DOJ Seeks to Derail Visa’s $5.3 Billion Plaid Deal

The antitrust lawsuit alleges the acquisition would stifle nascent competition in online debit payments.

November 09, 2020

WASHINGTON—The U.S. Department of Justice (DOJ) last week filed a civil antitrust lawsuit against Visa Inc., seeking to block its $5.3 billion acquisition of Plaid Inc., a San Francisco-based fintech startup developing an online debit payments network that would compete with the credit card giant, the department announced.

“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,” said Assistant Attorney General Makan Delrahim of the DOJ’s Antitrust Division. “American consumers and business owners increasingly buy and sell goods and services online, and Visa—a monopolist in online debit service—has extracted billions of dollars from those transactions,” Delrahim said.

Visa announced the deal in January. Plaid’s technology allows developers to plug into consumers’ financial accounts, with consumer permission, to aggregate spending data, look up balances and verify other personal financial data, the DOJ said. About 200 million consumer bank accounts and 11,000 U.S. banks connect to Plaid, making it a leading U.S. financial data aggregation company.

“Plaid’s money movement platform would allow consumers to pay merchants directly from their bank accounts using bank credentials rather than a debit card. Plaid’s established connections and technology uniquely positions it to enter the payments market and disrupt Visa’s monopoly,” the department said.

In the complaint filed in the U.S. District Court for the Northern District of California, the DOJ “alleges that Visa’s CEO viewed the acquisition as an ‘insurance policy’ to protect against a ‘threat to our important US debit business.’”

The DOJ noted that “millions of American consumers and merchants depend on debit services to transact business online. The complaint alleges 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. The lawsuit alleges that Visa’s proposed acquisition of Plaid is a violation of both Section 2 of the Sherman Act and Section 7 of the Clayton Act.”

Visa called the DOJ complaint “legally flawed and contradicted by the facts.”

NACS had urged DOJ to prevent Visa’s acquisition of Plaid.

In July, Sen. Richard Durbin (D-Illinois) and Rep. Peter Welch (D-Vermont), asked the Federal Reserve to investigate whether Visa and Mastercard and debit-card issuers are limiting competition in online payments, forcing merchants to pay excessive debit-card fees.