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The attorneys representing the Justice Department said that a successful acquisition would extend Visa’s “monopoly” in the payments industry.
The US Department of Justice (DOJ) aims to block Visa Inc (NYSE: V) from acquiring fintech firm Plaid. DOJ sees Plaid as a competitor to Visa, and the acquisition may limit competition in the payments sector.
The DOJ has filed an antitrust lawsuit to stop Visa’s plan to acquire Plaid. Referring to Visa as a “monopolist,” the Justice Department also mentioned Visa’s dominance in the payments industry. As noted in the complaint, Visa’s proposed acquisition violates Section 2 of the Sherman Act and Section 7 of the Clayton Act.
In the complaints filed with a Northern California federal court, the department said:
“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.”
The Justice Department further referred to comments by Visa CEO Al Kelly on the acquisition. The department highlighted Kelly’s remark on the deal as an “insurance policy.” The DOJ also said that the CEO described the purchase as a plan to subdue a “threat to our [Visa’s] important US debit business.”
In addition, the attorneys representing the Justice Department said that a successful acquisition would extend Visa’s “monopoly” in the payments industry. Hence, the complaint said the acquisition “must be stopped.”
Furthermore, the DOJ complaints stated Visa’s 70% market share and Mastercard‘s inability to restrain Visa’s monopoly. However, the DOJ believes that Plaid is positioned to “undermine Visa’s monopoly in online debit services.” The complaint revealed that Plaid’s connections with 11,000 financial institutions in the US would enable the fintech company to provide online debit services. This way, Plaid will counter Visa’s monopolistic position in the payments space.
According to a CNBC report, Visa has declared its disagreement with the antitrust lawsuit. Visa said the department’s attempt to block its acquisition of Plaid “is legally flawed and contradicted by the facts.”
The payment giant added:
“This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates.”
Visa’s Plans to Acquire Plaid in $5.3 Billion Deal
At that time, Visa CEO said the acquisition would help the payments company to grow further. He also noted that the acquired fintech efforts would help Visa to serve its consumers better.
Currently, Visa is down 0.68% to $196.30 in after-hours trading. The payments company has pulled in gains in the past year and also since the year began. Visa climbed 10.43% over the past year and over 5% since the beginning of 2020. Also, the company gained 0.65% and has jumped nearly 9% in the last five days.
Despite the recent gains, V has declined 4.36% in the past month.