DealmakingFintechM&A / Funding

More than $13 billion in fintech M&A deals could be in jeopardy

U.S. Justice Department scrutinizing proposed acquisitions of Plaid, Finicity and Credit Karma

The fintech sector is squarely in the crosshairs of antitrust attorneys at the U.S. Justice Department.

As first reported Oct. 27 by the Wall Street Journal, Visa’s pending $5.3 billion deal to buy fintech startup Plaid is being scrutinized by the Justice Department over antitrust concerns. 

According to the Journal, the Justice Department also is reviewing Mastercard’s planned acquisition of fintech startup Finicity for at least $825 million and Intuit’s proposed purchase of personal finance platform Credit Karma for roughly $7 billion. ProPublica had reported in August that the Justice Department was more closely eyeing Intuit’s bid for San Francisco-based Credit Karma.

Bottom line: More than $13 billion in fintech M&A deals could be in jeopardy. These three deals are among the largest fintech M&A transactions announced this year.

Both San Francisco-based Plaid and Salt Lake City-based Finicity power an array of fintech apps. Plaid’s customers include Venmo, Robinhood, Chime, Acorns, Square and Stripe, while Finicity’s customers include Experian, Rocket Mortgage, U.S. Bancorp, Wells Fargo and JPMorgan Chase. Visa and Mastercard are investors in Plaid.

The Justice Department signaled Oct. 27 that it was digging deeper into the Plaid deal. Federal attorneys have gone to court to force consulting giant Bain & Co. to turn over documents related to the Plaid acquisition. Bain, which advised Visa on the Plaid purchase, claims the documents are privileged and, therefore, should be kept private.

Makan Delrahim, the assistant U.S. attorney general in charge of the Justice Department’s Antitrust Division, said in a news release that gathering “relevant third-party documents and data is essential to the division’s ability to analyze” mergers and acquisitions.

“Too often, third parties seek to flout these requirements, hoping the division will lose interest and focus its enforcement efforts elsewhere … . Third parties, like Bain, must comply fully and expeditiously with our civil investigative demands and provide the documents and data we need to discharge our duties and serve the American people,” Delrahim said.

The Justice Department says the Bain documents include materials that shed light on Visa’s pricing strategy and its competition against other debit card networks.

To be sure, many folks in fintech are watching Delrahim’s every move these days.

In March, the National Retail Federation reportedly sent a letter to Delrahim asking that he look into Visa’s acquisition of Plaid, saying the deal would “impose a stranglehold” on the U.S. payments sector.

U.S. Sen. Ron Wyden, an Oregon Democrat who’s the ranking member on the Senate Finance Committee, wrote a letter in April urging Delrahim to launch an investigation into the Intuit-Credit Karma combo. Wyden cited worries over consumer choice and data privacy.

For his part, Delrahim recently said his division was reviewing whether the federal government’s guidelines surrounding bank mergers should be updated in light of the fintech boom. “Innovative emerging technologies are disrupting traditional banking models and introducing new competitive elements to the financial sector,” he said.

That proclamation comes on the heels of Delrahim reorganizing the Justice Department’s Antitrust Division to sharpen its focus on fintech, banking and financial services. Before the shakeup, the division’s oversight of fintech, banking, financial services, insurance and credit card companies was spread across four sections of the Antitrust Division. The reorganization placed all of those under one regulatory umbrella.

“The new financial services-focused section will build expertise across the waterfront of fintech, making it well positioned to understand how new entrants in these areas may spur competition with and among traditional players,” Delrahim said in an August speech at Stanford University.

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