DOJ lodges lawsuit to prevent Visa from acquiring Plaid

The U.S. Justice Department has lodged a civil antitrust lawsuit seeking to block Visa Inc. from acquiring Plaid Inc., a company that could pose a competitive threat to Visa's significant foothold in online debit services.

"Plaid powers some of today’s most innovative financial technology (“fintech”) apps, such as Venmo, Acorns, and Betterment," according to the complaint. "Plaid’s technology allows fintechs to plug into consumers’ various financial accounts, with consumer permission, to aggregate spending data, look up balances, and verify other personal financial information."

The company, which already has established connections to millions of consumer bank accounts and thousands of U.S. banks, is planning to create a payments network that would permit people to make payments from a bank account through the use of bank credentials instead of a debit card, thus posing a competitive danger to Visa, a company that boasts a significant market share in the area of online debit.

The complaint says that Visa's CEO communicated to his CFO the idea that buying Plaid represents an "insurance policy to protect our debit biz in the US."

While MasterCard also operates in this online debit business space, it has a lesser market share and has not driven down Visa's prices, according to the complaint.

"For years, Mastercard has neither gained significant share from Visa nor restrained Visa’s monopoly," the complaint says. "Mastercard’s participation in the online debit market has not translated into lower prices for consumers, and this appears unlikely to change."

“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.”