Department of Justice Sues to Block Visa’s Proposed Acquisition of Plaid

The Department of Justice filed a civil antitrust lawsuit to block Visa Inc.’s $5.3 billion acquisition of Plaid Inc, which connects to 200 million consumer bank accounts and 11000 U.S. banks.

Visa is a monopolist in online debit services, charging consumers and merchants billions of dollars in fees each year to process online payments. Plaid, a successful fintech firm, is developing a payments platform that would challenge Visa’s monopoly. 

In the statement, the Department of Justice said that Plaid would challenge Visa’s monopoly in payment. Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division claimed that Plaid is developing a disruptive, lower-cost option for online debit payments.

Plaid has become the leading financial data aggregation company in the United States 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.

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 i[s] critical and we must always do what it takes to protect this business.” 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.”

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.  The Department filed its lawsuit in the U.S. District Court for the Northern District of California.