In November, the Justice Department sued to block Visa from acquiring Plaid and now Visa has abandoned that acquisition effort. The first line of the complaint filed by Justice states, “Visa seeks to buy Plaid – as its CEO said – as an “insurance policy” to neutralize a “threat to our important US debit business.”
It goes on to state “Plaid, a financial technology firm with access to important financial data from over 11,000 U.S. banks, is a threat to this monopoly: it has been developing an innovative new solution that would be a substitute for Visa’s online debit services. By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”
So Justice has successfully protected technology that might create a competitive alternative debit network over the next decade, while also eliminating a huge $5.3 billion payoff for Plaid investors.
It will be interesting to watch what happens to Plaid’s debit dreams and what other preemptive strikes Justice has plans to implement:
“Visa Inc., facing a prolonged antitrust fight with the U.S. Justice Department, walked away from a proposed $5.3 billion acquisition of Plaid Inc. aimed at expanding the card network’s services.
The department sued to block the deal in November, accusing Visa of trying to buy the financial-technology firm to eliminate an emerging threat to its online debit business. Visa has said the government failed to provide ‘a shred of detail’ about how Plaid’s products would ultimately compete with the payments behemoth.
‘It really became quite clear in recent weeks that the Department of Justice is not inclined to work with Visa and Plaid to bring this process to a timely and reasonable conclusion,’ Visa Chief Executive Officer Al Kelly told analysts on a conference call Tuesday. ‘Therefore, we decided not to devote more time to this acquisition.’
The government called the companies’ decision to halt their combination ‘a victory for American consumers and small businesses.’ President-elect Joe Biden’s Justice Department would’ve been responsible for seeing through the case at a trial set for June.
‘American consumers and business owners rely on the internet to buy and sell goods and services, and Visa — which has immense power in online debit in the United States — has extracted billions of dollars from those transactions,’ the Justice Department said in a statement. ‘Now that Visa has abandoned its anticompetitive merger, Plaid and other future fintech innovators are free to develop potential alternatives to Visa’s online debit services.’“
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group