Protecting Nascent Competition: Visa and Plaid Abandon Anticompetitive Merger

On January 13, 2020, Visa announced plans to acquire Plaid, a successful financial technology (fintech) startup, for $5.3 billion.

Consumers use Visa debit cards to pay for goods and services directly from their bank account, including hundreds of billions of dollars in online purchases each year. Visa is accepted by the majority of U.S. merchants and earns billions of dollars each year processing these online debit payments. Plaid is a financial data aggregator whose technology enables consumers to provide their banking information to fintech applications like Acorns, Betterment, and Robinhood.

The Division sued to block the merger in November 2020 in the Northern District of California, challenging the acquisition as a violation of both Section 7 of the Clayton Act and Section 2 of the Sherman Act. According to the complaint, Plaid planned to leverage its existing technology—including connections to 200 million consumer bank accounts in the U.S.—to launch an online debit product that would compete with Visa at a lower cost to merchants.

The complaint alleged that Visa is a monopolist in online debit, extracting billions of dollars in swipe fees from merchants and consumers each year, and that Visa sought to buy Plaid as an “insurance policy” to neutralize a “threat to our important US debit business.” One Visa executive drew an island “volcano” to illustrate Plaid’s disruptive potential, whose current capabilities are just “the tip showing above the water,” warning that “[w]hat lies beneath, though, is a massive opportunity—one that threatens Visa.”

According to the complaint, Visa’s CEO recognized that the Plaid acquisition did “not hunt on financial grounds,” but justified the extraordinary purchase price as a “strategic, not financial” move because “[o]ur US debit business i[s] critical and we must always do what it takes to protect this business.”

On January 12, 2021, Visa and Plaid announced that the companies had terminated their merger agreement.

The complaint in Visa/Plaid demonstrates the Division’s commitment to blocking anticompetitive acquisitions of nascent competitors by dominant firms. In 2019, the Division similarly sued to block Sabre’s acquisition of Farelogix, alleging that the transaction would have allowed Sabre, the largest booking services provider in the U.S., to eliminate a disruptive competitor. The Division remains vigilant in ensuring dominant firms do not unlawfully protect their market power to the detriment of consumers.