The US Department of Justice (DOJ) has filed a lawsuit to block First Data Corporation's $7 billion acquisition of electronic transactions processor Concord EFS, arguing that the merger would substantially reduce competition in the debit payment networks.
Concord owns Star, the largest network in the US, while First Data owns the third-largest network, NYCE.
In a statement, R. Hewitt Pate, assistant attorney general for antitrust, says the merger will lead to higher prices to merchants, forcing them to pass on those price increases to many consumers in the form of higher prices for general merchandise.
First Data described the suit as 'inaccurate' and 'ill-advised', saying that it would vigorously defend the transaction in court.
Charlie Fote, chairman and chief executive officer of First Data, says by attempting to block the merger, the DOJ has elected to decrease competition and increase prices for consumers and merchants.
"I find it ironic that the DOJ is acting against a transaction where the combined company would handle less than 45% of PIN debit transactions, when only two years ago, the DOJ approved Concord's acquisition of Star, which resulted in Concord handling approximately 60% of exactly the same transactions," says Fote.
The companies say they still plan to hold their respective shareholder meetings next week to approve the acquisition.