’s Plaid acquisition is one of many well known deals that could face pressure from DOJ this year.
Credit Karma is reportedly in talks to sell its tax-filing business to Square to combat antitrust concerns, according to the Wall Street Journal. Intuit announced it would buy Credit Karma for $ 7 billion earlier this year, while also owning TurboTax. Regulators may be concerned that this combination will give consumers fewer options for filing online tax returns. Mastercard announced it plans to buy Finicity, a Plaid competitor, for about $ 1 billion earlier this year.