Visa increases litigation funding ahead of US antitrust battle

Diving certificate:

• Has visa $1.5 billion transferred into its litigation escrow account as the company prepares to defend a Justice Department antitrust complaint regarding its dominance in the debit card payments market. According to its most recent account, Visa had $1.596 billion in the account as of June 30 quarterly investor report. Visa paid $575 million in legal matters this year as of June 30, including $204 million in U.S. litigation.

• Visa plans to “vigorously” contest September 24th DOJ lawsuit According to the company, this is based on the size of the company and the business agreements. According to a Sept. 30 report, its defense will likely rely heavily on the Supreme Court's decision in Ohio v. American Express, which examined governance arrangements for credit card transactions on two-sided platforms Analysis by Mintz lawyers. The court ruled that the bank's commercial arrangements did not violate Section 1 of the Sherman Act.

• Visa created a “retroactive responsibility plan” for expected litigation 16 years ago in advance of its public stock offering in March 2008. Visa's litigation plan includes judgments and settlements in U.S. cases and impacts the value of its Class B shares, protecting Visa's Class A and C shareholders from direct losses. Visa's funding of the litigation account dilutes Visa's Class B ShareholdersThese are primarily four large US financial institutions, including Bank of America and JP Morgan Chase.

Insight into the dive:

The government's lawsuit alleges that Visa holds an illegal monopoly on debit card transactions Imposing agreements on merchants and banks that exclude potential competitors from direct debit processing. Visa has also struck deals with potential competitors — including Apple, PayPal and Square — to prevent them from developing competing networks for direct debit transactions, the complaint says.

The DOJ complaint “combines two important aspects – frequent antitrust challenges by both the DOJ and private parties (and other competition authorities around the world) to practices by Visa, MasterCard and American Express, and the increased use by the Biden administration.” Section 2″, Mintz attorneys Bruce Sokler and Payton Thornton wrote in their analysis.

On the day the lawsuit was filed, Visa attorney Julie Rottenberg said in a media statement that the Justice Department's lawsuit “ignores the reality that Visa is just one of many competitors in a debit space that is growing, with thriving new entrants.” .”

Visa will likely argue that the government does not understand how the debit transaction market works, as suggested in Rottenberg's initial comments. Visa's lawyers are also sure to consider the Supreme Court's 2018 ruling in the American Express case, in which 11 states appealed to the Supreme Court after a second ruling in the bank's favor. The DOJ left the case as plaintiff after the district court's decision.

Justice Clarence Thomas, writing for the 5-4 majority, said in this case the states had done so were unable to cope with their initial burden the rule of reason by showing that American Express's contractual anti-steering agreements restricted trade and were anti-competitive. American Express used these agreements with merchants to prevent them from pushing consumers to use another card for purchases, which resulted in lower fees for merchants.

The government's direct debit lawsuit “will reveal some of the challenges facing antitrust plaintiffs under the AmEx agreement,” Sokler and Thornton wrote.

Visa, along with rival Mastercard, has also been embroiled in multi-district merchant class-action lawsuits and other lawsuits for 19 years related to the credit card interchange fees it charges merchants for retail transactions.

In June, U.S. District Judge Margo Brodie made the announcement rejected a $30 billion request proposed a settlement of this dispute, stating that this would not treat all class members equally.

Warehouse sales

The government's antitrust lawsuit came weeks after four top Visa executives sold shares as part of SEC Rule 10b5-1 trading plans to regulate stock sales by company insiders.

Managing Director Ryan McInerney sold about $2.4 million worth of shares on Sept. 3, while Rottenberg sold $707,300 worth of shares on Aug. 29 as part of its default trading plans, Visa regulatory filings show.

Kelly Mahon Tullier, Visa's chief people and corporate affairs officer, sold $10.1 million of her shares on Aug. 16, including 2022 stock awards that vested this year. A day earlier, Chief Financial Officer Chris Suh sold about $4 million worth of shares.