PEP Episode 017 — Anti-Trust, Competition Law and Big Tech Implications featuring Adam Bucci & Matt Luciani
- December 5, 2023
Welcome to the Payments Experts Podcast, a podcast of global legal law firm today, two very special guests. We have global legal law firm attorneys, Adam Bucci and Matt Luciani. Gentlemen, today we’re talking about antitrust and non-compete laws. Very excited about this topic. Jump right in.
Thanks for having us on the day, Jeremy. I’m Matt Luciani, and that’s Adam Bucci. Before people get into the obnoxiously, Italian names that we have and all the nicknames that might go associated with them, our one housekeeping thing that we’re just going to get out of the way is that we do prefer Bucc and Lucc not “Blucc,” Bucc and Lucc. Okay. Now with that said, we’ll jump right into it and just kind of discuss a little bit of a background of antitrust law and competition law, the fact that they kind of go hand in hand, and how they also affect the payments industry since that is the bulk of a type of client that we really represent and the niche that we practice in.
Welcome to the Payments Experts Podcast, a podcast of global legal law firm ISOs, FinTech, pay fax agents, merchants, processors, acquiring banks and card brands. If these terms mean something to you, this podcast is for you. If these terms aren’t so familiar, this podcast is even more for you. We hope you enjoy this episode of pep, the Payments Experts podcast.
Adam, take it away.
So Matt, you mentioned antitrust law and competition law, but we don’t really use antitrust as much when we refer to this anymore, do we? Right?
No, sorry. That’s a good question because really globally, Europe, et cetera, they refer to antitrust law as competition law. So America, we really coined the term antitrust law, but competition law is very, very old, and I would prefer referring to it as competition law because biden’s administration kind of did start referring to it as competition law instead of antitrust law, and came out with the executive order 14,036, which was directly associated with making the DOJ and the FTCA little bit more involved in competition. I personally believe for the layperson, it makes it a much easier and digestible topic to call it and refer it to it as competition law because it is a little bit more all encompassing perhaps, is why in America we used to call it antitrust instead of competition because we do like to localize things, especially in the legal industry.
Fun fact for you, I actually learned not too recently why it was called antitrust law, and that was back in the 18 hundreds when turn of the industry times all these major corporations got together and just ruled over the economy capitalism back then, they formed trusts in order to maintain their monopolies. So that is actually why we called it antitrust law up until basically these past few years
And Sherman Act kind of addressed that, right? So Sherman Act a lot of times in America gets the credit for antitrust legislation. Really all that was though was our first major legislation that addressed all of those issues that you just brought up, Adam. And what people don’t really realize is that the FTC Act may be a little bit more important to the regular consumer because what Sherman really addressed was breaking up those trusts that you just discussed and getting rid of monopolistic powers and also addressing price fixing, which was some of the earliest competition laws. You go way back to the Julian era, they actually addressed price fixing in groceries.
The Sherman Act sounds germane to why we’re here. So if that doesn’t deserve the credit, then why does the FTC deserve the credit for this change?
I think the FTC acts a little bit more important specifically to the type of work that we do because Sherman doesn’t address the broader, unfair, ethical or unethical fraudulent business practices that the FTC ACT actually addresses, right? So 15 USC 45 really starts to address unfair competition and how that needs to be regulated. It defines it, et cetera, but it only provided public causes of action. So it also empowered the FTC to go after these companies. Amazon’s a big one on the news right now. Another one would be Microsoft, just specifically in the banking. PayPal. Yeah, PayPal is a big one for US. Banking and technology, the two biggest sectors that have really been consolidated by, depending on how you look at it, anti-competitive practices. And what America’s trying to do now is really put more scrutiny on these mergers and acquisitions, but more specifically to your FTC ACT question. What also did was it kind of provided model law for the states to actually draft legislation for consumers, and those state laws provide individuals with their private actions.
So in terms of legislation and more so important to us in terms of litigation, actually right now we’re experiencing a flurry of these antitrust or competition law based cases. You touched on a few of them. Amazon, PayPal, Activision with Microsoft is one. Let’s get into that. What’s going on in that field? What are these cases about? What’s a big important one to you that you think is interesting?
So I’m definitely keeping a close eye on the PayPal one, which was probably the most recent pleading to actually be filed. And that is a private pleading that’s not actually the FTC coming in. That’s actually a class action that was filed in the beginning of this month, I think it was October 5th that it was actually filed. And really that’s going to affect a lot of things for us, and I’m sure we’re inevitably going to have clients ask us about it too, because one of the biggest things in our sector is the merchant. Of course, we frequently represent the ISOs or other portions of the actual processing activity, but for a long time there hasn’t been a lot of regulation in this industry and specifically as it applies to the merchant. So maybe this could kind of shake things up a little bit and give the merchant a little bit more rights.
I mean, I do know, and just staying within the same realm of payments that one of our coworkers, Jarvis Laman was previously on here and discussed the Durban Amendments and just for illustrative purposes, that kind of serves as the first really landmark legislation in this sector that kind of addresses competition because something that a lot of people may not know is that the major card brands have already kind of experienced some actions on consumer’s behalf from the US government. So there haven’t been many private causes of action, and that’s why I’m a little bit more excited to see how that PayPal suit shakes up. I mean, there are other ones, right? There’s rum point versus Visa, which I believe we were talking about earlier. That has to do with interchange fees also, but interchange, right? I believe we have a podcast on that already, but the PayPal one actually addresses something different, and that’s anti steering.
Okay, what’s that? So anti steering is an anti-competitive practice. Yes. Steering, think of it that way, where you’re steered into a specific transaction. So a lot of times what happens with these merchant accounts and these merchant service providers is they tie their service into a behavior that the merchant also is going to have to provide. So when I say anti steering in this context, what’s happening is they’re forced into essentially marketing PayPal. And without getting into the merits of any of that, just kind of using it for illustration purposes and not addressing the case itself, I think that that is a pretty good example of, and how you did the steering because it’s as if you’re stuck in a straight line, you’re stuck in a funnel and this is your only option. There’s other examples of price fixing, right? You being the merchant, it’s the merchant’s only option.
Yes, yes. It’s the merchant’s only option. And in this ever-growing digital economy where if you don’t offer electronic payments, you’re faced with very limited options. And I think that’s one of the reasons why we’re finally seeing some private causes of action because maybe the former government actions didn’t address enough. I mean, another one that flies under the radar is actually the state of Ohio brought action against American Express fairly recently also, and it had to do with interchange fees also. So let’s go Ohio. Yeah, really? So I mean, without having a bias towards anybody in this situation, I think the one thing that a lot of people could agree on is that the merchant industries sector, the payment sector, it’s basically run by private businesses. And that’s kind of the whole basis of why we decided to address this today. Because what we’ve seen since EO or executive order 1436, is because Biden granted that power for the extra scrutiny in the FTC, in the DOJ who are really charged with upholding these regulations as far as the public goes. So
What we’re looking at now is really a payments processing renaissance, a power to the people sort of movement,
Getting this outlaw crazy run world that we operate in a little more focus away from the top heavy movers and shakers down to the merchants, the people that are actually operating within this ecosystem, not just running it. Right.
And I think that that’s probably the most important takeaway, right? Because we were talking about before trying to unpack that in layman’s terms, antitrust and why you and I prefer referring to it as competition just because we kind of feel like it is a little bit more encompassing. And because of this shift in politics really in our nation, that’s why this topic in general can get a little dicey because everybody’s entitled to their own opinion. Everybody’s going to have their own opinion over how much regulation is too much, how much regulation makes the economy less competitive than it should be, and vice versa, because there needs to be a balance. But we’re also seeing this ripple effect. It’s not just the private companies, it’s not just the individuals going after the companies. And it’s also gone over to the labor side of things and how’s that?
So actually in May, the National Labor Relations Board kind of stepped into this process also and did an opinion that also was issued by the DOJ, and it was kind of like a concurrent opinion on also. So that’s another one that’s really, really big in our area because of these companies exploding at an exponential pace as we continue to grow and become more technology dependent, these sales organizations is really what they are at the root. So when you hamstringing competition as far as your other competitors, but also the individual’s ability to leave for another competitor or even establish their own company, that’s an issue also to
Me, that flies right directly in the face of competition,
Right? Exactly. But up to this point, it’s kind of been addressed more in the labor sector, and of course we’ve acknowledged the economic impact of these restrictive covenants they’re commonly referred to. But that’s why I think that 1436 is so important because it did represent this ripple effect because that happened in 21, and we’re in 23 and look at what’s happened since May even, almost everything that we’re talking about today has happened since May of this year.
So what is it, excuse me. That kind of leads me to the question I was going to ask is you mentioned the merchants previously, a lot of our clients are merchants themselves. How are they finding out about this? How is this trickling down to them so that they are even aware that they’re being harmed in some way?
That’s a really good question, Jeremy, and I think it’s a very hard question to address because as we were just discussing, these are sales organizations, so they’re literally foot on the ground at sometimes door to door trying to grow their business. They don’t have the time to keep up with the types of things that we’re discussing right now. So it’s really on us and the legal field in general to make sure that they’re properly informed.
This podcast right here,
Potentially right there,
That’s the problem. How do we get them to know and understand that? Exactly. That makes a lot of sense. That’s why this is becoming such an important topic now, because it should have been information that has been in these merchant’s hands probably years and years ago when e-payments became a thing in the
Nineties. Exactly, exactly. And I think that my first time that I even saw the Rum Point Visa complaint, I know me personally, that was the first time I saw private right of action against one of these companies. And I don’t remember off the top of my head right now when it was actually filed, but I saw that in February, but specifically since May, the amount, I wouldn’t say it’s like the floodgates of litigation as attorneys, we hear that a lot, but since May specifically, and this is something that you and I keep an eye on, so that may be why also, but tremendous, tremendous, more news specific to this sector. And my thought would probably be, if you go back to EO 1436, you’ll see some of the statistics on the consolidation of the banking industry over the course of the 20th century.
Let’s break that down
And well, realistically what’s happened is there’s not regional banks anymore. I don’t know if you’ve noticed it or not, and even as recently as the last couple of months, what we just saw happen with Silicone Valley Bank, oops. Oops, is a great way to put that. Right? So it’s really, really hard for the local small business to survive against these bigger businesses. Now, realistically, bank of America, Goldman Sachs, the top three banks, let alone the top five banks, they own almost all of the assets in that entire market.
Your regional bank might still have the title, but it’s not so regional anymore. Right,
Exactly. And they may have even become an NA or National Association is what they call it when you’re not a state regulated bank anymore. I mean, we actually have had some litigation against some of these smaller banks who they are organized NAS even as a regional bank, and there’s a lot to unpack in that we wouldn’t really be able to cover in just one episode of this episode. Also, I mean, just a lot of these topics that we’ve brought up, this is more of an introductory kind of episode of why is this important to payments? But it’s important to payments because it’s important to the digital economy, it’s important to banks, and what we’re in is financial technology, so they’re the two most consolidated industries. So as we’re going away with these regional banks, what do you think is happening with these regional technology services, these ISOs and everything like that? At some points end up, it’s probably the biggest growth factor in this industry is mergers and acquisitions. Sure, yeah.
Has to be one thing. So we keep referencing EO 14 0 3 6. One thing you mentioned towards the beginning that kind of made my ears perked up is that we’re starting to look more towards this European model that has already existed. Can we talk about that a little bit? What have they been doing that we’ve been doing wrong? What are we starting to go more towards that they have already had established for some time?
And I think that this is where you start to get more into not just a legal theory and economic theory discussion, but also a political discussion, right? Sure. Those are fun. Sometimes they make people uncomfortable, sometimes they’re more of a neutral discussion, but in this case, it’s generally known that the European Union is a little bit more focused on the individual and a little bit more liberal than America is in general. I mean, I don’t want to say that we favor corporations more than Europe does or vice versa, but I think you could pretty safely say that what, and I also think that depending on what side of the coin you land on, you got to strike a perfect medium here. But what we’ve seen in Europe is a lot of scrutiny on merger and acquisitions for a long time. We’ve also seen a lot of scrutiny on these technology companies over privacy laws for a long time, and that’s really the trickle down effect that we’re starting to see come into America. That started with this elevated scrutiny that EO 14 0 3 6 really put forth. That was really what the purpose of it was, was to prevent privacy from it already is the most valuable thing in the digital economy. So we need to prevent it from being, for lack of a better term, weaponized. That’s one of the things. And then the banks keep becoming more technologically advanced, so that’s why this all goes hand in hand.
And in this new age too of technology, there’s so much interplay between US banks, privacy and international banks, privacy, mergers, things like that. So I would refrain from using the word standardization because that’s not necessarily it, but there needs to be, it seems like more communication between how it works in the United States, how it works in the eu, because there’s so much interplay already happening that you have these conflicting or laws that don’t cover certain things or something’s more focused while another isn’t. We’re seeing that in data privacy right now while our states are creating their own data privacy laws that are nowhere near as stringent as European Union laws. I think we’re starting to experience that same deal in competition law here.
And I think that that’s really where we’re going to start seeing the trickle down effect because information has become so valuable, and you just, I think, put it in the perfect perspective because all of these, even the Microsoft Activision deal, that wouldn’t have come under scrutiny six years ago. I mean, given both of them have a sufficient level of market share now, which is the term that you will consistently be used Market share. Yeah, market share is really what drives healthy competition. So that’s what you will consistently hear being used. You will consistently see it being used in all of these contexts, specifically as it applies to Sherman and monopolies, but also price fixing. But when it comes to the data security stuff, before Europe started examining Google, we wouldn’t have examined Google. So that’s a really good example of that interplay that I don’t think that we would’ve seen before. 14 0 3 6. Yeah.
Hey, Matt, for those of us who have been living under a rock for a while, can you talk to us about the Microsoft Activision deal? What’s at play there?
Yeah, so the Microsoft Activision deal, I don’t think anybody’s necessarily living under a rock. I think it’s just, it’s not even as much specific to our industry. It’s more broader tech. And what we’re seeing is Microsoft is massive. That goes without saying. I think that’s pretty common knowledge. They’re in social media, they are in video games, they are in everything.
They’re in your computer.
Yes. That’s what I think most people know Microsoft for. But Activision Blizzard actually owns some of the biggest video games, call of Duty, world of Warcraft, right, exactly. Just to name a few. So Blizzard is World of Warcraft, and then Activision is Call of Duty, but collectively, they have been Activision Blizzard for a pretty substantial amount of time now, and Microsoft’s been trying to buy them for a long time already, and there’s been a lot of holdup because of the market share issues that come into play here. And I’m not quite sure when the deal will fully be closed, because every time it seems like it’s finally going to close, there’s a new hurdle that comes up. I think what we’re going to end up seeing in that situation is going to be very similar to what happened with T-Mobile and Sprint, if anybody remembers that, that happened a couple of years back, and that’s probably one of the best illustrations of how competition law works in America.
They’re going to regulate it, but they’re still going to let it go through eventually. Right. You’re going to have, it’s going to happen. Yeah, exactly. So they had to divest certain aspects of that deal to other companies. I think it was actually Dish Network started buying some of those assets and by default kind of became the fourth cellular carrier because we always kind of had a big four cellular carrier situation, and that was the big fear with that merger. So I think that that kind of can help illustrate what will happen with a lot of these merger types of deals. There’s obviously plenty of other current events related to this. We touched on Amazon very briefly, but I do think it was important for us to talk about that Microsoft and Activision Blizzard, because that is one that is still under scrutiny, and that will kind of be a more recent one that people can kind of look at as just an example of how the DOJ and FTC and all these regulatory bodies actually examine these issues. Because regardless of what sector we’re talking about, the one thing that’s going to keep coming up is market share.
So we’re at this high level approach right now. We’re seeing how this affects just your everyday person. How is this going to affect people like our clients? How’s it going to affect our daily life at work? What are we going to start seeing as fallout from all of this new litigation, new ideas, new approaches? What are we going to see?
I think that we’re turning towards a more liberal court system than what we’ve seen before, is what I would say, and I use the term liberal for lack of a better term, but when you talk specifically about competition law and antitrust in America, there was a turn where Robert Bork was a big conservative theorist in judicial economics, and he published an opinion a while ago in the seventies, and it kind of spurred the University of Chicago theory on this topic. And that kind of, I think, hamstringed government intervention to a certain extent. That’s when we started looking at it as a more conservative theory of economics, this as a sector. And that’s why we keep referring back to 14,036. But that’s one of the things that 14,036 was kind of designed to get away from because I think a lot of people kept viewing these economic theories that this legislation addresses as more conservative economic theories. And again, I still think that we need to strike a better balance eventually, and what we’re going to end up seeing for our industry specific issues that you just asked is some regulation on the credit card industry with their interchange fees, because we started to see it with debit cards with Durban.
I was going to say, so Durban is probably right now our flagship moment in our field right now. That’s what we look to at this moment for how has this affected our industry. Also catch our Durban Amendment article on the green sheets, but please go ahead.
I think that that’s a great point though, Adam, because it’s been discussed Durban too. It’s kind of been referred to as well, but for whatever reason, the credit card transactions as opposed to the debit card transactions have been a little bit more difficult to have intervention with. Do we
Know why that is?
I think it’s really difficult to pinpoint, but I think it also has to do with the fact that that’s your own money. Sure. Right. You’re not dealing with That’s a great point. A middleman like a bank that’s extending credit. And I think that’s probably the biggest thing because once the government steps in and does something like Durbin two, which seeks to regulate the interchange fees of the credit cards, then you’re going to have lobbyists on both sides for the individual and the bank probably even more than the credit card company because the banks want to make their money. That’s what this really comes down to because what we’re discussing here is for the people who don’t know this industry, fractions, actual fractions, right? Most transactions, they charge somewhere around a 3% fee. The regular consumer doesn’t even realize that the merchant is bearing that fee, right? I mean, because of Covid, I think it came a little bit more to the forefront,
Right? You’ll see it on cash registers or on terminals. We are eating this 3% fee or however many it is.
Absolutely. And that’s another issue in of itself, compliance with that, the cash discount transactions they call it, right? That’s
Own podcast. Yeah,
That’s its own at least one podcast. But I think that that’s exactly why we haven’t really seen it for the credit cards as opposed to the debit cards is because there’s more parties involved.
Sure. That makes sense.
Gentlemen, you guys have talked about, this is kind of a part one episode, an introductory episode to these issues. You guys have done a great job. It’s been super interesting. We’ve been going now for a little bit. We probably will be tying it up in the next few minutes here. So with that in mind, can you talk maybe a little bit about what do you see as coming in part of this topic?
Take it away, Matt.
I mean, I think we’ll probably address something along the lines of non-compete clauses first. I mean, of course, we are located in California, San Diego County, beautiful. Encinitas, no
Non-compete. No problem.
Yeah, for most, I mean, it’s very easy to say that they’re unenforceable in California. There are some workarounds, sometimes very limited, and that’s why that could be its own topic given in of itself. But
The famous legal answer, it depends.
Yes, exactly. Everything’s gray. Nothing’s black and white, right? I mean, it’s not supposed to be at least otherwise, why would we be sitting here talking to you about it? But that really kind of just transitions into, we do a substantial amount of out-of-state litigation as well. And most of our clients in this space who need to address things like non-competes, obviously reside in another state because of the hurdles that California presents. And that’s why I think that that’s a particularly important topic that maybe we should discuss at another time. Of course, there’s other topics too, but I think that that would be a little bit more in the forefront, especially with the may opinions that the DOJ and that NLRB came out with.
It really seems like this executive order, 14 0 3, 6 6 has really started this snowball effect and is just picking up as it rolls down this hill, these related issues and bringing it into the fold. And we’re starting to see all of these issues completely brought to the forefront. Even on when you swipe on your phone into your news section, you’re starting to see articles about antitrust competition law, the Sherman Act, because all of this is so relevant to what you do every day, especially for us and especially for our merchants, but also for everyone swiping your credit card, swiping your debit card, what is happening when you do that? And that’s just now starting to become the forefront of people’s minds.
Yeah, I mean, the common person doesn’t think about these things and obviously we need to think about ’em on a daily basis, but I think that that’s one of the reasons that you and I even enjoy working with each other on this type of topic because I’m originally from the east coast, you’re originally from the west coast. Most of my litigation experience is out of state, obviously, and specifically in the south, like Alabama and stuff like that. Florida, we have a lot of, for lack of a better term, I would almost call it a payments renaissance or a payments Silicone Valley in the eastern shores of Florida, that west palm area in Miami and everything, Miami’s growing as a bigger, bigger financial district, and what it’s bringing is more entrepreneurs in the payment space to those areas. So that’s why we end up having these discussions where we’re kind of bouncing thoughts off of each other of the different cultures because all of that is, as weird as it sounds important to this legislation, it’s important to, when we go before a judge or how we write, it’s constantly a know your audience type of a thing.
You can’t be tone deaf with how frequently we’re working with local councils and pro hac Viche and other states and everything. I mean, New York compared to California, compared to Florida, compared to Texas, they’re all different.
Not a perfect puzzle piece. No.
Excellent. Gentlemen, to close this out, I’ll give you guys last thoughts of course, and maybe, but you can go after this and I’ll let Matt close us out. Similar listening to this podcast right now, they’re driving down the road, maybe they’re a merchant, maybe they’re an agent, maybe they’re an iso. What phone call do you want them to make? Why are they calling global legal in relation to this issue? What call are you looking for?
Yeah, I mean, man, that is an expansive question, demanding an expansive answer, but frankly, know what you’re doing when it comes to your costs. Know what you’re doing when it comes to what you’re charging. Your customers know what you’re doing when you’re paying someone for these terminals, for these lease agreements. Know what you’re doing. And it’s like we’ve already alluded to, it’s a pretty wild world out there in the payments processing ecosystem. So it’s just so important to be able to understand and have that guiding hand when you’re trying to really grow your business or even maintain your business, what is happening? Because as you can tell from this podcast already, it is such an ever-changing world out there, and we spend all day, every day working to keep up with it, so others can. That would be my answer.
I would just say even just who is listening to this right now, you probably heard about a thousand different reasons how this applies to your life, and there’s obviously a lot to unpack here. So that’s why we kind of preface this entire episode with this is an introductory thing. It’s going to be a little all over the place because it is everywhere. It affects our daily living. So as far as the common client goes, there’s two things that I would say, right, is have a tight circle of business advisors that has to include your typical mentor, attorney, accountant. But also one thing that was taught to me at a pretty young age was be a giver. So especially in an industry that’s as competitive as payments, that’s having so many new companies and so many mergers and acquisitions. When I was a financial advisor, that was one of the earliest things that somebody told me when I was insecurities was be a giver.
Because if you’re the person who’s connected to everybody, you have a better chance to learn from everybody and actually have your ear to the ground and be up with all of the changes. If you want to go about it a little bit more ruthless and not have this expanded network and think that your competitive advantages are always going to stick, that’s fine. I wouldn’t advise it because this is consistently changing, and you don’t want to make enemies where you don’t want to, especially in an industry where prices are constantly going to change, regulations don’t really exist yet. So by being a giver, you continue to expand your network, and especially in a moral, more often than not, sales role referrals should be your number one goal. So if you’re a giver, you’re going to get more referrals. You want to be the local wherever you live, you want to actually be that person that everybody goes to and asks the simple day-to-day questions. And then that kind of drives more business to you just by gaining trust. Hey, Matt, you’re a giver. No, I
Love this. This is great. No, seriously, that was awesome. This has been the Bucc and Lucc Global Legal Payments Experts podcast episode. Thank you for listening. We’ve had a special guest today, associate attorney Adam Bucci in studio with us, as well as Matt Luciani, associate attorney. Gentlemen, it’s been a real pleasure, and those of you listening out there, please give us a call at Global Legal Law Firm and thank you for listening to the end of this episode. Bye-Bye. Thank you for listening to this episode of The Payments Experts podcast. New episodes first and third Thursdays. If you’re interested in learning more about PEP and how Global Legal Law Firm may be able to assist you, please visit us at global legal law firm.com. To schedule a free consultation, give us a call at (888) 846-8901 or email firstname.lastname@example.org. And once again, thank you for listening. 1, 2, 3. Come on.
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