Visa ceases acquisition of Plaid after DOJ raises antitrust concerns

Visa halted the takeover efforts of Silicon Valley start-up Plaid about two months after the Justice Department filed an antitrust lawsuit for restricting competition in the payments industry.

The company said the decision to end the merger was mutual.

About a year ago, on January 13, 2020, Visa announced it planned to acquire Plaid in a $ 5.3 billion deal – roughly double the startup’s last private valuation. The company’s API software, often referred to as the ‘plumbing’ behind fintech companies, allows start-ups to connect to users’ bank accounts. The company says it integrates with more than 11,000 banks.

Plaid CEO Zach Perret said in a statement that the company will work with Visa as an investor and partner in the future.

The deal hit an issue late last year after the DOJ pointed out that the Visa acquisition could eliminate an emerging competitive threat. The DOJ cited Visa CEO Al Kelly’s description of the deal as an “insurance policy” to neutralize a “threat to our significant US debit business.”

The department argued at the time that there was the potential through the deal to extend a Visa “monopoly” on debit transactions, adding that it “should be stopped”.

The DOJ said in a statement Tuesday that the merger termination was “a victory for US consumers and small businesses.”

The lawsuit symbolized a step many tech critics believe should have been taken by the Federal Trade Commission when it approved Facebook’s takeover of Instagram in 2012 and WhatsApp in 2014.

Now those mergers are once again in the public debate. Late last year, the FTC and several states filed antitrust lawsuits against Facebook, claiming it used its market power to crush competitors before they could become true rivals to the Facebook empire. The suits suggest remedies that could include requiring Facebook to split off those two companies.

– CNBC’s Kate Rooney and Lauren Feiner contributed to this report.

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