On Thursday, the US Justice Department filed a lawsuit to end Visa's planned acquisition of $ 5.3 billion investment firm Plaid, saying it would violate antitrust laws and eliminate competition in the online debit market.
In a lawsuit filed in federal court in Northern California, Visa was called a "monopoly" in online debit transactions and noted that its proposed acquisition of Plaid violates both Section 2 of the Sherman Act and Section 7 of the Clayton Act.
Visa currently operates the largest card network in the United States and has 70% of the market for all online debit transactions, according to a Justice Department complaint. Plaid, on the other hand, provides the technology infrastructure for several high-tech platforms such as PayPal Venmo and the Coinbase crypto exchange.
Plaid has also worked with at least two decentralized finance (DeFi) startups: Dharma and Teller Finance.
The complaint said that, speaking to Visa's board of directors about the Plaid purchase, Visa's senior management assessed a “potential downside risk” of $ 300 million to $ 500 million “in our American debit business” by 2024 if Plaid falls into the hands of a competitor. According to the Department of Justice, Visa knew that losing Plaid could pose “significant risk to our US debit business” and that “Visa might be forced to accept lower margins or not have a competitive offering.”
While the antitrust lawsuit acknowledged that Plaid's current technology does not compete directly with Visa, the Justice Department noted that Plaid's online debit service could become a significant competitor to Visa and Mastercard.
"If the deal is allowed, it will deprive American merchants and consumers of this innovative alternative," Assistant Attorney General Makan Delrahim of the Justice Department's antitrust division said in a statement.
Plaid declined to comment, but a Visa spokesman told The Wall Street Journal that the lawsuit is "legally inappropriate and contrary to the facts. ... The combination of Visa and Plaid will bring significant benefits to consumers seeking access to a wider range of financial services, and Visa intends to vigorously defend this deal. "