Nov. 5 (UPI) -- The United States sued behemoth credit card company Visa on Thursday to stop its multi-billion-dollar acquisition of Plaid Inc. over anti-trust concerns.
Prosecutors accuse Visa in the complaint filed in the Northern District of California of acquiring Plaid "to neutralize" the threat it poses to its U.S. business as the financial technology firm has been developing a substitute for Visa's online debit services.
"By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers," the Justice Department said in the complaint, accusing Visa of being "a monopolist in online debit transactions."
The Justice Department said Visa's online debit monopoly is protected by "significant barriers" that Plaid "is uniquely positioned to surmount."
The complaint states Plaid's technology has made it the leading financial data aggregation company in the United States and was planning to leverage its connection to build a bank-linked payment service that would compete with Visa's debit service by allowing consumers to pay merchants directly from their bank accounts using their bank credentials.
On Jan. 13, Visa agreed to acquire Plaid for $5.3 billion, its second-largest acquisition in history, and the Justice Department is suing to prevent it from occurring, stating it violates the Sherman Act and Clayton Act, which was designed to prevent the creation of monopolies.
"Visa is attempting to acquire Plaid, a nascent competitor developing a disruptive, lower-cost option for online debit payments," Assistant Attorney General Makan Delrahim of the Justice Department's Antitrust Division said in a statement. "If allowed to proceed, the acquisition would deprive American merchants and consumers of this innovative alternative to Visa and increase entry barriers for future innovators."
Visa rejected the lawsuit Thursday, stating the Justice Department's complaint was "legally flawed" and reflected "a lack of understanding of Plaid's business."
"As we explained to the DOJ, Plaid is not a payments company," Visa said in a statement. "Plaid is a data network that enables individuals to connect their financial accounts to the apps and services they use to manage their financial lives, and its capabilities complement Visa's."
Visa said it is "confident" in its acquisition plan, stating it is good for both consumers and competition.