Visa abandons Plaid takeover after DOJ raises issues

Visa ended its takeover of the Silicon Valley business about two months after the Department of Justice filed an antitrust lawsuit claiming it would restrict 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 its intention to acquire Plaid in a $ 5.3 billion deal – roughly double the company’s last valuation. The company’s API software, often referred to as the ‘plumbing work’ behind fintech companies, enables start-ups on users’ bank accounts. The company says it links in with more than 11,000 banks.

CEO Zach Perret says in a statement that the company will work with Visa as an investor and partner going forward.

The agreement came to a head late last year after the DOJ pointed out that Visa’s acquisition could eliminate an emerging competitive threat. The DOJ cites Al Kelly’s CEO Al Kelly’s description of the deal as an “insurance policy” to neutralize a “threat to our major U.S. debit business.”

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

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

The lawsuit symbolizes a step that, according to technology critics, had to be taken by the Federal Trade Commission when it approved Facebook’s acquisition of Instagram in 2012 and WhatsApp in 2014.

Now these mergers are going into the public discussion again. Late last year, the FTC and several states filed antitrust applications against Facebook, claiming that it was using its market power to bump up competitors before they could become true competitors for Facebook’s empire. The charges point to remedies that may include Facebook having to shut down the two businesses.

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

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