Visa Inc argues DOJ’s claims regarding $5.3bn deal with Plaid are without merit
The past few days have been a period of holidays for many of our readers but for some businesses, such as Visa Inc, this was a time for a legal battle. Late last week, Visa filed its answer to a complaint by the Department of Justice (DOJ) seeking to enjoin Visa’s proposed acquisition of Plaid under the antitrust laws.
In its answer, Visa denies each and every allegation in the DOJ’s Complaint.
Visa notes that Plaid and Visa are not competitors today. The company attacks the “potential competition” theory of harm used by the DOJ and says that such an approach fails on the facts.
According to Visa, the DOJ’s narrative is “nothing more than a patchwork of excerpted party documents and testimony taken out of context, stitched together with conclusory allegations where facts do not exist, and embellished with irrelevant and stale customer complaints unrelated to Plaid and this acquisition”.
In reality, the significant, tangible, near term benefits that will be derived from the transaction simply dwarf the highly remote and speculative risk of anticompetitive effects that the DOJ posits, Visa argues.
The company goes on to explain that Visa and Plaid operate in different but complementary spheres. Visa’s core competency is facilitating consumer to business transactions. Visa’s payment network competes with other card based networks including Mastercard, Discover, and American Express, other payment methods commonly used by consumers, such as cash, check, and ACH (Automated Clearing House) and competing debit networks including Accel, Star, NYCE, and Pulse.
Plaid, by contrast, plays no role in this C2B payment ecosystem. Plaid’s core competency is enabling users to connect their financial accounts to apps from financial technology firms fintechs through its application programming interfaces. In essence, Plaid moves data, not money and it competes with other connector firms such as Finicity and Yodlee.
Visa’s motivation to acquire Plaid and Visa’s valuation of Plaid is founded on the growth of this connector segment and driven by the opportunity for Visa to develop closer relationships with the proliferating ecosystem of fintechs, and by the promise of creating new value by combining Visa’s and Plaid’s complementary capabilities.
Further, Visa argues that the DOJ ignores that Plaid’s research and development efforts consisting of a small number of pipeline products that Plaid began developing only months before the transaction discussions began do not actually constitute a PBB platform that would compete with Visa’s debit products for C2B transactions.
In addition, Visa stresses that the Complaint omits any mention of Visa’s plans to integrate payment functionality into Plaid’s APIs, creating new and valuable solutions for Plaid’s customers, or of Visa’s plans to accelerate Plaid’s entry into markets outside the United States.
The DOJ focuses on “cost dissynergies” that it contends are associated with the transaction. According to Visa, these cost dissynergies are, in reality, pro competitive investments that Visa plans to make for the purpose of enhancing the functionality and security of PlaidPlaid’s products.
For these reasons and others to be presented at trial, Visa says that the DOJ’s claims are entirely without merit.