🚫 ANTITRUST

Checking Visa

The Justice Department is continuing its crusade against corporate monopolies, this time against Visa.

The How, according to the DOJ, is that for over a decade "Visa has entered into de facto exclusive agreements with merchants and banks, encouraging them to route the bulk of their transactions through Visa’s payment network," writes the New York Times. "The company has maintained a monopoly in large part by imposing or threatening to impose higher fees on merchants that also use other payment networks to process debit transactions."

The suite mirrors a string of antitrust cases brought by the Justice Department over recent years, though most have focused on the tech industry.

“Anticompetitive conduct by corporations like Visa leaves the American people and our entire economy worse off,” Benjamin C. Mizer, a principal deputy associate Attorney General, noted in the agency's statement.

"You can mandate competition…But if what's happening behind the point-of-sale is inhibiting that, then you don't actually have competition," Stephanie Martz, general counsel for the National Retail Federation, told NPR. "There's no question that it affects consumers as well. …You're paying for these cards in the form of higher prices."

NPR adds that Mastercard was targeted for its own anticompetitive behavior in the debit card market, but settled with the Federal Trade Commission last year.

For it's part, Visa has vehemently denied the DOJ's allegations, stating:

“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services. …We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable."

Yet, the DOJ has accused Visa of limiting or partnering with the companies in that "ever-expanding universe". Vias has agreements with Apple, Paypal, and Square, and a Visa executive has been quoted in the DOJ suit claiming “we’ve got Square on a short leash and our deal structure was meant to protect against disintermediation,” CNBC reports.

Plaid Deal

In November 2020, the DOJ sued Visa to block the $5.3 billion acquisition of Plaid—a fintech company developing a payment platform to rival the credit card giant.

In its complaint, the DOJ quoted the CEO of Visa justifying the acquisition to the board of directors as “strategic, not financial”, adding  that Plaid “on their own or owned by a competitor [was] going to create some threat” with a “potential downside risk of $300-500M in our US debit business” by 2024. The CEO added that, should that occur, "Visa may be forced to accept lower margins or not have a competitive offering.”

Verdict

‍The DOJ is certainly running on momentum with its antitrust cases, and is hoping to score another win after the ruling against Google. Yet, win or lose, the department is clearly setting itself up to be bogged down in appeals and dragged out litigation with these massive corporations for years to come. Hopefully, the DOJ’s crusade against large corporations will effect change just by showing strength.

🤖 ARTIFICIAL INTELLIGENCE

Rage Against The Machine Learning

The artists live (survived a motion to dismiss their claim) to see another day (continue pursuing their case against a group of image generation AI companies).

"The lawsuit, filed last year, revolves around the LAION data set, which was built using 5 billion images that were allegedly scraped from the internet and utilized by Stability and Runway to create Stable Diffusion," The Hollywood Reporter explains. The suit "implicated Midjourney, which trained its AI system using the model, as well as DeviantArt for using the model in DreamUp, an image generation tool."

Recently, the defendant companies have motioned to dismiss various key claims of the case, including a motion to dismiss DMCA claims, a motion to dismiss the plaintiffs' unjust enrichment and Copyright Act claims, Midjourney’s motion to dismiss Lanham Act claims, and DeviantArt’s motions to dismiss the breach of contract and breach of the implied covenant of good faith and fair dealing claims.

According to Reuters, U.S. District Judge William Orrick ruled this week that the 10 artists acting as plaintiffs in the case "plausibly argued that the companies violate their rights by illegally storing their works on their systems. Orrick also refused to dismiss related trademark-law claims, though he threw out others accusing the companies of unjust enrichment, breach of contract and breaking a separate U.S. copyright law."

Judge Orrick hinted as his decision earlier this year when, in a tentative ruling, he stated that the plaintiffs had plausibly argued that the defendants had "copied and stored their work on company servers and could be liable for using it without permission."

Authorial Claim

In a similar copyright-infringement case, a group of authors suing OpenAI for allegedly using their works to train its datasets without permission will be allowed access to the firm's training data for inspection, writes The Hollywood Reporter. They add that "under the agreement, the training datasets will be made available at OpenAI’s San Francisco office on a secured computer without internet or network access. Any person who’ll review the information will be required to sign a non-disclosure agreement, sign a visitor’s log and provide identification."

Verdict

The ruling by Judge Orrick continues the David versus Goliath narrative of the StabilityAI case, but the damage has already been done to artists. The question is, should the plantiffs win, what penalty will the Judge impose on these companies to protect future artists from further harm. Meanwhile, the concession by OpenAI to show the plantiffs their training data seems like a win on the surface, it remains a major question mark who among the legal team will be able to understand the complex code.