Is Visa Helping Others Make Money From Illegal Images? The court says it may have allowed some claims against Visa to go forward, based on its role in processing payments for MindGeek. The lawsuit was filed by a woman who says MindGeek profited from nude videos taken when she was an underage teenager and posted on Pornhub.
“If Visa knew that there was a significant amount of child pornography on MindGeek’s sites, which the Court must accept as true at this stage of the proceedings, then it knew that it was processing the monetization of child pornography by funneling advertiser money to MindGeek for advertisements that play alongside child pornography, such as the Plaintiff’s videos,” Judge Carney wrote.
The decision’s unusually strong language is causing alarm for payment processors. This early-stage victory signals that firms may not be able to easily distance themselves from their clients’ accusations of wrongdoing.
Justice Carney: “When the Court combines MindGeek’s extensive content removal with allegations that former MindGeek employees raised general concerns with the company that Visa might pull the plug, it is not fatally speculative for the Court to say that Visa — knowingly of the monetizer and authorization to reject the means of monetization — bears direct responsibility (along with MindGeek) for MindGeek’s monetization of child pornography and, in turn, monetization of Plaintiff’s videos.”
Visa argued that the case could turn the economy upside down. In its motion to dismiss, Visa said a ruling against the company would disrupt the financial and payments industry, making it impossible for Visa to carry out its business processing transactions for millions of law-abiding businesses and consumers. A spokesperson for the company told DealBook in a statement that it condemns “child sex trafficking, sexual exploitation and sexual abuse material as repugnant to our values and purpose as a company.” A Visa spokesman said the company does not condone the use of its network for illegal activity and continues to believe he is an inappropriate defendant, calling the decision “disappointing” and saying it “mischaracterizes Visa’s role.” The judge, however, wrote that Visa’s argument was “reminiscent of the ‘too big to fail’ breakaway from the financial industry in the 2008 financial crisis” and said that asking Visa not to let its services be used to facilitating illegal activity was not a high order.
HERE’S WHAT’S GOING ON
Lina Khan, the chair of the FTC, fired her staff to sue Meta, Bloomberg Law reports. The agency filed an injunction last week to block the company’s acquisition of the maker of virtual reality fitness app Within. Khan’s move reflects her more aggressive approach to competition law and Big Tech. More than 70 current and former Deutsche Bank employees are under investigation in a tax scheme. An internal investigation into the bank has reportedly found that its staff broke the rules to help customers evade tax. Deutsche Bank has shared the results of its investigation, which it began in 2015, with prosecutors, the Financial Times reported. House Speaker Nancy Pelosi is embarking on a tour of Asia that may include a stop in Taiwan. China has issued increasingly strident warnings in recent days that a visit to the self-ruled island would provoke a response, perhaps even military. The Biden administration did not try to stop Pelosi, concluding that the potential risks of trying to stop the visit outweighed the risk of allowing Pelosi to proceed. Two major antitrust suits begin today. The Justice Department sued to block Penguin Random House’s proposed $2.2 billion acquisition of rival Simon & Schuster, as well as UnitedHealth’s $13 billion acquisition of health technology company Change Healthcare. Both suits advance the Biden administration’s fight against corporate consolidation.
Disney battles Visa and Mastercard over fees
Late Friday night, Disney filed a lawsuit against Visa and Mastercard, which is an offshoot of a 2005 lawsuit against credit card companies over interchange fees they charge merchants for each transaction and pay the card-issuing bank . Many companies that rely heavily on credit card purchases, such as retailers, argue that the card companies’ ownership of the market allows them to effectively set these fees. And they say the end result is higher prices for customers. Disney alleges that Visa and Mastercard used corporate maneuvers to mask their dominance in the industry. When Visa and Mastercard were private companies, they were backed by thousands of financial institutions, including major banks like JPMorgan Chase, that were recipients of interchange fees. When payment processors went public in 2006 and 2008, it created a perception of separation between them and banks, which some analysts said was aimed at easing regulatory scrutiny. “If it’s a single company, they were hoping it wouldn’t be considered a banking cartel,” Harry First, a law professor specializing in antitrust at NYU, told DealBook. “An individual company can set its own price and do whatever it wants.” (The strategy is similar to one the NFL used unsuccessfully in arguments before the Supreme Court years ago.) While the corporate structure has changed, Disney argues in the lawsuit, the behavior of the credit card companies has not. Disney says the lucrative fees offered to banks by Visa and Mastercard remain and the two companies dominate the industry, driving up costs. “The debit card market is dominated by Visa and Mastercard,” the suit notes. “Combined, Visa and Mastercard accounted for about 75 percent of all debit purchases in 2004 and account for more than 80 percent today.” Fees continue to be the focus of legislative action, as well. Senator Durbin and a colleague plan to introduce a new bill targeting them. “We do not anticipate litigating this matter and expect a resolution to be announced in the near future,” a Mastercard spokesperson told DealBook. Visa declined to comment on the filing. UPDATED Aug. 1, 2022, 12:17 pm ET
“It’s surprising to me on some level that we saw all this spike in buying activity and we couldn’t collectively see that it was going to end at some point.”
— JD Daunt, chief commercial officer at Liquidity Services, on liquidators’ boom periods as retailers rush to get rid of goods that were in high demand just a year ago.
Review of the IPO
The initial public offering is one of the most mythic and fraught transactions in the business world. In “Going Public,” published last week, Dakin Campbell, Insider’s chief financial correspondent, details how entrepreneur Bill Gurley led a 2019 effort to make IPOs fairer (in his opinion) to startups and average investors. The effort challenged the control of the big banks in the process, prompting different types of transactions, including direct imports and special purpose buyout companies. Three years later, some of the companies that went public in these non-traditional ways saw their shares plummet, causing big losses to investors. Other deals were outright scams. DealBook spoke with Campbell about this Silicon Valley-inspired IPO “revolution” and its aftermath. Who benefited from the changes in IPOs pushed by Silicon Valley brokers that you describe in the book? There is no doubt that venture capitalists and other corporate insiders have done well with direct listings, but average investors have also come out ahead. The traditional IPO gives institutional investors an early opportunity to buy shares at a lower price than average investors. With a direct listing, average investors have access to IPO shares at the same time as institutional investors, at a price set by the market. It’s much fairer. Is this good for the economy? Over the past 20-plus years there has been a dramatic decline in the number of companies listed on US stock exchanges. It has halved, according to some figures. If companies have more options to access public markets, they will be more inclined to do so. And that would be good for the state of corporate innovation, the larger economy, and citizens investing in public stocks to build wealth. But many of these deals did not create wealth. SPACs have been the market’s biggest losers. I’m sure many individual investors unfortunately lost money. So did institutional investors. In general, this is not a story about process, in my view, as much as it is a story about the business cycle. Fraud is a completely different matter. The SEC has taken a firmer hand in regulating the SPAC market, and I think we can agree that’s a good thing.
READING SPEED
Agreements Policy The best of the rest
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