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 made.

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 prosperity."

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 industry.

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 annamaria.andriotis@wsj.com, Brent Kendall at brent.kendall@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com

 

(END) Dow Jones Newswires

October 27, 2020 22:26 ET (02:26 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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