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DOJ Suit Over Visa, Plaid Deal Sounds a Lot Like a Monopoly Case

Nov. 10, 2020, 11:31 AM

The government’s lawsuit to block Visa Inc.'s $5.3 billion acquisition of Plaid Inc. contains language that could stir expectations of possibly stronger actions against the credit card giant.

The case, filed Nov. 5 in the U.S. District Court for the Northern District of California, only seeks to block Visa’s proposed deal to buy the fintech developer, known for its software used for linking apps to users’ bank accounts. But the complaint also details Visa’s “long history” of trying to stop other emerging rivals, including PayPal Holdings Inc., from expanding into the online debt market.

The deal “fits within an established pattern of Visa trying to thwart others from challenging its monopoly power,” the agency said.

If the DOJ were to pursue stronger actions, it could expand its complaint to include monopolization claims or file an entirely separate monopoly case.

“This could be a monopolization case, it’s all there,” said John Newman, a former attorney at the DOJ’s antitrust division who is now an antitrust professor at the University of Miami School of Law.

“There’s allegations of threats, coercion to prevent innovation, you have exclusive deals, and a high market share in an industry with high barriers to entry,” he said.

‘Exclusionary Conduct’

Visa allegedly used threats and exclusive deals to undermine competitors. That has prevented “cheaper, more efficient online debt options from gaining traction” the DOJ said.

Such accusations are similar to the monopolization claims the DOJ is pursuing against Alphabet Inc.'s Google.

Such claims, if found to be true, can carry hefty repercussions, including a possible court-ordered breakup of a company’s assets.

There are “enough strong allegations of exclusionary conduct” and “clear evidence of monopoly power” listed in the DOJ’s complaint to bolster a stand-alone monopolization case against Visa, said Sally Hubbard, the director of enforcement strategy at Open Markets Institute.

The DOJ didn’t immediately respond to a request for comment.

“Visa strongly disagrees with the Department of Justice (DOJ), whose attempt to block Visa’s acquisition of Plaid is legally flawed and contradicted by the facts,” it said in a statement.

A spokesperson for Visa declined to provide further comment.

Past Lawsuits

Visa is no stranger to the government’s antitrust scrutiny, but it hasn’t been the focus of a monopoly case.

In 1998, the DOJ sued Visa and MasterCard Inc., alleging the two colluded to restrict member banks from doing business with other credit card companies, like American Express Co. A judge in 2001 ordered Visa and MasterCard to end their exclusionary conduct.

The DOJ also sued Visa, MasterCard, and American Express in 2010, alleging the three companies violated antitrust laws by enforcing anti-steering provisions that prohibited merchants from offering customers lower-fee credit cards.

Visa and MasterCard settled with the DOJ. But American Express litigated the case all the way to the U.S. Supreme Court, which in 2018 ruled in favor of the credit card company.

Merger Path

In its latest Visa case, the DOJ is asking a court only to prevent the acquisition.

The DOJ is best at bringing merger suits, considering that there’s substantial case law to support its position, said Avery Gardiner, general counsel and senior fellow for competition, data, and power at the Center for Democracy and Technology.

Merger cases also take less time because companies want a swift decision in order to close a transaction. Most merger suits take less than a year to complete, whereas cases seeking to tame a company’s conduct often take years to resolve.

“It’s smart to do this as a merger case because it is going to be easier for a judge to rule for DOJ,” said Gardiner, who previously served as a DOJ antitrust trial attorney, said.

But that doesn’t preclude the government from bringing a monopoly suit against Visa, Gardiner said.

The DOJ’s monopolization cases are much rarer than merger suits.

But in litigating Visa’s deal, the parties will conduct discovery and new facts may emerge that could support a monopolization case, said Hubbard, a former assistant attorney general in New York State’s Antitrust Bureau.

Mergers are time sensitive, and the DOJ has a narrow window to block them. “So it makes sense DOJ would do that first and but they can still bring a monopolization case against Visa separately,” she said.

Hubbard noted that the DOJ is already taking on the massive Google suit.

Whether the department will actually sue Visa with monopolization claims “is a question of where the DOJ will put their resources,” she said.

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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