The United States Department of Justice (DOJ) filed a lawsuit Thursday to stop Visaâ€™s planned $5.3 billion acquisition of fintech firm Plaid, saying it violates antitrust laws and would eliminate competition in the online debit market.
Filed in a Northern California federal court, the lawsuit described Visa as a â€œmonopolistâ€ in online debit transactions and noted its proposed acquisition of Plaid violates both Section 2 of the Sherman Act and Section 7 of the Clayton Act.
According to the DOJâ€™s complaint, Visa currently operates the largest card network in the United States and has a 70% market share of all online debit transactions. Plaid, on the other hand, provides the technological infrastructure for multiple fintech platforms such as PayPalâ€™s Venmo and crypto exchange Coinbase.
Plaid has also been working with at least two decentralized finance (DeFi) startups, Dharma and Teller Finance.
The complaint said that in making its case before Visaâ€™s board of directors to buy Plaid, Visaâ€™s senior leadership estimated a â€œpotential downside riskâ€ of $300 million to $500 million â€œin our U.S. debit businessâ€ by 2024 should Plaid fall into the hands of a rival. According to the Justice Department, Visa knew losing Plaid could create an â€œ[e]xistential risk to our U.S. debit businessâ€ and that â€œVisa may be forced to accept lower margins or not have a competitive offering.â€
While the anti-trust lawsuit acknowledged Plaidâ€™s current technology doesnâ€™t directly compete with Visa, DOJ noted Plaidâ€™s online debit service could become a significant competitor to Visa and Mastercard.
â€œIf allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative,â€ Assistant Attorney General Makan Delrahim of the Justice Departmentâ€™s Antitrust Division said in a statement.Â Â
Plaid declined to comment but a Visa spokesperson told The Wall Street Journal that the lawsuit is â€œlegally flawed and contradicted by the facts. â€¦ 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.â€