Earlier this year, payment giant Visa announced its plans to buy Plaid, a top player in the financial-technology space. However, the plan has hit a major roadblock as the Department of Justice (DOJ) voiced concerns over antitrust issues with the deal.
The DOJ may file a lawsuit to block the deal if it finds enough evidence of excess position in the sector.
DOJ wants to prevent an unfair advantage
The concern of the department is the deal may limit competition within the sector if the deal falls through, allowing Visa to have an undue advantage over other players in the sector.
Yesterday, the Wall Street Journal reported that the DOJ will decide on the deal soon.
The department has already filed a petition with the U.S. district court in Massachusetts, requesting consulting firm Bain & Co to provide documents to conclude the antitrust review. The document also includes information that describes Visa’s strategies, competition methods, and pricing against other card networks.
However, the department said the law firm is proving difficult and being reluctant to provide the required documents. According to DOJ, Bain was “asserting unsupported claims of privilege over the documents.”
When Bain was reached to comment on the situation, the law firm declined to comment, choosing not to reveal anything to the public.
Visa wants to close the deal to enable the payment giant to have more access to the fintech space. But it may not go through if the DOJ sees enough evidence of any unfair competition as a result of the deal.
Plaid Inc. offers a variety of technological infrastructure for a wide range of next-generation apps. People familiar with the matter said the DOJ is stalling the completion of the deal because it wants to make sure the deal doesn’t limit the competition brewing in the payments sector.
In line with the suite, the DOJ has been lining up potential witnesses for the case, but no action has been taken yet.
Plaid provides a platform for cardless purchase
Plaid has been viewed in the industry as a platform that can help users make purchases without relying on debit or credit cards.
The Silicon Valley start-up connects over 200 million consumer accounts with 11,000 banks. The firm has dealings with high-profile clients such as Robinhood, Venmo, Betterment, and top crypto exchanges such as Gemini and Coinbase.
With this wide customer-base in the financial sector, DOJ fears Visa’s purchase of the firm may give it an unfair advantage over other competitors in the industry.
The US antitrust bodies have improved their scrutiny on payment and fintech giant to help preserve the nascent competition in the payments sector.
It’s not certain whether any of Visa’s competitors brought complaints about the deal to the DOJ, but the authorities have always been upfront about any deal that will cause a major setback in the payments sector.