American Banker - Visa-Plaid deal highlights need for more scrutiny of M&A

Garphil Julien, research associate for Open Markets Institute, and Daniel Hanley, policy analyst for Open Markets Institute, write in American Banker that Visa’s acquisition of Plaid highlights the need for more merger enforcement.

As the Biden administration begins transitioning leaders into finanical and enforcement agencies like the Department of Justice, they must also consider a new approach to merger enforcement with more strict, updated and concrete rules.

The financial industry is a great place to start this new approach as there are a number of big-name deals pending approval.

Earlier this year Visa announced a $5.3 billion deal to acquire Plaid that would give the credit card giant a rising competitor in data aggregation. Plaid’s new debit card business would have allowed consumers to purchase online products directly from their bank accounts and mobile applications without using payment processors, such as Visa, that have been known to impose harsh transaction fees for services. This acquisition, exacerbating the spate of consolidation in the financial industry, hurts consumers and independent businesses.

While the Justice Department already announced last month its intention to block the acquisition, the agency missed the opportunity to stop similar monopoly-type mergers that are just as patently harmful.

The current merger enforcement regime leaves too much room for subjective and haphazard enforcement. Anemic enforcement in the financial industry has also led to dangerous concentrations of financial risk in the economy.

History, however, can provide solutions to fix these enforcement issues. The incoming Biden administration must instruct the DOJ to enact new bright-line M&A rules similar to its 1968 guidelines.

Such rules stop competitors from merging if the top four firms had a market share of more than 75%, and the combined firms have 4% or more of the market. Additionally, the DOJ would challenge a merger for downstream or upstream vertical dependents if a supplier had 10% or more market share, or an actual or potential customer had 6% or more market share in a downstream market.

Read the full article on American Banker here.