Court filing
Transcript of Proceedings re: Conference held on 5/29/2025 — United States v. Visa Inc. (Dkt. 85, S.D.N.Y. No. 1:24-cv-07214)
Filed May 29, 2025 in United States v. Visa Inc.; one of 154 filings from this case.
Record facts
| Court | U.S. District Court for the Southern District of New York |
|---|---|
| Filed | 2025-05-29 |
U.S. District Court for the Southern District of New York · No. 1:24-cv-07214-JGK · Doc. 85 · 2025-05-29 · Docket on CourtListener
Full text
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SOUTHERN DISTRICT REPORTERS, P.C.
(212) 805-0300
P5TEVISC
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------x
UNITED STATES OF AMERICA,
Plaintiff,
v. 24 Civ. 7214 (JGK)
VISA INC.,
Oral Argument
Defendant.
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New York, N.Y.
May 29, 2025
11:00 a.m.
Before:
HON. JOHN G. KOELTL,
District Judge
APPEARANCES
DEPARTMENT OF JUSTICE - ANTITRUST DIVISION
Attorneys for Plaintiff
BY: CRAIG CONRATH
BENNETT MATELSON
WILKINSON STEKLOFF LLP
Attorneys for Defendant
BY: KIERAN G. GOSTIN
BETH A. WILKINSON
BRIAN STEKLOFF
JASPER PRIMACK
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(Case called)
MR. CONRATH: Good morning, your Honor.
Craig Conrath for the United States.
THE COURT: Good morning.
MR. MATELSON: Bennett Matelson for the United States.
MR. GOSTIN: Kieran Gostin for Visa.
MS. WILKINSON: Good morning, your Honor.
Beth Wilkinson on behalf of Visa.
MR. STEKLOFF: Good morning, your Honor.
Brian Stekloff on behalf of Visa.
MR. PRIMACK: Jasper Primack for Visa.
THE COURT: Good morning all.
I'm sorry for the delay in starting. I understand
there was an issue with respect to setting up the remote.
All right. This is a motion to dismiss by Visa. I'm
familiar with the papers. I'll listen to argument.
MR. GOSTIN: Good afternoon, your Honor.
Kieran Gostin. Thank you for having us in today for
this oral argument.
The government conducted a five-year investigation
before bringing this lawsuit, yet I still think there are
significant holes in its complaint that warrant dismissal and
should end this case. It's carefully crafted market definition
to satisfy two legal theories that are in direct tension, yet
it has not applied the legal tests and economic tests that the
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Second Circuit has said it required for excluding functionally
equivalent products.
It also challenges Visa's price discounts, yet it
doesn't allege any below-cost pricing, which the Supreme Court
has said is necessary to avoid chilling price cuts which are a
core antitrust objective.
And finally, it baldly alleges that Visa has paid off
competitors in exchange for express conditions not to compete.
But when Visa produced those agreements which it relies on, it
was unable to identify any such quid pro quo in the agreements.
So, those are the general arguments that we think
warrant dismissal. I'm happy to talk about any of them if you
have any questions, otherwise I have a few points on each of
those arguments that I'd like to make.
THE COURT: By the way, if I agreed with one or all of
the arguments, would that dispose of the entire case?
MR. GOSTIN: That's a good question, your Honor.
So, it depends on which argument it is. For market
definition, that would dispose of the entire case. Regeneron
said that you have to define the market even at the motion to
dismiss phase.
On the other two theories, if you got rid of the price
cost claim, the pricing claim, that would get rid of
Count Three definitely. I also think that it would get rid of
the monopoly claims because so much of their foreclosure
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analysis relies on the merchant agreements.
If you dismiss the claims related to the Fintech
agreements, it would get rid of claim four which is their
section one claim. And I think we did need to discuss whether
it would also get rid of the monopoly claims, but I think the
argument wouldn't be as strong there, if I'm being completely
candid.
THE COURT: Okay. Go ahead.
MR. GOSTIN: For the market definition claims, I think
there's a couple of points to make here. One, I really want to
emphasize the tension that's in their complaint. They're
trying to exclude ACH and RTP, which we call interbank payment
networks, yet they include in their market all sorts of other
networks, including alternative debit network which rely on ACH
and RTP. So, there's a direct tension, there's a reason that
they're doing that. They need the alternative debit networks
to be in the market because they need it for their Fintech
agreement claim, because those are what they're saying are
suffering the harm, these alternative debit works, so they need
those in the market. However, they're excluding all other ACH
and RTP forms because it would dilute their market power
allegation.
THE COURT: So, the problem with the market
definition, as far as you're concerned, is the failure to
include ACH and RTP in the market.
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MR. GOSTIN: Yes, that's correct.
THE COURT: It's hard for me to wrap my mind around
the notion that those two networks are sufficiently similar to
Visa and the way in which Visa generally works in terms of
presenting a Visa card to a merchant and having the customer's
bank account then be charged.
Is the ACH network or the RTP network anything like
that? Do people come and say to their local merchant, I'm
going to use RTP or I'm going to use ACH?
MR. GOSTIN: Yeah. I think the answer --
Oh, sorry. I didn't mean to cut you off.
THE COURT: No. No, that was the question.
MR. GOSTIN: Your Honor, I think largely it's because
the market has changed so much. So many transactions now are
done online and many online transactions can be conducted
through ACH and RTP. When you go online, you don't give your
card, you type in the number of your card or you use a
different version, you can type in your bank account to make
payments at a lot of different merchants.
So, I think that it's a very different market now than
it was, say, five or ten years ago because online payments are
the majority of transactions that happen in the country these
days. So, the market has really changed in that way and I
think that's where ACH and RTP are much more used today than
they were before.
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THE COURT: Much more used today than they used to be,
but that really doesn't answer my question about how different
the use of ACH and RTP is from the use of a Visa debit card,
which also then leads to the next question of the government
says that there are about four distinct aspects of the Visa
debit card and the other participants in the market that ACH
and RTP don't have, at least they don't have three of those
characteristics, and in your papers you don't say that they
really do have those characteristics. Essentially, you say it
doesn't make a difference.
MR. GOSTIN: Yes, your Honor.
Maybe I could just make one more point on your prior
question because I don't think I fully answered it for you, and
then I'll answer this one.
I do want to point out that they've included things
like PayPal and Square where you also don't present your
debited card, so that's really an important point here, right?
They are included PayPal where you use an app or Square where
you use an app, which is very different than producing your
debit card. So, I don't think they can say the debit card is
the defining point in the market.
THE COURT: Okay. If you use PayPal or so, isn't that
an instantaneous charge, if you will, compared to the use of
ACH or RTP?
MR. GOSTIN: Well, RTP is instantaneous; ACH can take
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a couple of days to process, and that goes to the features that
you were raising in your second point.
So, I think there's plenty of cases that say just
identifying that products have different features alone is not
enough. We've cited a series of cases where they said the two
products had different features, and that doesn't necessarily
mean they're in different markets because consumers can still
choose between those features, it doesn't mean that they can't
choose between those products. Maybe for some transactions
they don't care about having dispute back rights and some they
do.
They've also been very unclear in terms of products
they have included in the market. For example, they include
PIN networks, yet as we say in our brief, they specifically say
that PIN networks also don't have sufficient fraud detection,
yet they include those in the market. And I think that goes to
why the Second Circuit has said it's not enough to just
identify features, you have to apply Brown Shoe or the
hypothetical monopolist test. That's what Regeneron says even
at the motion to dismiss phase, and that's because trading off
between features is something that consumers do all the time.
THE COURT: Regeneron, if my recollection is right,
denied the motion to dismiss on the grounds of market
definition at the motion to dismiss stage; right?
MR. GOSTIN: That's correct. Under very different
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factual allegations.
THE COURT: Right. But on the grounds that there are
factual disputes that can't be resolved on a motion to dismiss.
And I remember going over this with you at the premotion stage
when we had the conversation about this motion. So, the motion
is now fully briefed, and the question remains whether or not
the issue of market definition and what companies should be
included in the market definition is in fact a question of fact
that can't be resolved on a motion to dismiss. And the
question in my mind is, what specific most similar cases stand
for the proposition that I could dismiss the complaint on the
grounds that the government hasn't included a couple of
additional companies that should be included in the definition
of the market? What other cases on a motion to dismiss that I
could decide that issue and dismiss the case?
You spend a lot of time explaining what a careful
decision Regeneron is and then you get to the bottom line and
the motion to dismiss was denied, and so you rely on some other
cases where there were insufficient allegations of the market
definition, but there are certainly lots of specific
allegations of what the market definition is in this case and
why the government is excluding other companies from the
market. So, the question is, in my mind, just what are the
specific cases, hopefully Court of Appeals cases -- Regeneron
was not -- that stand for the proposition that in similar
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cases, the market definition can be decided on a motion to
dismiss and the case dismissed because the plaintiff has failed
to allege a sufficient market? What are the most persuasive
cases which I will then read with great care? Not just cases
where the Court said, you haven't sufficiently defined the
market. What are the cases on which you rely?
MR. GOSTIN: I think the most important case for your
Honor to pay attention to that is sited in our briefs is
Hicks v. PGA Tour, it's 897 F.3d 1109, and that's from the
Ninth Circuit in 2018. And there, they tried to allege a
market that was advertising during live golfing events and
distinguishing that from other advertising that occurred during
those events, so the market was defined as including
advertisements that were actually on the golf course and not
advertisements that were on commercials in-between the play.
And the Court said, no, that's not enough. There were
different features that they pointed to in terms of how they
were displayed, whether you could fast-forward through the
advertisements or not, how impactful they were likely to be,
but they said that wasn't enough, that just saying those
features was not sufficient. And I think that is the closest
case that we have.
Going back to Regeneron, I would just like to point
out the factual allegations that were in that case. There,
they alleged the SSNIP test was satisfied, which is the
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hypothetical monopolist test, they alleged facts supporting
that the SSNIP test was satisfied, and they alleged allegations
going to four of the seven Brown Shoe factors. Here, at most,
we have one of the seven Brown Shoe factors, which is different
product features.
So, we're not trying to dispute the factual
allegations here, we're accepting them for what they are, but
we're just saying they don't meet the legal test of Brown Shoe
and the hypothetical monopolist test even if you accept their
allegations as true, which I know you have to, your Honor, of
course.
THE COURT: By the way, how different would the market
be if it included ACH and RTP?
MR. GOSTIN: In terms of their market power?
THE COURT: Yeah.
MR. GOSTIN: It would significantly diminish. I don't
have the numbers available, but I think it would significantly
diminish and undermine any claim of market power.
THE COURT: Isn't the definition of "market" usually
dependent on expert testimony?
MR. GOSTIN: Yes, your Honor. But as we said, it
doesn't mean that they always get to go past the motion to
dismiss. I mean, yes, if you ultimately get to that, but they
haven't even alleged the economist that an economist would
apply. They haven't alleged that they could satisfy the
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hypothetical monopolist test.
And I'll point out, they have been investigating this
industry for five years. If they could have alleged that it
would be excluded under the hypothetical monopolist test, they
should have been able to at this point.
THE COURT: Okay.
Go ahead.
MR. GOSTIN: So, I think --
THE COURT: By the way --
MR. GOSTIN: Yes.
THE COURT: -- you don't dispute that the geographic
area of the market is the United States; right?
MR. GOSTIN: Not for purposes of the motion to
dismiss.
THE COURT: And you don't dispute that credit cards
don't belong in the market that we're talking about?
MR. GOSTIN: Again, not for purposes of the motion to
dismiss.
THE COURT: Okay.
Go ahead.
MR. GOSTIN: So, I think that we can move on. I think
that covers most of the points in the market definition, and I
thank you for letting me talk about the issues there.
THE COURT: By the way --
MR. GOSTIN: Yes.
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THE COURT: -- you haven't made any specific arguments
about the CNP submarket.
MR. GOSTIN: Not on the motion to dismiss, your Honor,
no.
THE COURT: Wouldn't that remain then?
MR. GOSTIN: The CNP is a submarket of the larger full
market, so if the entire market goes away, the submarket goes
away as well because ACH and RTP would necessarily be included
in the submarket.
THE COURT: Okay.
Go ahead.
MR. GOSTIN: So, to be clear, the argument goes to CNP
and the entire market, but we're not making any specific
arguments just about CNP.
THE COURT: Okay.
Go ahead.
MR. GOSTIN: In terms of the volume discounts, again,
we're not asking the Court to resolve any factual disputes
about what they've alleged about the volume discounts, we're
asking your Honor to determine the appropriate legal test that
should be applied to evaluating those. The Supreme Court has
said that price discounts --
THE COURT: Can I stop you at the outset?
You phrase the argument now about volume discounts. I
had thought that the original motion was drafted in terms of
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the government hasn't alleged a sufficient anticompetitive
scheme because they haven't alleged that the price that was
being charged was below cost. The government then responds,
well, yes, we're not arguing that this is a predatory pricing
case, we're arguing about numerous other aspects of the
contracts.
Isn't that right?
Go ahead.
MR. GOSTIN: So, your Honor, you don't have to allege
predatory pricing in order for the price cost test to apply.
THE COURT: I know.
MR. GOSTIN: Yeah.
THE COURT: I know, but I thought that your original
motion was based on the concept that the fallacy in the
government's contention was that they haven't alleged that the
price was in fact less than Visa's cost, and Visa responds,
that's right, we're not arguing for a predatory pricing case,
we're arguing that there are other aspects of the contracts
that make them anticompetitive.
MR. GOSTIN: Yes, your Honor.
And the question, I think, is whether those other
aspects go to price or not, because if they go to price, then
they have to meet the price costs or the discount attribution
test. So, it's a question of whether those other factors are
actually doing the work here. So, if you look at their
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complaint, they allege that we're bundling contestable and
noncontestable transactions, and that we're putting those into
a single discount and that the PIN networks can't compete with
that discount. That's a pricing claim. That's about our
pricing model and how it works. And the discount attribution
test is designed exactly, and the discount attribution test is
just a form of the price cost test that applied to bundling
where you have to have below-cost pricing. The discount
attribution test is the precise test that courts have developed
to determine whether that sort of pricing scheme has an
anticompetitive effect.
So, the question is, have they alleged anything that
goes beyond price to allege their de facto exclusive deals, and
they have the price discounts, which are applied on volume,
they have the bundling of contestable and noncontestable
transactions, they also cite early termination fees, but again,
that goes to price, and they don't cite any case where early
termination fees were enough to show a de facto exclusive deal.
I think it's helpful if you took out the bundling of
contestable and noncontestable transactions.
THE COURT: Could --
MR. GOSTIN: Yes, your Honor. Go ahead.
THE COURT: They allege various factors which they say
are anticompetitive, and they say, we're not alleging a
predatory pricing case but we are alleging all of these other
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factors. It's not clear to me how, on a motion to dismiss, I
can say, okay, they've alleged at least five other factors
which they say are part of the contracts and the scope of
dealing that Visa had with the market participants, and I can
say, well, all of these simply reduce to an issue of price, and
decide that on a motion to dismiss.
So, again, my question is what case or cases similar
have been dismissed on a motion to dismiss with a similar
argument? Namely, all of these other factors reduce to an
argument of price, and that's not enough to allege
anticompetitive conduct. And what are the cases that are
particularly persuasive on a motion to dismiss?
MR. GOSTIN: Yes, your Honor.
I do have one case, and I apologize this was not cited
in our briefs, but I would like to provide you with the cite.
THE COURT: Sure.
MR. GOSTIN: I think it is a helpful case.
THE COURT: You can tell me, I'll write it down. I'm
sure the government can respond.
MR. GOSTIN: And I have a copy. I'll actually hand a
copy to the government so they have it during this. And I'm
happy to hand you up a copy, too, if you'd like.
THE COURT: Not necessary, just give me the cite.
MR. GOSTIN: It's Nicsand v. 3M, and it's
507 F.3d 442, and it's from the Sixth Circuit.
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THE COURT: Okay.
MR. GOSTIN: And that was decided on a motion --
THE COURT: And the year? Sounds recent.
MR. GOSTIN: Jasper, can you grab the year for me? I
don't have it up here.
MR. PRIMACK: Yes.
MR. GOSTIN: Thank you.
My colleague is just going to grab the year. I don't
have it in front of me right now.
THE COURT: That's okay.
MR. CONRATH: '07.
MR. GOSTIN: '07.
THE COURT: Okay.
MR. GOSTIN: And that case was a motion to dismiss as
well, and it has a few similar points. They alleged that they
were not alleging a predatory pricing scheme but they were
using the price as something they were challenging. They also
alleged that it was exclusive dealing, just like they were
doing here. And what the Court said is, you take a look at
each of the factors separately. First, let's look at the
prices; or here, you have prices plus the contestable
transactions. Have they alleged anything to show that those
were exclusionary? That those were exclusive dealings? There,
there was no below-cost pricing, so they got rid of those
allegations. And then they looked at what else was alleged
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beyond that in terms of exclusive dealing, and they went
through those and they said, that doesn't amount to exclusive
dealing.
And I think that's the same thing you have here: You
have the pricing and the bundling, and once you get past that,
you really don't have much. They talk about market power and
entry barriers, but that's in any monopoly case that's always
alleged, so that can't be related to the conduct.
And it said, no, that doesn't count to exclusivity,
and I think the same thing is true here. If you take away the
pricing and the bundling of contestable and noncontestable
demand, you don't have much else left.
I also want to add one point. In their complaint,
they specifically say what is driving exclusivity in this case.
And let me get the cites for you, your Honor, so you can take a
look at it if you're interested. I think paragraphs 79 and 102
of their complaint both say very specifically that we are using
the bundling of contestable and noncontestable transactions to
create de facto exclusivity. They say that directly in those
paragraphs.
So, that's their allegation, that that's causing it.
They've now come back and said, hey, yes, there are some other
things throughout our complaint that we can sort of try to
cobble together to make a different exclusive dealing argument,
but that's what they said in their complaint, and I think they
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should be bound by what they said there.
THE COURT: They also allege that on occasion, Visa
entered into contracts with an agreement that the other side
would not, in fact, deal with a competitor.
MR. GOSTIN: Yeah. That's a separate claim. That's
their fourth claim, which I'm happy to talk about as well with
the Fintech agreements. But they don't claim that those
Fintech agreements are exclusive deals; importantly, nor could
they.
THE COURT: Why would that not go into the issue of
anticompetitive conduct?
MR. GOSTIN: Well, the first claim, your Honor, is
about merchant deals and the allegation is that we're locking
up the available transactions throughout. These are not about
locking up transactions; these Fintech agreements, their
allegation is that we paid them not to develop ACH-based
systems. So, it's a separate claim that doesn't have to do
with the merchant routing, it has to do with whether we are
paying them not to create different sorts of competitors.
Things like PayPal ACH or Square ACH or Amazon or Apple
creating an ACH-based network.
THE COURT: Okay.
Go ahead.
MR. GOSTIN: So, I think the final point I want to
make is just the Supreme Court has been very clear that they're
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supposed to be safe harbors for price discounts, and I know
they're not alleging a predatory pricing scheme, but they are
challenging the price discounts we offer. And the Supreme
Court has said there should be a Safe Harbor there because we
don't want to risk chilling price discounts. That's why I
think it's appropriate at a motion to dismiss level for you to
rule on what the appropriate tests should be to evaluate these.
And if you do determine that the price cost and discount
attribution test are applicable here, there's no factual
dispute that you have to resolve. They have not alleged
below-cost pricing, they don't claim to, I don't believe,
although maybe they'll come up here and say something
different, but under either of those, the case should be
dismissed.
THE COURT: Okay.
Go ahead.
MR. GOSTIN: So, moving to the third one, the Fintech
agreements, these were all filed under seal. I have copies of
the agreements but I don't want to read them into open court at
all. If you need a copy, I'm happy to pass up a binder for
you. But I think the point here is simple: They say in their
complaint -- and this is at paragraph ten -- that we pay
competitors as an express condition for them not to create
ACH-based competitors. Yet, when we produced the agreements,
they were not able to identify any payments. Moreover, even in
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their allegations, they agree that two of the three companies
that they've identified -- there's Apple, PayPal, and Square --
PayPal and Square have ACH-based networks, so the idea that
we've paid them on a basis of an express condition not to
produce an ACH-based network seems impossible.
THE COURT: My recollection of the briefs is that the
government contests that your description of the contracts is,
in fact, complete and accurate, that there are things left out
of your description of the contracts. You say no, that's not
right. Again, how exactly could I decide that dispute on a
motion to dismiss?
MR. GOSTIN: As an initial point, we have provided the
two Apple contracts and the PayPal and the Square contracts,
the overarching contracts. There are many regional, like,
addendums to those. We didn't want to burden your Honor with
thousands and thousands of pages of contracts.
But here's the point: They could have come back and
said, hey, look at this specific agreement, or look at this
specific provision, and this is where those payments are, but
they never did. And what we identified is provisions in there
that did not contain any payments and specifically say Visa
does not provide payments in exchange for any of this, and
allows them to create these ACH-based networks. In every
contract there is something ACH-based network. So, I think the
contracts both positively say that you can create these, and
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they haven't identified anything in those contracts saying that
we paid them. And again, I do want to stress: They've had
these contracts for a long time. These were all produced
during the investigative phase. It's not like a case where
they don't have these contracts; they have them. And if they
thought that there was something in there they could point you
to, your Honor, I think they would have.
THE COURT: Okay. Thank you.
MR. GOSTIN: And that's all my points for now, your
Honor.
THE COURT: Okay. Thank you.
Government. Mr. Conrath.
MR. CONRATH: Yes. Good afternoon, your Honor.
Craig Conrath for the United States. May it please
the Court.
I will track through these in the same order that we
just went through them.
I want to say, first, the definition of the market
essentially is normally an intensely fact-specific inquiry.
It's been said in a lot of case but Todd v. Exxon is one that
comes to mind, Regeneron as well. And the reason for that is
that markets are defined by what consumers demand, and what
consumers demand is inherently a fact question which is surely
in dispute in this case.
So, we have alleged the two varieties of markets that
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involve getting money from point A to point B, but they involve
more than that because that's what consumers demand. They
demand three additional things beyond simply moving money from
A to B, and they are: An immediate guarantee of payment,
because an electronic store isn't going to let an expensive
piece of equipment walk out the door without being confident
that it's going to be paid.
It is a system of dispute resolution and charge back,
which both merchants and customers want to give them the
confidence to go ahead with the transaction against the
possibility that something might go wrong with it. Both sides
knowing there's a way to resolve disputes makes the product
more usable by consumers.
And thirdly, fraud protection, which is important to
the merchant in particular to be sure that they have a system
to prevent fraud to make their transactions profitable.
So, those are the products that we've defined in the
market. What defendants want to do is throw in simple ACH,
simple RTPs, simple FedNow. I'm going to just refer to ACH to
make it simpler. Those are services that just move money from
bank account A to bank account B. They are an important input.
They are an important input because, as counsel pointed out, we
do mention that those products are used. They are an input
into a full-fledged competitor debit service, but they're, by
themselves, not enough to provide what customers want, and that
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of course is the ultimate question, a fact question appropriate
for later in the trial but not at the motion to dismiss stage.
THE COURT: Or at the summary judgment stage.
MR. CONRATH: Well, yes. We could be there someday,
your Honor, but it's certainly not appropriate at the motion to
dismiss.
So, basically, let me analogize to the Regeneron case
because it's a pretty good example. The question was whether
the exact same medicine delivered in a vile was in the same
product market as the medicine already preloaded in a syringe,
and the customers -- here, physicians -- preferred the
preloaded medicine because it was safer, because there was less
risk of infection, and it was more convenient. And the Court
of Appeals ultimately said that that's enough differentiation
that it's appropriate to define a separate product market for
it, even though the product itself, functionally similar, was
in a vile was something that was available but it wasn't what
customers demanded, and for that reason, it was outside the
market.
Same thing is true here: A simple ACH movement of
money from one place to another is risky and inconvenient. You
may have to type in a long string of your bank account numbers.
If the money is gone, it's gone because it's been transferred
to the other money account because there's no dispute
resolution, no charge back. And so as the evidence will show
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at trial, the fact dispute that's there, the market definition
that we've alleged will be supported by the evidence of
customer preferences, and that will not include simple
unadorned ACH transactions.
Visa has said that we did not allege a couple of
factors that go into market definition ordinarily. The
hypothetical monopolist test, which uses the SSNIP test, we did
make that allegation, it's in paragraphs 155 and 163. So, we
did not use the words "hypothetical monopolist test," we said
rather a single company that was the only seller of a good in
the market, which of course is a way of saying "hypothetical
monopolist" without using so many 50-cent words. So, that
allegation we did make and expect to prove it at trial.
Another method that courts use in defining markets is
the Brown Shoe factors. It comes from the Supreme Court case
Brown Shoe. There's a list of factors which often define a
market. We surely did mention the one; this whole thing is
about the attributes of the market, the characteristics of the
market, which are those three qualities that are essential for
consumers to provide a network that's a competitor to Visa as a
debit card, but we also made allegations on some of the others.
Price sensitivity is one of the Brown Shoe factors, and of
course the hypothetical monopolist test is specifically that.
Distinct prices. Simple ACH as a price very different
from the price for debit services. That is another allegation
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that we made.
So, we did, in fact, make an allegation about the
hypothetical monopolist test and we did, in fact, make
allegations about the Brown Shoe factors.
Unless there's anything else that I've failed to
address on market definition, I'll move on, your Honor.
THE COURT: Go ahead.
MR. CONRATH: So, the second topic is the allegations
about exclusive dealing arrangements. This is also a fact
question extensively. We have alleged nothing to suggest that
we're making a predatory pricing claim; we are making a claim
that the provisions of their contract that require exclusive
dealing are in fact unlawful under Section 2, unlawful under
Section One.
And those are contracts. I want to be clear, they're
not exactly volume discounts. It's not as if you buy 100, you
get this price. For the most part, as we allege in the
complaint, their requirements are that the customer deliver all
or nearly all of its eligible transactions to Visa. So, these
are 100 percent requirements -- in some cases somewhat smaller,
97, 90 -- but all of them are de facto exclusive dealing
arrangements because they effectively say, you will deliver all
of your eligible transactions to Visa, and therefore, they
implicitly say, picking up on a question that the Court asked,
that they are in agreement not to deal with a competitor. If I
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have an agreement that says I will give 100 percent of my
eligible transactions to Visa, I am of course implicitly saying
I will give zero percent to the competitor. So, they are, in
fact, agreements not to deal with a competitor.
THE COURT: Visa argues, essentially, that all of the
aspects of the contracts that you're complaining about resolve
into issues of price discounts, and the Supreme Court has made
it clear that the antitrust laws shouldn't be construed in such
a way as to discourage price discounts.
MR. CONRATH: Right. So, they would like to
characterize our allegations as predatory pricing claims.
THE COURT: No, no. I mean, it doesn't necessarily
follow that a price discount is predatory. It's that it's
below cost.
MR. CONRATH: Yes. I guess I meant to say, your
Honor, that their description of our exclusive dealing
allegations as all about price is actually not accurate. The
allegations are we don't say that their prices are too low, we
say what's wrong with their contracts is that you have the
exclusive dealing arrangement, the you will deal 100 percent
with me and zero percent with my competitors.
So, the Court asked for examples of cases addressing
this question on a motion to dismiss. I think neither party
cited cases where, on a motion to dismiss, there was a finding
that a price cost test had to be applied to an exclusive
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dealing claim. On the contrast, there have been a substantial
number of cases that, with well reasoned logic, courts have
decided that the appropriate standard of looking at an
exclusive dealing case is the ordinary rule of reason standard
under the antitrust law. So, let me just mention a couple of
them.
In a way, the leading case is ZF Meritor, which is a
case where the Third Circuit interpreted the Supreme Court's
decision in Tampa Electric, which is the origin of exclusive
dealing doctrine. I note, if my memory is correct, the
ZF Meritor case is after the Nicsand case that was just handed
out. And some other cases have followed that logic and said,
if price is not the predominant motive exclusion, the
appropriate standard is the ordinary rule of reason and there's
no need to use the price cost test, and that's the situation
that we're in here, your Honor.
But there are Sure Strips cases that we cited in our
brief; are two of them, one of an FTC enforcement action and
one a private action. Both, this argument was denied on a
motion to dismiss. The FTC v. Syngenta case, the motion to
dismiss was denied. Remicade, the Dial Corporation, American
President Lines, all cases that we cited where courts have
declined to apply a price cost test to an exclusive dealing
allegation.
I should note, so we did not address the Nicsand case
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in our papers because it's not cited in defendant's papers. If
we have a moment to respond, if the Court would like a
follow-up letter to address the Nicsand case that counsel
passed out, I'd be glad to do that.
THE COURT: Sure. Give me a letter by Monday.
MR. CONRATH: Okay. Will do.
So, a way to think about this is to turn to the basis
for the price cost test, because that kind of helps us
understand the logic behind this. We're recommending to the
Court use the ZF Meritor standard which says if price clearly
predominates as the mechanism of exclusion, only then does it
make sense to apply the price cost test.
So, in a predatory pricing case, the allegation is
that their prices are too low in period one, they're so low
that they're below cost, and then eventually they drive out the
competitors, and in period two, there is a recoupment where the
company charges high prices. We allege nothing like that in
complaint; rather, this fits the mode of exclusive dealing,
which critically can be profitable while it's going on.
There's no period of loss. And the reasons why the Court
decided a price cost test was needed in predatory pricing cases
is helpful. The Court said, first, the allegation that you can
get a monopoly by predatory pricing is implausible because it
requires certain losses in period one and uncertain recoupment
in period two. That's one.
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Number two is the Court said, we don't want courts to
be making fine judgments about prices because it might
discourage aggressive price competition, which, of course, is
the fundamental part of competition the antitrust laws protect.
So, those are the reasons why the Court said, we
needed the special price cost test. Neither of those factors
is present in the allegations we have made in this case.
There's no allegation, there's no implausibility, there's no
two-period process. As the Court in ZF Meritor notes,
competitors can be excluded without below-cost pricing under an
exclusive dealings scheme, and there's nothing in what we've
alleged that is going to call upon the Court to make a decision
about the level of Visa's prices. We make no allegations about
the level of their prices. What we say, in fact, is that
generally their prices are supracompetitive. Too high. We're
not saying the prices are too low, we're saying they're too
high, and that is because they're protected by the exclusive
dealing arrangement.
THE COURT: One question is whether, on a motion to
dismiss, it's necessary for the Court to say, under the facts
alleged in this case, we don't apply the price cost test, we
apply the ZF Meritor test, we apply a rule of reason. That in
and of itself is a significant decision to reach on a motion to
dismiss whether the facts, plainly, are disputed.
MR. CONRATH: You're reminding me, your Honor, of
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something I should have said.
So, whether price predominates should be a fact
question, appropriate for later in the process. If we look at
the origin of the clearly predominates test, the ZF Meritor,
which was itself resolved on post-trial motions, and the
specific question of whether this is a fact dispute was
addressed by the Syngenta Court and said that it is a fact
dispute.
And actually, if you just describe what the question
is, it kind of tells you that it's a fact dispute. Does price
clearly predominate? Is A better bigger than B? Does A
predominate over B? Does A clearly predominate over B? That
just sounds of and appropriately is a fact question.
So, perhaps underscoring the way your Honor phrased
there question, that does not have to be resolved at this
stage. And we have made sufficient allegations to put that
fact question into later in the process.
THE COURT: Okay.
MR. CONRATH: And finally, let me talk about the
Fintech agreement.
So, a little market context might be helpful here.
All this Visa conduct with the Fintech agreements arises out of
Visa's steep concern --
THE COURT: I'm sorry. We're talking about the third
issue?
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MR. CONRATH: The third issue. I'm sorry.
THE COURT: The specific contracts.
MR. CONRATH: Yes.
Turns out we're not talking exactly about the specific
contracts in the way that Visa has argued it, so let me get to
that.
Visa is deeply worried that some of these Fintech
companies could start to create other ways of moving money that
meet consumers' needs and that will displace or partly displace
Visa's role as a middle man in transactions. They call this
disintermediation, and they're clearly concerned about it.
Their fear about that kind of disintermediation led them to
enter into agreements, into understandings with various
potential competitors. And the essence of these agreements was
that Visa gives concessions, discounts, rebates, and what Visa
gets is protection from disintermediation. Basically, Visa
entered into deals to co-opt potential disrupters before they
could ever become disrupters, before they become the next
generation of competition for Visa. In the words of one Visa
executive that we quoted in the complaint: Everybody is a
partner, nobody is a competitor.
So, the complaint alleges that these arrangements with
Fintech competitors are part of a Section One violation of the
agreements and also part of the broader monopoly allegations
and attempted monopolization allegations. So, Visa's claim is
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that the express agreement not to compete is not exactly
written down in the contracts, at least the ones they supplied
to the Court. So, this argument can be rejected for several
reasons:
First of all, what our complaint alleges is an overall
agreement, an understanding, between Visa and each of the
potential competitors. The substance of which was a quid pro
quo as just described in the complaint where the quid is the
competitor gets rebates, discounts, money basically, and the
quo is Visa gets protection against disintermediation.
And the basic idea that it can be unlawful to enter
into agreements with your potential competitors that they won't
compete with you, comes out of FTC v. Actavis, Palmer v. BRG --
THE COURT: But Visa says there's nothing in the
agreements that provide precisely that, and the government has
had those agreements for some time and can't point to anything
in the agreements that stands for that proposition. And as I
read your papers, you say, well, Visa's submission of those
contracts is incomplete, and is Visa says, no, not right.
We've given the contracts. And as the government has other
provisions of the contracts that they'd like to offer, they're
welcome to do that.
MR. CONRATH: Yes. And the reason that argument is
not sufficient is, I think, threefold:
First, our allegation is not limited to the words of
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the contract. Obviously, the antitrust laws don't expect or
don't require that companies are going to write down the most
anticompetitive parts of their agreement and include them in a
written agreement. So, our allegation in the first instance,
which is this sets Visa's strategy and the reasons for it are
set forth in our complaint at paragraphs 108 to 117. So, there
is an understanding between Visa and each of those companies,
the allegation is that there's a quid pro quo, effectively, a
market division: We'll give you money, you won't compete
against us.
But secondly, they attach the current contracts and
say they don't have anything. They don't address the fact that
we make substantial allegations about prior contracts, so prior
contracts where Visa had agreements with the companies to avoid
competition.
So, just to take one of the examples: With PayPal,
Visa had an agreement in about 2015. PayPal introduced a
staged digital wallet, which is a particular type of wallet
that Visa perceived as exactly the kind of thing that might
lead, in the future, to disintermediation. And Visa threatened
some very high punitive fees on PayPal if they did that, and
they reached an agreement which eliminated or significantly
restricted the competition that PayPal could provide in this
way. So, this digital wallet basically requires, at a minimum,
two functions: Money coming in, money going out. So, the
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money going out is the merchant acceptance part of the deal;
the money coming in is how the transaction is funded. So,
PayPal was getting some merchant acceptance because it had
context. Nothing like Visa, but it was perceived by Visa as a
threat.
One of the ways to get money into the stage wallet was
from your Visa debit card. PayPal added another way to get
money into the card through an ACH transaction. And of course,
just to take us back to market definition, when PayPal does it,
it has some of the other characteristics, so it's not a naked
ACH. So, ACH is potentially going to displace some Visa
transactions as a way for money to get into the PayPal staged
wallet.
Visa didn't like that, they say, we're going to impose
a staged digital wallet fee. Internally, Visa described this
as a behavioral fee; that is the incentive or the meaning is
quite clear: We want to influence the behavior of PayPal, our
potential competitor. And the terms of the standard that Visa
imposed in the contract were if a customer has Visa as one way
to get money into the wallet, you cannot use ACH as an
alternative way. What does that mean? Well, it's a very
direct interference with the competitive process, which is one
of the clearest standards for what makes an anticompetitive
effect. If I'm in the wallet, you cannot use a competing
method to get money into the wallet. That suppressed what
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could have become a more competitive alternative to the Visa
debit network.
Now, after this investigation started, Visa changed
that most blatantly anticompetitive term, and today, instead of
flatly forbidding the use of ACH as funding for a point-of-sale
transaction, instead it makes it kind of clunky and
inconvenient. You have to use a QR code and it's not very
convenient. So, of course under the antitrust laws, it's not
only illegal if you totally block your competitors' activities,
it can be illegal if you just make them inconvenient and hard,
if you handicap them, basically.
So, part of our allegation is that, under that earlier
contract, that helped Visa to block potential competition that
could have erupted, entrenched Visa and protected Visa's
existing monopoly, and that has continuing effects to today.
And so looking only at the current contracts that Visa appended
does not, by any means, address all the issues in the
complaint.
THE COURT: You say it continues today.
MR. CONRATH: Effects.
THE COURT: I'm sorry?
MR. CONRATH: That the effects continue today.
THE COURT: Is that allegation in the complaint or
just in your response to Visa's allegation that there's nothing
in the contract that specifically provides the anticompetitive
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conduct that you're talking about?
MR. CONRATH: So, the allegations about the conduct
are set forth extensively, and there's a portion of the
complaint that talks about effects, and I believe it's in that
portion that it talks about effects continuing forward. I
don't know that it names specifically the one transaction that
I talked about, but it makes the allegation generally that
effects continue.
THE COURT: Go ahead.
MR. CONRATH: All right.
THE COURT: You had a third point.
MR. CONRATH: Yes.
So, the first point is there's an allegation of an
overall agreement. The second point is there are prior
agreements that are not mentioned in the motion that may have
continuing effects. The third fact is -- and I guess implicit
in these is that the written agreements are, themselves, an
implementation of the overall quid pro quo and not necessarily
themselves freestanding quid pro quo agreements. But if we
look at the Apple agreement that's described, actually it is.
So, there was a written agreement -- it's Exhibit 3 to their
motion -- it implemented the quid pro quo. It provided that
Visa would give Apple various payments and incentives. The
payments and incentives are set forth in addendum two for the
U.S., which they didn't supply to the Court, but basically they
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consist of we, Visa, will give money and things of value to
Apple. In order for Apple to receive this money, they must
remain eligible under Section 10 of that contract.
Elsewhere in the contract, it provides that Apple is
not eligible if it -- and I'm not going to use the exact words
because they make a claim of confidentiality over the exact
words -- but they say you're not eligible if you're doing
something that Visa regards as disintermediating; in other
words, that Visa regards as competing with Visa.
So, that's pretty direct. It says: I will give you
money but only if you do not compete with me. And so there's
maybe a three-step agreement not to compete because it's got
the eligibility term in-between, but it's pretty clearly a quid
pro quo: You only get the money if you continue not competing
with me.
This conduct very closely parallels conduct that was
found to be part of a monopolization scheme in the
U.S. v. Google, Google search case. There, Apple was one of
the few companies that might have been able to create its own
search engine to enter and compete against Google, but instead,
Google paid substantial amounts of money to Google for the use
of it, and the Court said that clearly disincentivized Apple
from entering and competing, and therefore could be part of a
monopolization claim.
Similarly here, the parallel is that Apple is a
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company that could enter the debit network markets, but these
large payments from Visa disincentivized them from entering,
and in that sense, they can be part of a monopolization claim.
And unless the Court has additional questions, I think
that's what I have to say.
THE COURT: No.
MR. CONRATH: Thank you.
THE COURT: Thank you, Mr. Conrath.
Mr. Gostin.
MR. GOSTIN: Thank you, your Honor.
I have a few responsive points that I want to make if
you'll allow me.
First, my very good team also told me there's another
market case I should cite for you in addition to Hicks if I
could just highlight that for you. It's also cited in our
brief. It's Jacobs, it's Eleventh Circuit case from 2018, and
it's 626 F.3d 1327, and that involved a mattress case where
there were different qualities of mattresses and there were
different features between them that were alleged, and the
Court said just alleging that the different mattresses, like
expensive mattresses and less expensive mattresses, didn't
define a market and that they both should be included, and that
was at the motion to dismiss phase as well.
THE COURT: But there are a lot more allegations with
respect to the definition of the market than simply that. That
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was sort of what I was referring to asking for the similar
cases. I mean, plainly, there are a series of cases which
have, at the motion to dismiss stage, said insufficient
allegations of a market, but those have tended to be fairly
extreme cases. Here, there are lots of allegations as to how
the market would be defined to exclude ACH and RTP. I mean,
they're not cursory allegations. So, this could be a case
that's closer to Regeneron.
But go ahead.
MR. GOSTIN: Well, let me address that, your Honor,
please.
So, they've tried now to come up here and cite other
allegations in their complaint, suggesting that they have
satisfied more of the Brown Shoe factors. For example, they
talk about price differences, and they say that ACH is price
low, and that is alleged in the complaint, but two points on
that your Honor:
One, that's --
THE COURT: They also allege about three factors of
consumer preferences that would exclude ACH and RTP from the
market that they are identifying. And I come back, and you can
respond to this, to the notion if you're looking at consumer
preferences as an important factor in determining the market,
how do you conceive of a consumer going into a merchant and
saying, okay, here's my Visa card, process the transaction, as
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opposed to a consumer who goes in and says to the merchant, I
want to use ACH or RTP.
In fact, RTP couldn't even be used that way, could it?
MR. GOSTIN: A couple responses there, your Honor.
THE COURT: Go ahead.
MR. GOSTIN: First, on the paragraphs that they cite,
paragraph 155, for example --
THE COURT: Go ahead.
MR. GOSTIN: Oh, sorry. I thought you were going to
say something.
THE COURT: No, no.
MR. GOSTIN: Paragraph 155. That doesn't mention ACH
and RTP, it's just a general allegation. It doesn't say
anything about consumer dispreference for ACH or RTP. Those
two aren't.
And to make a SSNIP argument, which is what they're
saying that allegation is, you have to make an argument
specific to a product. You have to say they don't prefer ACH
or RTP for X, Y, or Z reason.
THE COURT: Let me just stop you.
I thought that your argument -- and again, you can
correct me if I'm wrong -- was that they have insufficiently
identified the market because they have failed to include other
products, if you will, specifically, ACH and RTP, to which they
respond, no, just look at those products. They do not have at
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least three of the factors that they point to which are
important to consumers.
Your turn.
MR. GOSTIN: Your Honor, nowhere do they say that
those are the driving consumer factors for that. What they say
is that people prefer debit but they never say that, oh, why
they prefer debt over ACH in terms of those, they just rely --
Sorry, your Honor.
THE COURT: But --
MR. GOSTIN: I feel like I'm not answering your
question, so maybe if you could -- what's your concern? Your
concern is that you think that by just alleging these factors,
that's enough to say that those differing features are enough
to drive consumer demand. And my point is that the courts have
said just identifying different features is not enough, you
have to say why those features are economically defining for
the market, and that's what they haven't done. That's what the
allegations don't get to. They don't go beyond just saying
these are different features and saying that, yes, maybe some
consumers prefer those features in certain situations but they
don't say that they're market defining in any way, which is
what you would do if you alleged a SSNIP, for example. The
SSNIP allegation, to be clear, is alleging that if we raise the
price, that they wouldn't go to ACH or RTP. There is no
allegation that if Visa raised its prices, people would not go
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to ACH and RTP. They do not allege that.
THE COURT: Perhaps I'm missing something. My
question to you is how plausible is it, particularly at the
motion to dismiss stage, to say that in the market which
consists of debit transactions in which a consumer uses a debit
card to draw on the consumer's bank account and Visa provides
that service, that it's a fatal flaw in the complaint and in
the definition of market not to include ACH and RTP. Strictly
from the description in the complaint of the various products,
how reasonable is it, particularly on a motion to dismiss, to
say that ACH and RTP is sufficiently like the Visa card to be
included in the same market?
MR. GOSTIN: Your Honor, I understand you're focusing
on this idea of whether someone can use ACH at a merchant.
They have not alleged that ACH cannot be used at merchants.
That is not alleged in their complaint, and I understand why
you're focusing on it, but that is not something they allege.
And there's a reason that they don't allege it: Because you
can use ACH at merchants. So, they cannot come back and say
you cannot use ACH at Amazon because you can go onto amazon.com
and you can use ACH. They haven't alleged that you can't
because they cannot allege that. So, I understand that there's
a --
THE COURT: Hold on.
MR. GOSTIN: I understand that historic --
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THE COURT: Hold on.
MR. GOSTIN: Sorry, your Honor.
THE COURT: Or RTP?
MR. GOSTIN: Or RTP. I'm not sure whether RTP can be
used there or not. But they haven't alleged it with ACH or
RTP.
So, I understand that's your focus, but that is not
something that they've alleged.
THE COURT: Okay. Go ahead.
MR. GOSTIN: So, although they said that they alleged
the SSNIP test, I don't think they have alleged that. They say
that they've alleged price differences, but they also allege
that PIN networks are cheaper than Visa, and PIN networks are
included in the market, so just alleging that again drives them
towards inconsistency. I think that's why they didn't make
that argument in their brief and are just raising it now. So,
I still think that they've only alleged one of the seven Brown
Shoe factors. And that very different than Regeneron and it's
much more similar, I think, to Jacobs and Hicks, where all they
focused on were these features.
Unless you have more questions about market
definition, I'll move on.
THE COURT: No. Go ahead.
MR. GOSTIN: In terms of the volume discounts, I think
that they came up here and told you exactly what we told you:
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That price is what is driving exclusivity. They said that we
demand 100 percent exclusivity. That's not true. First of
all, they don't allege 100 percent exclusivity, and I don't
think that's accurate, but any level of exclusivity is not what
we demand. You can still pay Visa's rack rates. So, you can
come and use Visa and you pay our normal rates, that's fine;
however, if you want to get our discounts, then you have to
agree to route a certain amount of volume to us. That's a
volume discount. So, they very clearly said when they came up
here that what was driving exclusivity was the pricing.
And I just want to read something from the complaint
which says it quite explicitly. This is paragraph 102 which I
mentioned to you before. It says: Visa uses its power to
ensure control over noncontestable transactions and then
leverages its control over those transactions to demand and
enforce exclusivity. Again, that's the bundling of contestable
and noncontestable transactions, a pricing mechanism that they
are saying is driving exclusivity. And they say it
specifically and directly. So, they mention Meritor and said,
isn't this a fact question? And price predominant certainly
sometimes is a fact question, but not when they've specifically
alleged what is driving exclusivity. That's what's different
here. They specifically allege it.
And the facts in Meritor and those other cases were
very different. Meritor involved where the defendant was
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threatening supply shortages. Remicade was where there was a
fail-first provision, it was two medications, and you couldn't
prescribe another medication unless they failed on your
medication first. So, there were lots of clearly nonprice
mechanisms that were driving it. There's no claim here that
Visa is threatening a supply shortage. Any merchant that
accepts Visa can do it and just get their rack rates. The
question about exclusivity is, if you want our lower prices
then you have to agree to route a certain number of
transactions to us or put us in a certain level on your routing
table, and that's about price, and that's why I think the price
cost or discount attribution test should apply here.
Before I move on, let me see if there's just anything
else I wanted to mention on that. If you'll give me one
second.
No, I think those are the main arguments on predatory
pricing that I wanted to address.
Moving to the Fintech agreements, I think they made
three points, and I want to respond to each of them just
briefly. The first is that they say, oh, we're not relying on
the actual agreements, we're relying on allegation of
agreements that happened outside of the written agreements.
But if you look at those allegations that they cited, there's
nothing in there that says there's a de facto quid pro quo, and
they haven't alleged when such agreement was supposed to take
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place, how it took place. They've seen all the emails between
the companies, they haven't identified an email where that
agreement took place. Normally, to allege a plausible
agreement, you have to do more than just blatantly say there
was an agreement, you have to allege facts supporting that
there was some agreement beyond the written agreements, and I
don't think they've alleged anything that comes close to that.
Moreover, most of those allegations in there don't
involve a quid pro quo where we paid them allegedly not to
institute an ACH-based payment mechanism. They involve
situations where we allegedly said you have to pay additional
fees in certain situations or you have to put Visa products
more or equally accessible on your PayPal app. We're allowed
to do that, your Honor. That's not what they're alleging is
against the law, nor could they. If PayPal or Apple decides to
become our competitor, or if PayPal competes with us, if they
develop their own network, we don't have to deal with them. We
can walk away from the deal. And for the same reason, if they
do become a competitor, we can charge them additional fees for
our transactions. There's nothing that prevents us from doing
that, and that's not what they say in their complaint.
If you go to their -- and again, I'm sorry I keep
reading stuff from the complaint, but I think it's important
what they actually alleged here. I think they should be held
to it.
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If you go to paragraph 196, I believe it is. This is
in their third claim, which is their Fintech claim. This is
the basis for the claim: Visa's agreements -- and they say
"agreements," which I assumed meant written agreements -- pay
competitors not to compete in each relevant market and pay
potential competitors not to develop alternatives to debit card
networks or adopt new technologies that may disintermediate
traditional debit card networks.
Nowhere have they cited still any sort of payment that
way make. The closest they've come to, and this was their
third point, was when talking about Apple. But what they were
citing, and it's important to understand there's two courses of
dealings going on between Visa and Apple: One is Visa has a
deal with Apple related to Apple Pay, which is where an ACH
mechanism might be induced. That's called the Apple Technology
Agreement. And Visa provides Apple certain technology, and in
exchange, Visa is included on Apple Pay and Visa can be used.
Nothing in that agreement involves any payment from Visa to
Apple. They haven't cited anything. They mention something
about payments from issuers, but if you go and look at that
specific provision, and we've cited it, it specifically says:
This is not a payment from Visa to Apple, it's just Visa
collecting fees and passing them on to Apple. It's just a
service they're providing.
Then you get to the merchant agreement. This is the
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second course of dealing. So, Apple is also a merchant; they
have Apple Stores, Apple locations, they sell products. And
just like any other merchant, they get a volume discount. So,
we didn't include and addendum to, and if it's important, we
are happy to provide that to the Court, but there is no dispute
that what that addendum does is provide volume discounts just
like we do with every other merchant. That's not a payment for
them not to create an ACH-based mechanism.
And there's actually even a provision in that contract
that says this has nothing to do with Apple Pay. And I won't
read it into the record because it's a sealed agreement, but
just to cite it for the Court so you can look at it, it's
Schedule B, this is of the merchant agreement which is
Exhibit 3. Schedule B, Section One, at page five. And it
specifically says: This merchant agreement doesn't control
anything that happens in Apple Pay, which is where an ACH-based
mechanism would occur.
So, yes, we have a deal with Apple as a merchant, but
they haven't identified anything suggesting that that's a
payment for them not to create ACH-based mechanisms. It's just
a payment that we have with any merchant.
Finally, on PayPal, I think the same points here.
They're talking about this digital wallet fee that we used to
impose on PayPal for using a QR code in person; we've now
waived this fee in our most recent agreement. But it's
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important to understand what that fee is. The digital wallet
fee is not a fee on ACH-based transactions, it's a fee on Visa
transactions. And even the old contract, which they haven't
provided, but if they did, all they allege is that we impose
that fee on Visa transactions if you're going to use something
other than a QR code -- the current agreement just says: If
you're going to use something other than a QR code, you're
going to get charged this extra fee on Visa transactions.
We're allowed to do that. If they want to become our
competitor, we can charge them more money for our product.
They haven't cited any case that said that that was not
allowed.
So, again, I want to be very specific. What they
allege they can show, what they say in their papers, both their
complaint and their opposition, is they can show that Visa paid
these competitors or potential competitors not to launch
ACH-based systems. First of all, PayPal and Square have ACH
systems and there's no payments in there preventing them from
doing that.
And for Apple, they haven't alleged any payment that
was given to them not to do it. All it says is that, look,
Apple, if you become your competitor, if you launch your own
ACH-based network, we can terminate our deal. We can stop
dealing with you. And there's nothing in the law that requires
Visa to deal with Apple. And Apple is not a small competitor.
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They're perfectly capable of handing themselves. The idea that
Visa is bullying Apple around I don't think passed the smell
test.
So, unless your Honor has any questions, those were
the points that I wanted to make.
THE COURT: No. Thank you.
All right. Thank you. I'll take am motion under
advisement.
Thank you all.
(Adjourned)
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