The United States Department of Justice has sought to block Visa’s proposal to acquire Plaid, an API fintech company that makes it possible for institutions to connect with bank accounts of users: “The DOJ claims Visa’s acquisition of Plaid would violate two federal antitrust laws — the Sherman Act and the Clayton Act — and allow Visa to maintain a monopoly in online debit transactions”.
This singular action could kill the party in the global fintech space. Yes, it is now evident that the U.S. government would not allow industrial age firms to use cheap money, during this age of low interests, to buy out competitors. A world without Plaid is one where there are fewer thorns for Visa, and the government does not want that.
A federal antitrust lawsuit filed November 5 by the U.S. Department of Justice seeks to block Visa’s proposed $5.3 billion purchase of fintech startup Plaid, a San Francisco-based fintech that enables applications to connect with users’ bank accounts.
In the court filing, the Department of Justice (DOJ) complained that Visa is buying Plaid to wipe out a competitor in the lucrative business of online debit transactions.
The DOJ claims Visa’s acquisition of Plaid would violate two federal antitrust laws — the Sherman Act and the Clayton Act — and allow Visa to maintain a monopoly in online debit transactions.
“Visa seeks to buy Plaid—as its CEO said—as an ‘insurance policy’ to neutralize a ‘threat to our important US debit business,” said the Justice Department in its lawsuit.
The government is changing its playbook after it allowed Facebook to pick properties like Whatsapp, Instagram and others. No matter how you see it, the government may be right: the idea of extremely rich companies buying out competitors does not usually favour consumers in the financial sector. Plaid has a promise of being the future Visa, and unless Visa is ready to go back to the lab and innovate, cheap money should not save it.
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Months ago, Visa had put a $5.3 billion acquisition deal for Plaid: “Visa in January announced plans to acquire Plaid, which makes digital infrastructure linking financial data from people’s bank accounts to the apps they use to manage their money such as Venmo, Coinbase and Expensify.”
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Facebook’s acquisition of both Instagram and Whatsapp was one ‘error’ the DOJ might not allow to repeat itself again, same goes for Google and YouTube.
If you cannot build from scratch, just keep managing your old self, the era of allowing few companies to buy off the innovative ones is gradually coming to an end; times have changed.
The intent of buying is not to make them better, but to kill off competition, even when they claim the opposite.
Companies are not run by angels, so almost all their acquisitions are selfish.