Latest news on stock market and economy of August 1, 2022

Credit card companies suffered legal setbacks over the weekend in a pair of cases challenging the way they handle payments and the fees they charge.

A federal judge on Friday rejected Visa’s request to be removed a case who claims he conspired to help MindGeek, the parent company of the website Pornhub, profit from child sexual abuse images.

The question the case presents is whether Visa is helping others make money by distributing illegal images, the DealBook newsletter reports. The court says there may be, allowing some claims against Visa to proceed, based on its role in processing payments for MindGeek.

The lawsuit was filed by Serena K. Fleites, who says MindGeek profited from the nude videos made when she was a minor teenager which were later published on Pornhub. Ms. Fleites’ story was the focus of a New York Times column by Nicholas Kristof in late 2020 detailing the many child sexual abuse videos available on Pornhub and how those videos had altered the lives of those featured in the videos

“If Visa was aware that there was a substantial amount of child pornography on the MindGeek sites, which the court must accept as true at this stage of the proceedings, then it was aware that it was processing the monetization of child pornography, moving money of advertisers. to MindGeek for ads that play alongside child pornography like the plaintiff’s videos,” Judge Cormac J. Carney of the U.S. District Court for the Central District overseeing the case wrote in his decision from California

The judge’s unusually strong language in rejecting Visa’s dismissal request raises alarm bells for payment processors. Judge Carney wrote that it was not “fatally speculative” for the plaintiff to say that Visa was directly responsible for “MindGeek’s monetization” of child sexual abuse images. The decision indicates that companies may not be able to easily distance themselves from allegations of wrongdoing by their customers.

Visa, in its motion to dismiss, argued that a ruling against the company would change the financial and payment industries, forcing payment processors to monitor billions of transactions.

Visa condemns “sex trafficking, sexual exploitation and child sexual abuse material as repugnant to our values ​​and purpose as a company,” a company spokesperson said in a statement. He added that Visa does not condone the use of its network for illegal activities and continues to believe he is an improper defendant, calling the ruling “disappointing” and saying it “mischaracterizes Visa’s role.”

The judge, however, wrote that Visa’s argument was “reminiscent of the financial industry’s ‘too big to fail’ refrain during the 2008 financial crisis,” and said asking Visa not to allow its services were used to facilitate illegal activity was not a problem. great order

In a separate case, the Walt Disney Company filed an antitrust lawsuit Friday afternoon against Visa and Mastercard that is an offshoot of a 2005 lawsuit against credit card companies over interchange fees, which they charge merchants for each transaction and pay the issuing bank. the card

Many businesses that rely heavily on credit card purchases, such as retailers, argue that the control that credit card companies have in the market allows them to effectively collude in setting these rates. And they say the result is higher prices for customers.

The litigation stems from a roughly $6 billion settlement in 2012. The initial settlement included an agreement by Visa and Mastercard to reduce the charge for processing transactions for eight months. But legislators, included Senator Richard J. Durbin of Illinoisargued that the concessions offered by the credit card companies were insufficient.

Some large retailers, like Walmart, opted for the deal, hoping to get better terms, like Amazon done this year. That means the lawsuit could be Disney’s way of pushing for cash, better terms with credit card companies, or both.

Disney claims that Visa and Mastercard used corporate maneuvering to circumvent its control over the industry. When Visa and Mastercard were private companies, they were backed by thousands of financial institutions, including banks as large as JPMorgan Chase, which 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 mitigating regulatory scrutiny.

“If it’s a single company, they hoped they wouldn’t be seen as a banking cartel,” Harry First, a law professor specializing in antitrust at New York University, told DealBook. “A single company can set its own price and do whatever it wants.” (The strategy is similar to one the National Football League used unsuccessfully in arguments before the Supreme Court years ago.)

The corporate structure changed, Disney argues in the lawsuit, but the behavior of the credit card companies did not. Disney says the lucrative fees that Visa and Mastercard offered banks remained and that the two companies dominate the industry, driving up costs.

The debit card market is dominated by Visa and Mastercard,” the lawsuit notes. “Together, Visa and Mastercard accounted for about 75 percent of all debit purchase volume in 2004 and today account for more than 80 percent.”

Rates also continue to be a focus of legislative action. Mr. Durbin and a flatmate to propose a bill to point them out.

“We do not anticipate litigating this and expect a resolution to be announced in the short term,” a Mastercard spokesperson told DealBook. Visa declined to comment on the filing.

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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!