Visa Inc. (NYSE:V) has budged into pressure and terminated plans to acquire Silicon Valley start-up Plaid. Early last year, the company inked a $5.3 billion deal to acquire the start-up as it sought to strengthen its debt payment empire. The deal conversely attracted interest from the Department of Justice.
DOJ Scrutiny
Concerned by the DOJ antitrust lawsuit, Visa has decided to call it quits. In its antitrust lawsuit, the DOJ had sought to block the deal on concerns it will affect competition in the payment business. The DOJ has always reiterated that if the $5.3 billion deal was allowed to go through, it would have led to the elimination of a young competitive threat with tremendous potential.
The DOJ went on to cite Visa CEO’s AL Kelly remarks that showed Plaid would be an ‘insurance policy’ for neutralizing any competition threat in the debit business. Visa’s pursuit of Plaid did not come as a surprise.
The silicon startup boasts of unique API software that allows start-ups to connect to users' banks. As it stands, the API connects to more than 11,000 banks, a hot property that Visa would have loved to add to its arsenal of tools. Amid the deal termination, Plaid will continue working with Visa. Plaid CEO Zach Perret has confirmed Visa will remain as a strategic partner and investor going forward.
Anticompetitive Practices
The DOJ has already echoed its support for the termination of the proposed takeover. The agency has come under scrutiny in recent years for doing little to curb practices by tech giants, some of which have gone to enhance monopoly. A number of companies have been accused of acquiring small players in a bid to stifle competition and enhance their monopolistic practices.
Facebook, Inc. (NASDAQ:FB) is one of the tech companies that have always elicited mixed reactions over the way it has carried itself to the extent of becoming a social networking behemoth. The company has been accused of resorting to acquiring companies it deems to pose significant competition.