Visa says it will drag on its deal with Plaid to avoid continued litigation.
The Department of Justice (DOJ) filed an antitrust lawsuit last November to block Visa Inc.’s upcoming acquisition of Plaid, an electronic payments technology company. Now Visa has officially announced that it will stop the $ 5.3 billion deal. Plaid is a San Francisco-based company that validates users’ bank credentials by creating bogus account login pages to facilitate transactions. This would have given Visa customers the ability to make secure payments directly from their financial accounts without having to use debit card transfers. These cards are mostly controlled by Visa or Mastercard.
Visa is the largest payment processing company in the world, and DOJ officials believed the deal between the two companies would have given too much power over the way consumers buy goods and services. The agency’s lawsuit alleged that the partnership would “allow Visa to maintain its monopoly and competitive prices on online direct debits”. This would have put Mastercard at a particular disadvantage and further blocked the entry of newcomers to the market.
Photo from CardMapr on Unsplash
“American consumers and business owners are increasingly buying and selling goods and services online, and Visa – an online debit monopoly – has withdrawn billions of dollars from these transactions,” said Assistant Attorney General Makan Delrahim of the DOJ’s antitrust division. “Now Visa is looking to acquire Plaid, an emerging competitor developing a disruptive, lower-cost option for online debit payments. If the acquisition could proceed, the acquisition would deprive American merchants and consumers of this innovative alternative to Visa and raise the barriers to entry for future innovators. “
The complaint alleged that Al Kelly, CEO of Visa, viewed the acquisition as “an insurance policy to protect against a threat to our vital US debit business”. It would come at a time of transition in the financial sector, with a significant increase in the use of international cryptocurrency.
The lawsuit states: “The Visa CEO justified the deal to Visa’s board of directors as a strategic rather than a financial move, stating that this was in part because our US debit business was critical and we always have to do that to protect this business. Unless the plan was implemented, Visa feared that Plaid was alone or owned by a competitor [was] If Plaid continues to be free to develop its competing payments platform, Visa could be forced to accept lower margins or not have a competitive offer. “This could pose a threat with a potential downside risk of $ 300-500 million in our US debit business.”
In its most recent announcement, Visa claimed the partnership has continued to benefit its customers and the market – especially “financial institutions and developers”. However, Kelly said the company wants to resolve the matter to avoid continued litigation.
“It has been a full year since we first announced our intention to acquire Plaid and long and complex litigation is likely to take significant time to be fully resolved,” he said in a statement.
Visa cancels the merger with Plaid following antitrust proceedings by the Justice Department
Merger of visa and plaid demolition after a blocking action by the antitrust department