Judge says Visa can’t escape Pornhub lawsuit

Judge says Visa can’t escape Pornhub lawsuit

This weekend, Judge Cormac J. Carney of the U.S. District Court in Central California denied Visa’s request to be dismissed from a case that alleged he conspired to help MindGeek, the parent company of the Pornhub website, to profit from child sexual abuse images.

Does Visa help others make money from illegal images? The court says it may have, allowing some claims against Visa, based on its role in processing payments for MindGeek. The complaint was filed by a woman who claims that MindGeek profited from nude videos taken when she was a minor teenager that were posted on Pornhub.

• “If Visa knew 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 it was dealing with the monetization of child pornography, transferring from money from advertisers to MindGeek for advertisements playing alongside child pornography like the plaintiff’s videos,” Justice Carney wrote.

The decision’s unusually strong language is ringing alarm bells for payment processors. This early-stage victory indicates that companies may not be able to easily distance themselves from accusations of wrongdoing by their customers.

• Justice Carney: “When the Court links the removal of expansive content from MindGeek to allegations that former employees of MindGeek reported general concern within the company that Visa might pull the plug, it does not appear that the Court is fatally speculative to say that Visa – with knowledge of what was monetized and the power to withhold the means of monetization – bears direct responsibility (along with MindGeek) for MindGeek’s monetization of child pornography, and to turn of the monetization of the applicant’s videos.

Visa argued the case could upend finance. In its motion to dismiss, Visa said a ruling against the company would upend the finance and payment industries, making it impossible for Visa to do its job of processing transactions for millions of law-abiding businesses and consumers. . A company spokesperson told DealBook in a statement that it condemns “sex trafficking, sexual exploitation and child sexual abuse material as contrary to our values ​​and our purpose as than business”. Visa’s spokesperson said the company does not condone the use of its network for illegal activities and continues to believe it was an unsuitable defendant, calling the decision “disappointing” and saying that she “distorts the role of Visa”.

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

HERE’S WHAT HAPPENS

Lina Khan, the chairwoman of the FTC, canceled her staff to sue Meta, Bloomberg Law reports. The agency filed an injunction last week to block the company’s takeover of the maker of virtual reality fitness app Within. Khan’s decision reflects his more aggressive approach to competition law and Big Tech.

More than 70 current and former Deutsche Bank employees are being investigated in connection with a tax scheme. An internal investigation at the bank reportedly found its staff broke rules to help customers evade tax. Deutsche Bank has shared the results of its investigation, which it launched in 2015, with prosecutors, the Financial Times reported.

House Speaker Nancy Pelosi is embarking on an Asia tour that could include a stopover in Taiwan. China has issued increasingly vocal warnings in recent days that a visit to the self-governing island would provoke a response, possibly 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 continue.

Two major antitrust lawsuits begin today. The Justice Department has filed a lawsuit to block Penguin Random House’s proposed acquisition of rival Simon & Schuster for $2.2 billion, as well as UnitedHealth’s $13 billion acquisition of the health technology company Change Healthcare. Both lawsuits advance Biden administration’s fight against corporate concentration.

Disney battles Visa and Mastercard over fees

Late Friday night, Disney filed an antitrust lawsuit against Visa and Mastercard that is an offshoot of a 2005 lawsuit against credit card companies over the interchange fees they charge merchants for each transaction and pay to the bank that issued the card. Many businesses that rely heavily on credit card purchases, such as retailers, say the card companies’ market power allows them to effectively price these fees. And they say the end result is higher prices for customers.

The litigation stems from an approximately $6 billion settlement in 2012. The initial settlement included an agreement between Visa and Mastercard to reduce transaction processing fees for eight months. But lawmakers, including Senator Richard J. Durbin of Illinois, argued that the concessions offered by credit card companies were insufficient. Some big retailers, like Walmart, have opted out of the settlement, hoping to secure better terms themselves, as Amazon did earlier this year. That means the lawsuit could be Disney’s way of pushing for money, better terms with credit card companies, or both.

Disney says Visa and Mastercard have used corporate maneuvers to disguise their hold on the industry. When Visa and Mastercard were private companies, they were backed by thousands of financial institutions, including major banks such as JPMorgan Chase, which received 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 intended to ease regulatory scrutiny. “If it’s one company, they were hoping they wouldn’t be seen as a cartel of banks,” Harry First, a NYU antitrust law professor, told DealBook. “A single company can set its own price and do whatever it wants.” (The strategy is similar to one the NFL used unsuccessfully in Supreme Court arguments years ago.)

While the corporate structure has changed, Disney claims in the lawsuit, the behavior of credit card companies has not changed. Disney says the low fees Visa and Mastercard used to offer banks remain, and 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 approximately 75% of all debit card purchase volume in 2004 and account for over 80% today.” Fees also continue to be at the center of legislative action. Senator Durbin and a colleague are considering proposing a new bill to target them.

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

“I’m surprised on some level that we’ve seen all of this increase in buying activity and haven’t been able to collectively see that it’s going to end at some point.”

— JD Daunt, Chief Commercial Officer at Liquidity Services, boom times for liquidators as retailers rush to get rid of products that were in high demand just a year ago.

Rethinking the IPO

IPO is one of the most legendary and heaviest transactions in the business world. In “Going Public,” which was published last week, Dakin Campbell, Insider’s chief financial correspondent, details how venture capitalist Bill Gurley led a 2019 effort to make IPOs fairer (to his credit). opinion) for start-ups and average investors. The effort challenged the big banks’ control over the process, resulting in different types of transactions, including direct quotes and special purpose acquisition companies.

Three years later, some of the companies that have gone public in these untraditional ways have seen their shares plummet, causing heavy losses for investors. Other transactions were outright frauds. DealBook spoke to Campbell about this Silicon Valley-inspired IPO “revolution” and its aftermath.

Who benefited from the changes to IPOs pushed by Silicon Valley power brokers that you describe in the book?

There’s no doubt that venture capitalists and other company insiders have done well with direct listings, but average investors have also come out on top. The traditional IPO gives institutional investors an early opportunity to buy stocks 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 it good for the economy?

Over the past 20+ years, there has been a dramatic reduction in the number of companies listed on US stock exchanges. It has halved, according to some figures. If companies have more options for accessing public markets, they will be more inclined to do so. And that would be good for the state of business innovation, the economy as a whole, and the citizens who invest in public actions to create wealth.

But many of these deals did not create wealth. SPACs have been among the biggest losers in the market.

I’m sure many individual investors unfortunately lost money. Institutional investors did the same. Basically, this isn’t a story about process, in my opinion, as much as it is a story about the business cycle. Fraud is an entirely different matter. The SEC has taken a stronger hand in regulating the SPAC market and I think we can agree that is a good thing.

READING SPEED

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• A sometimes unrealistic Netflix show about an ambassador has diplomats buzzing. (Policy)

We would love your feedback! Please email your thoughts and suggestions to dealbook@nytimes.com.