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Credit card companies were forced into legal setbacks over the weekend with two lawsuits challenging how they manage payments and the fees they charge.

On Friday, a federal judge asked to dismiss Visa’s lawsuit, which alleges MindGeek, the parent company of website Pornhub, conspired to profit from child sexual abuse imagery.

The issue raised in the lawsuit is whether Visa is helping others make money from illegal image distribution, reports the DealBook newsletter. The court said it may have allowed certain claims against Visa to proceed based on MindGeek’s role in processing payments.

The lawsuit was filed by Serena K. Fleites, who MindGeek says was profiting from posting naked videos she took as an underage teenager on Pornhub. Fleites’ story will be the focus of her Nicholas Kristof column for The New York Times in late 2020, with many cases of child sexual abuse videos available on Pornhub and those videos detailed how it upended the lives of those who appeared in

“If Visa knew there was a substantial amount of child pornography on MindGeek’s site, the court would have to admit the truth at this stage of the case. and was moving money away from advertisers,” he told MindGeek. Court Justice Cormac J. Carney wrote in his decision.

The judge’s unusually strong language in denying a visa denial request is ringing alarm bells for payment processors. Judge Carney wrote that plaintiffs’ claim that Visa was directly responsible for “mindgeek monetization” of child sexual abuse imagery was not “fatal speculation.” The decision shows that companies may not be able to easily distance themselves from allegations of misconduct by their clients.

In its motion to dismiss, Visa argued that the decision against the company would disrupt the financial and payments industries and force payment processors to crack down on billions of transactions.

“Sex trafficking, sexual exploitation and child sexual abuse material are contrary to our corporate values ​​and purpose,” Visa said in a statement. He added that he did not condone Visa’s use of its network for illegal activities and continued to believe that Visa was an improper defendant, adding that the ruling was “disappointing” and “represents the role of Visa”. misunderstanding,” he said.

However, the judge said that Visa’s argument was “reminiscent of the 2008 financial crisis that the financial industry was ‘too big to fail'” and that Visa would not use its services to encourage illegal activity. He said it was not a valid reason to ask. Tall order.

In another case, The Walt Disney Company filed antitrust lawsuits against Visa and Mastercard late Friday. It is an offshoot of a 2005 lawsuit over interchange fees charged to merchants by credit card companies for each transaction and paid to the bank that issued the card. card.

Many businesses, such as retailers, that rely heavily on credit card purchases claim that the hold credit card companies have in the market allows them to effectively collude to fix these charges. . And they say the price to the customer is higher as a result.

The lawsuit stems from a settlement of approximately $6 billion in 2012. The initial settlement included an agreement by 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 major retailers like Walmart have opted out of the settlement, hoping to get better terms, as Amazon did this year. or improve terms with credit card companies, or both.

Disney alleges that Visa and Mastercard used corporate tactics to mask their position in 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 was an interchange fee recipient.

When payment processors went public in 2006 and 2008, some analysts said they were aimed at easing regulatory scrutiny, creating a perception of separation from banks.

Harry Furst, a law professor specializing in antitrust law at New York University, told Dealbook: “One company can set its own price and do what it wants.” (This strategy is similar to what the National Football League failed in a Supreme Court argument years ago. )

The corporate structure has changed, Disney claims in the lawsuit, but the behavior of the credit card companies has not changed.According to Disney, the lucrative fees that Visa and Mastercard provided to banks remained the same, and the two companies were expected to take over the industry. , which is pushing up costs, he said.

The debit card market is dominated by Visa and Mastercard,” the complaint states. “Visa and Mastercard together accounted for about 75% of all debit purchases in 2004, and now he accounts for over 80%.”

Fees also continue to be a focus of legislative action. Mr. Durbin and his colleagues plan to propose legislation to cover them.

A Mastercard spokesperson told DealBook, “We have no plans to file a lawsuit over this and expect a resolution to be announced in the near future.” Visa declined to comment on the record.