San Francisco, Nov 6 (IANS) The US Department of Justice (DoJ) has filed a civil antitrust lawsuit to stop Visa Inc.’s $5.3 billion acquisition of financial services company Plaid Inc.
Visa is a monopolist in online debit services, charging consumers and merchants billions of dollars in fees each year to process online payments, DoJ officials claimed on Thursday, adding that Plaid, a successful fintech firm, is developing a payments platform that would challenge Visa’s monopoly.
“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,” Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division said in a statement.
“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.”
According to the complaint, Plaid powers some of the most innovative fintech apps. Plaid’s technology allows developers to plug into consumers’ various financial accounts, with consumer permission, to aggregate spending data, look up balances, and verify other personal financial data.
Headquartered in San Francisco, California, Plaid connects to 200 million consumer bank accounts and 11,000 US banks.
The complaint alleges that Visa’s CEO viewed the acquisition as an “insurance policy” to protect against a “threat to our important US debit business.”
Visa’s CEO justified the deal to Visa’s Board of Directors as a “strategic, not financial” move, and noted that in part because “our US debit business (is) critical and we must always do what it takes to protect this business.”
Unless acquired, Visa feared that Plaid “on their own or owned by a competitor (was) going to create some threat” with a “potential downside risk of $300-500M in our US debit business” by 2024.
If Plaid remained free to develop its competing payment platform, then “Visa may be forced to accept lower margins or not have a competitive offering.”
In response, a Visa spokesperson told ZDNet that “Visa strongly disagrees with the DOJ, whose attempt to block Visa’s 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,” the spokesperson was quoted as saying.
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