Visa Hits Back

Visa Inc. isn’t taking it lying down. The card network last month delivered a rebuke to the Department of Justice over the government’s antitrust lawsuit attempting to block Visa’s $5.3-billion acquisition of Plaid Inc., calling the lawsuit “legally flawed and contradicted by the facts.”

The Department of Justice, which had filed the suit hours earlier, charges that Visa’s deal for Plaid is an effort to stifle competition in debit networking by acquiring an entity whose technology could enable it to challenge what the DoJ sees as Visa’s dominance in that market.

“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 says in a prepared statement.

“Now, Visa is attempting to acquire Plaid, a nascent competitor developing a disruptive, lower-cost option for online debit payments,” the statement continues. “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.”

Visa announced in January it had struck a deal to acquire Plaid, an 8-year-old company that connects nonbank payments providers such as Stripe and Venmo with consumers’ bank accounts. The links, which are opened with consumers’ permission, are used to aggregate spending data, look up balances, and verify other personal financial information.

These connections, also known as open banking, are vital links for fintechs seeking to enable such services as peer-to-peer payments, online banking, and digital investing (“Open Banking And Its Friends,” September).

One of the biggest players in open banking, Plaid has connections to 200 million consumer bank accounts and 11,000 U.S. banks, according to the DoJ.

In its response to the lawsuit, Visa argues the government misunderstands both Plaid’s business and the ultra-competitive landscape in which it operates.

“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,” Visa says in its statement.

“As we explained to the DoJ, Plaid is not a payments company. Visa’s business faces intense competition from a variety of players—but Plaid is not one of them,” the statement goes on. “Plaid is a data network that enables individuals to connect their financial accounts to the apps and services they use to manage their financial lives, and its capabilities complement Visa’s.” good for competition.”

Far from being anticompetitive, the merger will be “good for competition,” Visa argues. The company could not be reached for further comment.

Despite Visa’s claims, Plaid’s size and reach are most likely what gave rise to the DoJ’s theory that an acquisition by Visa would violate antitrust law, says Patricia Hewitt, principal at PG Research & Advisory Services, a Savannah, Ga.-based consultancy.

“There is increasing value in organizations to get to depository accounts and affect transactions in those accounts,” Hewitt says. “What Plaid does is connect disparate entities to bank accounts and other authentication services. The acquisition of Plaid by Visa could lock out a lot of competition in open banking.”

“Visa has always been an aggressive competitor and it looks for contractual exclusivity in its business arrangements,” she adds. “The DoJ is obviously looking hard at the antitrust implications of Visa’s planned acquisition of Plaid.”