By AnnaMaria Andriotis, Brent Kendall and Peter Rudegeair
Visa Inc.'s $5.3 billion deal to buy a key player in the
financial-technology space is in jeopardy because of antitrust
concerns, according to people familiar with the matter.
The Justice Department could decide soon whether it will sue to
block Visa's acquisition of Plaid Inc., a firm that provides the
technological infrastructure underpinning an array of
next-generation financial apps. After spending the better part of
the year scrutinizing the deal, the department is concerned it
could limit nascent competition in the payments sector, people
familiar with the matter said.
The Justice Department has been making preparations for
potential litigation, including lining up potential witnesses for a
trial, some of the people said. No final decision has been
The department late Tuesday publicly signaled its concerns in a
rare legal action that asks a Massachusetts federal judge to order
that Bain & Co., which has done consulting work for Visa,
comply with a civil subpoena and hand over work material related to
the Plaid deal. The department alleged Bain "has tried to stymie"
the investigation and has claimed legal privilege over important
documents, at Visa's direction.
The legal filing said the Justice Department is considering
whether the Plaid acquisition will "allow Visa -- the dominant
provider of debit services in the United States -- to create or
maintain a monopoly."
Representatives for Visa and Plaid declined to comment on the
investigation. A Bain spokesman didn't immediately respond to a
request for comment.
A Justice Department spokeswoman declined to comment on the
state of the investigation. Makan Delrahim, the DOJ's top antitrust
official, issued a written statement about Bain, saying third
parties like the consulting firm "must comply fully and
expeditiously with our civil investigative demands and provide the
documents and data we need to discharge our duties."
The Justice Department has recently placed new emphasis on
antitrust enforcement in the financial sector. The department's top
antitrust official, Mr. Delrahim, in August announced a shake-up of
internal operations to improve how the department evaluates
financial-sector competition, saying the government needed to "take
a fresh look" at how new technologies are changing competitive
dynamics in the financial-services industry.
At the same time, the Justice Department and Washington broadly
are taking a closer look at big tech companies that dominate the
way people shop, work and communicate. The Justice Department last
week filed a blockbuster antitrust lawsuit against Google, alleging
the company used its dominance to stifle competition, allegations
the search giant denies.
Any cases filed this late in the Trump administration's first
term will fall to whoever wins next week's presidential election.
Antitrust enforcement is not likely to subside if Democratic
nominee Joe Biden wins. He has said economic concentration
"threatens our American values of competition, choice, and shared
Plaid has been viewed by fintech companies and merchants as a
platform that could one day enable consumers to make purchases
without having to rely on debit and credit cards.
The San Francisco-based startup has said it provides connections
between more than 11,000 banks and financial-services companies and
more than 200 million consumer accounts.
Visa, which announced the planned acquisition in January, is the
largest U.S. card network, handling $2.2 trillion of credit, debit
and prepaid-card transactions during the first half of 2020,
according to the Nilson Report, a trade publication. Its closest
competitor, Mastercard Inc., handled $942 billion in card
transactions during the same period.
The Justice Department is also reviewing Mastercard's nearly $1
billion deal for fintech firm Finicity, a startup similar to Plaid,
as well as Intuit Inc.'s roughly $7 billion deal for
personal-finance portal Credit Karma Inc.
Visa initially said it expected the Plaid acquisition to close
by the summer, pending regulatory approval. In the summer, Visa
said it was expecting to close by the end of the year.
Plaid makes software that allows banks and fintechs to plug into
consumers' various financial accounts, enabling those companies,
with users' permission, to aggregate spending data, look up
balances and verify other personal financial information. Its
clients and partners include Venmo, the digital money-transfer
service owned by PayPal Holdings Inc.; stock-trading app Robinhood
Markets Inc.; and mortgage-software startup Blend Labs Inc.
Visa and Mastercard have been concerned about getting left
behind if more people change how they make payments and use apps
that, for example, enable bank-account-to-bank-account payments
that essentially bypass the card networks.
Both companies have been buying firms in recent years that
enable new types of payments.
Merchants, meanwhile, have been hoping that fintech companies
such as Plaid would eventually help facilitate these new types of
payments. That could allow merchants to avoid the swipe fees that
are set by networks such as Visa and Mastercard, which have long
been a point of contention between merchants and the card
Members of Congress asked the Federal Reserve in a letter this
summer to look into whether the card networks and debit-card
issuers are limiting competition in online payments. Sen. Richard
Durbin and Rep. Peter Welch, both Democrats, said in their letter
that such practices could force merchants to pay fees they can't
afford. Separately, the Federal Trade Commission is investigating
Visa and Mastercard's debit-card practices.
Plaid doesn't currently operate a payments network like Visa's,
but Plaid's software can see if a consumer is the owner of a given
bank account and can look up how much money is in that account.
The Justice Department has spoken with merchant trade groups,
people familiar with the matter said. It also has spoken with
companies that work with Plaid, including PayPal, Stripe Inc.,
which allows internet companies to accept credit cards,
cryptocurrency exchange Coinbase Inc. and Intuit, which makes
TurboTax products, according to people familiar with the matter.
PayPal was an early investor in Plaid.
Some of those interviewed told the department they were worried
the acquisition could harm fintech companies' ability to provide
services, including limiting their ability to interact with banks
on behalf of customers, those people said.
DOJ lawyers said in Tuesday's court documents that they deposed
Visa Chairman and CEO Alfred Kelly earlier this month.
Write to AnnaMaria Andriotis at email@example.com,
Brent Kendall at firstname.lastname@example.org and Peter Rudegeair at
(END) Dow Jones Newswires
October 27, 2020 22:26 ET (02:26 GMT)
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