U.S. sues Visa to block its acquisition of Plaid | Hacker News Reader

U.S. sues Visa to block its acquisition of Plaid

reuters.com

259 pointspseudolus105 comments

> The Justice Department’s suit said Visa’s chief executive called the acquisition an “insurance policy” to neutralize a “threat to our important U.S. debit business.”

Whoooops! To all CEOs whether its China or the United States, if you want to make some value for shareholders: Shut the fuck up, forever!

Yeah, when it comes to business, the definition of "gaffe" is to tell the truth.

Also maybe, try to innovate instead of suffocating innovation with a pillow stuffed with cash.

US debit business is likely replaced with Fed instant payments in 2-3 years [1] (the core functionality is approved and building has started [2]). Can't innovate your way out of a central bank replacing your product. You're only left with uncompetitive business options to hold onto your regulatory capture as long as possible.

Plaid exists because the US hasn't mandated financial API access like Europe did with PSD2. Regulatory requirements to support this would negate the need for "innovative" startups.

EDIT: Real Talk, these networks should not be taxing economies percentage points of total payment volume [3] (again, Europe used regulation to cram down interchange fees to be more reasonable). These are legacy businesses that should be replaced with low cost utility-esq payment services such that the Fed is doing (and already exist in most first world countries [4]).

[1] https://www.bankingdive.com/news/fed-gives-new-details-on-it...

[2] https://www.federalreserve.gov/newsevents/speech/brainard202...

[3] https://theweek.com/articles/850232/why-are-all-paying-tax-c...

[4] https://en.wikipedia.org/wiki/Instant_payment#Examples_of_in...

I'm sure there will be lucrative contracts to be had by banks in that scheme. Just like electronic tax filing and ACA health plans.

I'm not so jaded yet to believe that it won't be an improvement over the status quo. YMMV. Get involved (I am, and submit comments to the Fed and contact reps on the U.S. House Committee on Financial Services). Be the squeaky wheel, do some bureaucracy hacking. Communications and relationships with representatives is some of the greatest leverage you'll ever have. Success is not assured, but constant vigilance is mandatory.

> these networks should not be taxing economies percentage points of total payment volume

I agree, but what value do you place on the insurance aspect of credit-card payments? There are definitely vendors I only buy from because I know I can call Citibank if they screw me.

"Let merchants charge customers the credit transaction fee as a surcharge [1] [2], and let consumers pay to receive the benefits if they so desire. Everyone else can use debit cards now, and instant payments when they arrive in 2023-2024 [3] [4]. If it's transaction insurance customers demand, let them vote with their dollars (versus mandating everyone pay it as a transaction tax)."

Therefore, if you value the insurance, you still should have access to it, but you should pay for it.

Citations above are in my original comment on the topic: https://news.ycombinator.com/item?id=24899057

To add to this, there is a big problem with the current structure of "insurance" as a flat rate for all consumers.

The risk is shared between the business and consumer, as all legitimate businesses still have disputes and I know many consumers who "just disputed a charge" to not pay.

My guess (based on watching data on 2 businesses for 10 years) is that 90% of the risk in the transaction is probably in the consumer (but hard to know for sure).

This makes sense, because right now with a flat rate the "good customers" (who rarely disupte) subsidize the "bad customers" (who dispute a lot).

It would be a bad idea for everyone got the same rate for car insurance, because it would promote bad behavior (since being a bad driver would be subsidized).

Small businesses also get disproportionally hit with this issue. People are less likely to dispute a charge with Amazon (and lose access to its service) than the local store.

So the bulk of the "cost" of insurance here is borne by small businesses and good customers.

How are you going to get people to adopt something that makes them pay a surcharge? Mastercard/Visa are free for the consumer (other than shops that charge for card payment, but they made that illegal in the UK).

See my citations [1] and [2] in the link in my comment you replied to where credit card surcharges charged by merchants are already permitted in the US. If instant payments are free to the customer, but they pay for the credit card transaction, the behavioral economic nudge is obvious.

On a first approximation, I place a negative value. The largest effect of that insurance is enabling the ridiculous security of credit card transactions.

Ignoring that, not much, because credit card companies are hard to deal with and that insurance doesn't even always materialize.

> Can't innovate your way out of a central bank replacing your product.

What about the fact that Visa and Mastercard are accepted internationally pretty much universally for transactions, whereas what you're talking about would be more likely analogous to the UK Faster Payments Service (though state backed). It's fantastic, however for buying a coffee tapping a contactless card that's also accepted in most other countries is much nicer. Perhaps with mobile wallets and being able to scan a QR to pay for stuff or using NFC could be equivalent in ease-of-use.

I don't hand wave away this use case, but it is a much smaller amount of volume compared to domestic payments. As instant payment services sponsored by central banks roll out, the hurdles become lower for cross currency/international transactions. TransferWise already does a swank job interfacing with antiquated financial infra for cross border transfers and payments, I imagine that you'll see more competitors and possibly even native integration with central bank apps for cross border payments as improvements continue. It's all messages (ISO 20022) on a bus or in queues after all.

My country is heavily pushing for this kind of payment system. Given how bad android security and patching is I wouldn't trust anything involving my phone.

So will this mean we go from having a fairly standard international payment system with two main players (Visa/Mastercard) where anyone from any country can pay for things in pretty much any other country, the same, way, to a situation where every country has it's own (perhaps cheaper) system. How does that work for tourism?

I assume the traditional cross border payments will stick around until better systems using new instant payment primitives are built. I would not anticipate these user experiences to get worse, only better.

Casual international use isn't much of a concern for most people in the US.

Interac in Canada is doing pretty well...it's not an either/or situation. National low-cost payment networks are pretty easy, and have been helped back artificially in the US.

https://newsroom.interac.ca/interac-by-the-numbers/

*held back

You don't have to have a global network to have global acceptance - RuPay[1] is a domestic-only network in India, but RuPay cards are accepted internationally via the Discover network. And the Fed seems to be heavily emphasizing interoperability with existing/external financial systems for FedNow, so there's no reason to think that wouldn't extend to interoperability/integration with international partners to extend acceptance internationally.

And even if they don't, siphoning off a huge chunk of domestic-only US transactions will still be a massive blow to Visa and Mastercard's revenue stream. And the ubiquitous nature of FedNow domestically could easily disrupt market dynamics, if/when it reaches a point of saturation where businesses can actively choose to not accept Visa/Mastercard payments. Squeezing their 40-50+% profit margins on top of reducing their revenue, as they're forced to actually be competitive against FedNow.

[1] https://en.wikipedia.org/wiki/RuPay

Or better yet, CEOs should not buyout competitors to eliminate threats.

Why not?

Because it’s anticompetitive, bad for users, and sometimes against US law. Like when you’re as big as Visa.

Because it's the definition of anti-competitive actions.

Maybe a CEO "should" because it's good for them and their company, but a healthy market regulator "should not" allow those type of transactions, in general, for the good of market participants.

I agree about your being specific about these types of transactions. At this scale, these things should be blocked.

In healthier marketplaces, acquisitions can also improve the overall health of the marketplace by improving efficiency, output, etc., while maintaining competition.

The interesting question to me in these discussions is, are there systemic changes we can make that would prevent these marketplace distortions from being possible in the first place, and what would be the negative tradeoffs? And are they politically feasible?

well I mean, don't say that's why you are buying them out.

Or again, don't do it in the first place.

But also, still buy them out for billions.

Shareholder call:

CEO: "And for our strategy over the next year, we will consider buying a controlling interest in Plaid..."

Icahn-type shareholder: "Really? Why? It would cost a fortune! What's the value proposition there?"

CEO: "Because Plaid has a cool ... name ...?"

That could fly, something like the brand name is good and is cheaper than the licensing fees they had offered

And just repeat growth over and over again

That's also misrepresenting material facts (in my view, which matters diddly squat in a courtroom without the right lawyer), and lying by omission. The fact that "proving" malintent in the U.S. in M&A's and market shaping revolves around someone finding a rather fiendishly worded memo is somewhat laughable.

>"You can't prove I was going to take a cookie! Maybe I just like having my hand in the jar!"

If it would get the stink eye from my Mom, the same argument form should not be considered a valid approach to business or legality.

Fair enough, maybe not the best example. The point is just that they'd have to beat around the bush and not be able to give a good enough reason that justifies a solid buyout price without admitting the monopolist strategy.

Icahn-type shareholder: Make a clone of Plaid called Tartan.

"To better address the varied needs of consumers who may desire peer-to-peer payments via less robust channels along side our world-class debit system"

Some meaningless fluff that implies it's not a competitor. Toss in something like "will allow synergies via our X to give consumers more choice about how their debits are processed" and you can even make it sound like you're doing everyone a favor rather than the obvious monopoly move.

You know, I have an honest question.

If you sell a company to an established player for $Phat_Stacks_Of_Cash, should you qualify as knowingly contributing to bad market behavior?

It seems to be accepted that decreases in competition beyond a particular threshold tends to screw up all sorts of incentives and feedback mechanisms.

It just seems to me like we're pretty doomed to stagnate and locking the status quo to the whims and operating decisions of $Handful_of_CEOs of huge established firms if we accept that growth to exit via buyout by established player is an accepted norm.

I mean, that's exactly the kind of consolidation and small social circle that makes corruption and large scale collusion possible.

> If you sell a company to an established player for $Phat_Stacks_Of_Cash, should you qualify as knowingly contributing to bad market behavior?

maybe? it seems like this is a variant of the old question: is it (morally) worse to be the hitman or the person who hired the hitman? it takes two to tango, but I'd say creating the incentive is usually worse than following an existing incentive gradient.

The reason they sell out is essentially that they don't expect to be able to do better long term (risk adjusted) essentially regardless of reason.

If the entrenched company is offering a large value for a company they recognize some sort of value to it and could try to replicate it with the funding if told "no" and that may be a fight they feel would have a good chance of losing, that growing bigger means it is "not enjoyable/in their skillset" anymore or similar reasons.

A doom of stagnation is also less than certain - the sellers care about cash first and foremost and would not priveledge entrenched beyond what they can pay and the given source funding may hypothetically come from many others - whether CEO or even "large collection of retirement or university endowment funding" even if they are run by CEOs essentially are not necessarily the status quo.

Rookie CEO mistake. They are supposed to buy them out and then ice all their progress, move all the employees into some shitty office, increase the turnover rate til no original employees are left, and then finally slowly kill the company. That's the tech industry methodology.

Can confirm

Why not? It's the natural consequence of wealth accumulation in free market economies. Not everyone has the same warchest, and money is a great moat for inefficient or rent-seeking businesses.

Being able to outspend your competitors is kind of the point of having it.

Live footage of the emergency board meeting[1][2]

[1] It's not really, this is a joke.

[2] https://www.youtube.com/watch?v=_OSj4Xmgvu8

This is probably more accurate than you know

> Whoooops! To all CEOs whether its China or the United States, if you want to make some value for shareholders: Shut the fuck up, forever!

Paging Elon Musk....

I find it just interesting that given the intense division in the US right now that the thing that seems to bring the highest bipartisan support is limiting market power of large tech companies.

The tech companies (and large business in general) can be viewed as a threat to their power, so they take action.

-edit-

Just to be clear because I've seen some comments after mine. I'm not advocating for a position, but just stating what I believe is happening. FWIW I'm more inclined to think that neutering tech companies is beneficial, but open to arguments and nuance.

That's... generally how governments should work, no? The government should not let private entities undermine it's power.

Just to be clear I'm not really advocating for a position here, just stating what I think is going on.

But with that being said, yea I agree with you here in theory. But it's exceedingly difficult for me to not be skeptical about it when I think about it as a power struggle between a Congresswoman and a tech company over who gets to fuck me over.

Yeah, there wasn't any language that indicated you were taking a side.

The thing is, at least the Congresswomen is democratically elected and (in theory) serves the interest of their constituents. Whereas a company serves the interest of it's shareholders, by law, so well-being of it's customers and even employees is secondary to it's legal mandate for profit.

Is there a particular reason why it's women in Congress who make you skeptical? Is there some context I'm missing here?

I just try to use the terms interchangeably in hypothetical scenarios so that there isn't a sense of normal association. Sometimes I use Congressman, sometimes Congresswoman. Sometimes I use Congressperson as well. I think if people are noticing then that's a clear sign to keep doing it, because you probably had a prior bias that the person doing something wrong would have been a man.

“Congressmember” in the generic and “Representative” and “Senator” for the specific houses are widely accepted (standard and formally preferred for the house-specific ones) and gender neutral.

Yes, thank you for that. I'm specifically not using gender-neutral terms in this instance, actually. The goal is to muddy the associations that exist and unfortunately gender-neutral terms are unable to do that. They definitely have a time and place for use, though, and I do use them when I think it makes sense to.

Interesting approach, but what it reads like is that you are intentionally gendering the term for some purpose. I was trying to figure out if you meant Senator Warren specifically, because she has been behind a lot of this discussion.

You might be confusing your audience more than you are accomplishing your other objective.

Hey thanks for the feedback. Yea you're right that I was intentionally gendering the term here. My goal was to have someone notice that I used Congresswoman in a negative context.

But I definitely appreciate your comment here and it's something I'll continue to evaluate. On one hand it's shouting into the void. On the other... well... it's probably still shouting into the void.

On the third hand, you’re deliberately using sexist language to … secretly fight sexism? I think a continued evaluation is indeed in order.

Hmmm. Could you specify what sexist language I’m using? That’s quite the accusation.

> I was intentionally gendering the term here. My goal was to have someone notice that I used Congresswoman in a negative context.

The proper generic term is obviously "Congresscritter".

It's just generally a surprise when the Republicans actually do their job.

Ha. Depends on how you define what their job is supposed to be. :P

Not as an absolute. Speaking broadly, outside of this specific context, it seems obvious to me that systems which are sufficiently dysfunctional should cede their power to a better system.

In the US at least, this is laid out at the very beginning of the Declaration of Independence:

> That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government

Bringing the context back in to this discussion, I don't have a strong opinion. The power the tech companies wield is scary indeed, but the amount of political dysfunction is also pretty scary.

I suppose, since they are equally scary to me, that I'd prefer them to have equal power to act as a check against each other?

Wouldn't you want power to stay with elected officials who can be removed from office by the public rather than a private business that's primarily motivated by profit and only answers to shareholders.

comments like above are reminders of how strong libertarianism is in tech circles, for better or worse

That sounds good in theory but I think in practice, at least in the relatively broken representative system in the US, I'm not so sure.

Consider that politicians often operate against the will of ~49% of their constituents. As long as they can maintain a majority, they don't care as much about the minority. I don't think a company, operating in a healthy non-monopolized marketplace, would be as willing to lose 49% of their customers.

in theory, yes. in practice, I'd rather be a customer than a constituent.

Depends on which kind of accountability is more necessary. In the same way that people buy good cheap stuff that works well from Satan himself, they also vote for their ideological allies whether or not public services are within a thousand miles of functioning.

When it is over what is a means of accountability for them (it is the media and not the tech which draws the aggro)? Fuck no - they already forget they are servants and not masters.

I think that there’s a dichotomy between east coast oil/finance/defense/old money power and west coast tech money power that’s somewhat independent of the right-left political dichotomy. There’s a desire among Washington and New York power brokers and journalists to knock big tech off its pedestal, which creates an insatiable appetite for anti-tech narratives.

I think this explains why so much of the conversation around the 2016 election blames Facebook for the result, when it was one of 100 factors, and some of the more proximate factors were choices of institutions like the FBI and the New York Times. Facebook and Twitter’s measures to visibly suppress Trump’s claims of winning the current election can be seen as attempts to head off this kind of scapegoating, neutralize the narrative, and bow to those east coast institutions. These actions are legally unrelated to antitrust, but seem to be part of an effort to cede ground in the larger conflict the antitrust actions are part of.

Do you consider Visa west coast tech money? They started in Fresno, but by BoA which is old school. Plaid then would also be west coast tech money...

Yeah, I don’t think this thread is entirely relevant to this particular case, but the parent comment was about the anti-tech actions uniting the two political parties.

For those like myself that are unaware of what Plaid does: https://plaid.com/what-is-plaid/

"Connecting your bank to your apps We power thousands of the apps that people rely on to manage their financial lives.

Venmo (peer-to-peer payments) Betterment (automated investing) Chime (online banking) Dave (earned wage access) And thousands more..."

Now of course, if only banks implemented some kind of OAuth instead of relying on a third-party logging into your account as you...

Banks are already doing that with openid. See partners of https://yes.com/ (European)

Plaid would still have a place, as they could manage connecting applications to every bank in the US (so you don't have to use different client libraries for every single bank, because god knows they won't pick a common setup).

I'm really surprised they haven't gotten BofA to give them access to their consumer accounts API, considering Plaid can't deal with BofA's SMS 2FA. It's the largest bank in the US and Plaid can't handle it, which shows how fragile the whole scraping thing really is.

https://teller.io/ is trying to do something like this.

The fact that Plaid has been so successful convincing so many consumers to enter their banking credentials into random, unverified third party sites (with no verification whatsoever that you're even talking to Plaid in the first place) is pretty amazing to me.

Goes to show, if so many people are willing to trade their financial security for convenience, is it any wonder that they'll trade their privacy for convenience?

It’s absolutely insane to me that people willingly give their bank credentials to random third party companies. Plaid (and others) are basically mitm as a service and they’ve built a billion dollar business because banks live technologically in the stone age

It's amazing... amazing to me the confused looks I get from people when they start telling me their venmo credentials or whatever and I just hand them a 20 dollar bill for my share of lunch.

It's exhausting explaining to people that I am fine with them having an extra dollar and two cents over what I owe if the alternative is giving my fucking banking password to some california cowboy company that doesn't have to follow banking regulations.

> some california cowboy company that doesn't have to follow banking regulations.

Oh they do legally need to follow most banking regulations. That many “fintech” companies don’t do regulatory training and compliance will result in hefty fines and shutdowns. The FDIC, FTC, OTS, etc. are pretty humorless and fairly efficient and effective.

I bet 99% of people think they are actually securely logging in to their bank.

I wonder what the fallout will be if plaid eventually gets hacked.

Plaidis one of the few companies offering access to banks through the PSD2 api

As someone who doesn't fully understand the rules around these acquisitions, is there a clear enough framework for what companies one can acquire?

Are companies more frequently flouting that or is this a case of suing companies while the regulatory framework catches up?

Basically, is suing companies to block acquisitions standard procedure?

There are clear-ish rules for when you need to report the transaction and seek clearance in advance. They come down to transaction size, I believe. But the DOJ/FTC can sue to block any transaction on antitrust grounds, whether reportable or not.

There are no rules that block any particular acquisition, just rules about whether you need to preemptively notify the government about the transaction and give them time to decide whether to challenge it.

Here is likely what you’re referring to. Above ~~$75M it has to be declared and then you are subject to review.

https://en.m.wikipedia.org/wiki/Hart–Scott–Rodino_Antitrust_...

Yes it's standard, or at least it was. The FTC has been rubber stamping acquisitions for almost 20 years.

they blocked the Harry’s Razor acquisition successfully

Basically, it's codified in Hart–Scott–Rodino [0]

[0] https://en.wikipedia.org/wiki/Hart%E2%80%93Scott%E2%80%93Rod...

From a realpolitik perspective, It's not possible for their to be a standard procedure in practice. Even if the law is clear and unambiguous (it's not), prosecutors and regulatory bodies have the discretion to attempt to enforce or not. These decisions are subject to an ever shifting set of power and influence as circumstances and motivations change.

As an example, in general the way Facebook and Google operate is not substantively different than it was a decade ago. The impending anti-trust action they are facing is a result of changing feelings and external conditions, not a (significant) change in law and regulation.

A decade ago Facebook did not own Instagram or WhatsApp. Framing this as "Facebook and Google have not changed how they operate" is disingenuous, seeing as Anti-trust has generally been enforced over what is in the interest of the consumer.

Google has always been an advertising company. Google's growing monopoly, however static their operating methods have been, is no longer viewed as in the consumers' best interest and is thus now under scrutiny.

I don't think it's all that accurate to frame this as "people in power are threatened by [big tech]'s power" when there are plenty of reasonable people making convincing arguments that big tech is no longer operating in the best interests of the consumer.

> is there a clear enough framework for what companies one can acquire?

There are clear enough general goals and a factors to consider, I'd say. Those goals being that transactions are prevented based on if they are anti-competitive (limit competition in some way), and if the purchasing company has significant market power.

The sticking point though, is when those general goals are passed or not.

Mastercard announced an acquisition of Finicity (Plaid competitor) a few months ago that is still pending approval.

Have to imagine that acquisition is now under further review.

Plaid speed… denied !

The usa is really showing its anti-capitalist.

Adam Smith, the man who literally wrote the book on Capitalism, warned of the danger of monopoly power and urged State regulation to prevent it.

Both you and your parent can be true, just because Adam Smith wrote the book on capitalism doesn't mean he was 100% for it in all forms.

I guess the real answer is what is capitalism, and the first answer I could find is: "an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state."

This ruling would not bring any trade or industry in state control so in that way I cannot see how the parent is correct.

Edit: Wikipedia says this though: "Capitalism is an economic system. In it the government plays a secondary role. People and companies make most of the decisions, and own most of the property. Goods are usually made by companies and sold for profit. The means of production are largely or entirely privately owned (by individuals or companies) and operated for profit.[1][2]

Most property, for example, is owned by people or companies, not by the government or by the workers. Capitalism has a more or less free market economy, which means that prices move up or down according to the availability of the products. People buy and sell things according to their own judgment. In most countries there is some regulation (trade laws) and some planning done by the government. They are sometimes called "mixed economies" to indicate this. Some people disagree on whether capitalism is a good idea, or how much of capitalism is a good idea."

According to this I guess it is fair to say that this is anti-capitalistic. In a true capitalistic society government should not be involved in transactions or take important decisions about this. I don't think such a society would work but people can have different opinions on this.

> In a true capitalistic society government should not be involved in transactions or take important decisions about this.

Even under a purely capitalist system, if there is a suspicion of malfeasance in such a transaction, it is reasonable for the government or others to ask for more clarity. Blackmail, bribery, embezzlement, or other bad faith agreements can introduce legal proceedings, none of those things are permissible under capitalism.

> This ruling would not bring any trade or industry in state control

There is a well established history, within capitalism, of taking actions to prevent monopolies from engaging in anti-competitive actions.

The most famous example, being when the railroads got broken up.

Markets can both exist, and anti-competitive behavior can be prevented. This has been established for a long time.

No ideology is so nearly perfect that it can be successfully implemented wholesale. It's surprising to me that someone who I assume deals with edge cases on a daily basis wouldn't realize that.

Capitalism, just like a system of government, has pitfalls. What do you suggest; just let it run wild and hope for the best (hint; that's been tried.)

Capitalism isn't nor shouldn't be a system of government.

Capitalism is an economic policy.

I worded that a bit confusingly, but I assure you I know capitalism is not a system of government. I was using governance as another area where we have ideologies which simply can't be implemented wholesale without some tinkering around the edges.

Capitalism reasonably a system of governance. Politics is all about the distribution of power, and capitalism says that certain parts of society are governed by wealth. Eg. A land owner gets to do stuff on land that they own, or the board gets to choose a ceo.

To make a clearer comparison, we could hold general elections to choose the ceo of Coca-Cola like we do for things that we call "government"

Well an important part of capitalism is preventing monopoly power from being wielded in such a way that it hurts markets.

A market can have significant problems, that hurt consumers, if significant market power is allowed to be used to create anti-competitive consequences.

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