Retailers welcome DOJ challenge to Visa acquisition

The federal government is looking to block Visa’s $5.3 billion planned acquisition of fintech start-up Plaid on grounds that it would limit competition in the payments industry.

According to a complaint filed by attorneys for the Department of Justice, the deal has the potential to extend a Visa “monopoly” on debit transactions. For antitrust reasons, the acquisition “must be stopped.”

“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 said in the complaint.
 
The National Retail Federation said it welcomed the suit, agreeing with federal officials that the takeover would threaten competition in the payments market.

Plaid provides technology that supports mobile apps such as Venmo, a service which allows consumers to send money to friends or retailers without using expensive processing networks such as those run by Visa, according to the NRF.  Banks and card companies charge merchants a “swipe” fee averaging about 2 % for credit cards and about 25 cents for debit cards for payments processed over the networks, amounting to more than $100 billion a year.

“Visa has used its power to impose anticompetitive prices and practices on merchants for decades,” NRF chief administrative officer and general counsel Stephanie Martz said. “One of the few ways to bring Visa’s anticompetitive behavior under control is through the adoption of innovations powered by technology from companies like Plaid. But Visa’s buying spree of fintech companies is an attempt to protect its dominance of the payment card industry and extend that control into mobile payments and other new payment options. This acquisition would block badly needed competition and should not be allowed to move forward.”

NRF asked DOJ in a March letter to “carefully scrutinize” Visa’s acquisition of Plaid, saying new payment technologies present “the one glimmer of hope” for alternatives to card networks such as Visa’s. The United States is the only country with no usable financial technology alternative for consumer networks that is not proprietary to a card network or bank, NRF said.

Plaid is one of five fintech companies Visa has announced plans to acquire or enter partnerships with since 2019.

In a statement, Visa said it “strongly disagrees” with the Department of Justice, “whose attempt to block Visa’s acquisition of Plaid is legally flawed and contradicted by the facts.”