Visa's plan to fight its DOJ antitrust lawsuit

Companies have two basic choices when faced with an antitrust lawsuit from the U.S. Justice Department: Fight or flee. Visa plans to fight.

Driving the news: The credit card giant filed its legal response to DOJ's efforts to block its $5.3 billion purchase of fintech "connector" company Plaid. Its primary arguments are that regulators gerrymandered an industry definition and conjured competition.

Industry: The DOJ believes that Visa is a monopolist in the online debit card space, arguing that its market share exceeds 70%. Visa doesn't dispute that figure, but instead argues it's arbitrary.

• Visa claims that the relevant industry is online payments, which would include not just online debit, but also credit cards and services like Apple Pay. Or at least would include other methods of direct debit from bank accounts, such as PayPal and using routing numbers to satisfy utility bills, etc.
• Also worth noting is that Visa's overall debit card market share drops to 60%+ when in-person purchases are included (it increases for online since few e-commerce merchants accept PIN cards).

Competition: The DOJ argues that Plaid could become a major competitor in the online debit space, and that Visa's acquisition is designed to extinguish that nascent threat.

• In short, Visa calls this nonsense, claiming Plaid has no online debit efforts in its product pipeline.
• DOJ had obtained communications from a Visa biz dev exec who said that Plaid "threatens Visa" in terms of online debit, analogizing it to an underwater volcano that has explosive potential despite being barely visible. Visa asks in its reply for the entirety of those communications to be reviewed by the court.
• A source familiar with the situation tells Axios that the executive was deposed by DOJ and testified that his statement — which was part of a research document from early 2019 — was not seen by senior Visa executives who had a decision-making powers on the Plaid deal.

Timing: There's also a dispute over when this trial might begin, with DOJ asking for next September and Visa saying it could be ready by late February. An upcoming case management conference should sort all of that out.

The bottom line: There's no structural remedy available here, because Plaid doesn't have an online debit business that Visa could divest. And there really isn't a Plaid rival of similar scale. So unless DOJ's next antitrust chief chooses to reverse course, this one is headed to court.

Go deeper: Read the DOJ's complaint and Visa's reply.