The U.S. government on Thursday filed a lawsuit seeking to block Visa Inc V.N from purchasing the financial technology company Plaid.
In a complaint filed with a federal court in San Francisco, the government called Visa “a monopolist in online debit transactions,” and said the proposed acquisition “would eliminate a nascent competitive threat” to that monopoly.
Visa said in January it had agreed to buy privately held software startup Plaid Inc in a $5.3 billion deal aimed at boosting the payments giant’s access to the booming financial technology sector.
Visa said it “strongly disagrees” with the lawsuit, adding that it “reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates.” The company said it “intends to defend the transaction vigorously.”
Visa shares were up more than 2% in midday trading.
The Justice Department’s lawsuit said Visa’s chief executive called the acquisition an “insurance policy” to neutralize a “threat to our important U.S. debit business.”
Visa has some 70% of the market for online debit services, while Mastercard MA.N is at 25%, the complaint said.
Plaid, a financial technology company with access to financial data from over 11,000 U.S. banks, “is a threat to this monopoly: it has been developing an innovative new solution that would be a substitute for Visa’s online debit services,” the Justice Department said.
Plaid is the backbone of financial technology apps like Venmo, which is owned by PayPal, Acorns and Betterment, the government said in its complaint.