Visa Sued by U.S. Over Proposed Purchase of Plaid

The U.S. Justice Department's antitrust authorities sued to stop Visa's proposed $5.3 billion acquisition of the fintech firm Plaid.
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The U.S. Justice Department on Thursday sued to stop Visa's  (V) - Get Report $5.3 billion acquisition of the fintech firm Plaid, alleging the credit card giant wants eliminate a threat to its online debit business. 

Visa shot back, saying in a statement that it "strongly disagrees with the Department of Justice, whose attempt to block Visa’s acquisition of Plaid is legally flawed and contradicted by the facts."

Shares of Visa were up 2.2% to $198.24 at last check.

The complaint alleges that Visa CEO Al Kelly viewed the acquisition -- the second-largest in Visa’s history -- as an “insurance policy” to protect against a “threat to our important US debit business.” 

Kelly justified the deal to Visa’s board as a “strategic, not financial” move, the government said. And he noted that in part because “our US debit business i[s] critical and we must always do what it takes to protect this business.”  

Plaid’s technology enables developers to plug into consumers’ various financial accounts -- with consumers' permission -- to aggregate spending data, look up balances, and verify other personal financial data.

Plaid connects to 200 million consumer bank accounts and 11,000 U.S. banks. Visa in January agreed to acquire Plaid for $5.3 billion.

Because it accesses data on behalf of so many fintech app customers, the government said, Plaid has become the leading financial data aggregator in the U.S. 

Plaid’s established connections and technology "uniquely positions it to enter the payments market and disrupt Visa’s monopoly," the government said.

“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 a nascent competitor developing a disruptive, lower-cost option for online debit payments."

If  the deal is allowed to proceed, Delrahim said, it "would deprive American merchants and consumers of this innovative alternative to Visa and increase entry barriers for future innovators.” 

The complaint charges that Visa has dominated online debit for years and has protected its monopoly with exclusionary tactics that have prevented rivals, including Mastercard  (MA) - Get Report, from expanding or entering.

"This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates," Visa said in its statement. 

"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."