Visa’s plan to acquire Plaid is forfeited as the Department of Justice announced that the two companies had abandoned their merger plan.
The Fintech giant Visa cancels the acquisition of Plaid announced last year for a whopping 5.3 billion dollar.
Visa Cancels Plaid Acquisition after DOJ Case
Visa and Plaid announced the termination of the agreement for the merger after the DOJ antitrust lawsuit threatening to block the deal.
The Department of Justice said that VISA is reportedly acquiring Plaid to cut competition in the market.
There have been many instances of antitrust violations in the tech industry of late. The Department of Justice is closely watching such instances of violations by leading tech firms. According to the Department of Justice, Visa is using acquisition to increase its monopoly in the market and thus posing a threat to the US debit business. By acquiring Plaid, Visa would neutralize the competition, and this is a potential threat to the newer players in the online debit system. The complaint further highlighted that Visa does not have much competition in the online debit services market, and it’s only competitor Mastercard also has a very smaller market share than Visa.
While Visa has long-term contracts with the banks, which restricts the banks to issue Mastercard cards, Visa has a very strong position in the market. The complaint stresses that Visa has curtailed its smaller rivals by either posing technical barriers or gaining restrictive agreements with institutions. The barriers restrain smaller competitors from growing their share in the online debit market. While Plaid is one of the rare threats to Visa against its monopoly as the company has the potential to undermine Visa’s monopoly. Now Visa is acquiring Plaid to cut the competition and retain its monopoly.
The antitrust department representative Makan Delrahim said that “Visa — which has immense power in online debit in the United States — has extracted billions of dollars from those transactions..” With DOJ’s victory in stopping Visa to acquire Plaid, the industry is safeguarded from ant competitiveness. Now fintech innovators like Plaid other upstarts are free to build alternatives to provide an alternative to Visa services and aspire to grab a substantial market share. The customers get better services, and competitive prices as one player’s monopoly is curtailed.
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