DOJ Accuses Visa of Being a Monopoly & Ozempic Prices Grilled by Congress

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0:27Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, the DOJ is on an antitrust bender, the likes of which we haven't seen since the first hangover. Its latest target, Visa. Then Novo Nordisk's CEO was in the hot seat yesterday as he tried to explain to senators why Ozempic costs so dang much. It's Wednesday, September 25th. Let's ride.

0:53Austin Powers had mini-me, and the Earth's moon is about to get a mini-moon. Yeah, it's not often we get new visitors from outer space, But in just four days from now, a newly discovered asteroid named 2024 Pt-5 is going to be captured by Earth's gravity and orbit the planet for about two months. Then it'll return to its orbiting the sun like it had been before. But because Pt-5 will be circling the Earth for at least some time, astronomers have called it a mini moon. You know, I'm kind of glad that our regular moon will have a younger sibling to hang out with until November. Must get a little lonely out there as a single child moon.

1:30See, I see it as quite romantic, actually. Here is this object traversing through the empty vacuum of space until the perfect amount of gravitational pull, the perfect amount of distance brings it together and brings it into contact with us. So isn't that what we're all looking for in life, our mini moons? Tobi, you got to be all romantic. I had a cuffing season. I see your point, too. This doesn't happen that often. It's only a couple times a few decades that you're right. the physics lineup where this asteroid that's orbiting the sun is somehow pulled into Earth's gravity and safely orbits the Earth.

2:05We should say this is not going to crash into us. At least they don't think. And it is orbiting about 10 times the altitude of the moon. Although maybe I'm thinking it's a more of a doomed love, though, because it's fleeting, beautiful, and then catapulted back off into space. All right. Well, the mini moon is coming and you can't see it, by the way. It's going to be too distant. Now let's take a moment to hear about our sponsor, Wise Business, the app for handling payments in multiple currencies. So Neil, you recently went away for a weekend on the Jersey Shore, got a nice Airbnb, got a little tan, but then what did you realize when you got back home?

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4:25In its unprecedented crusade against monopolies, the Biden administration has launched antitrust lawsuits against companies in tech, aviation, concert ticketing, fashion, and more. Finance, you're up. Yesterday, the DOJ sued Visa, accusing it of operating an illegal monopoly in debit card transactions. It's the first major antitrust case that the Biden White House is targeting against the financial services industry and a potential threat to Visa's dominance of debit payment networks. In its lawsuit, the government says Visa is abusing that dominance by penalizing merchants who tried to use payment alternatives while inking deals with upstart fintech companies to make sure they don't turn into rivals.

5:05Attorney General Merrick Garland says that's resulted in Visa charging a hidden toll on each of trillions of transactions. And yes, the numbers do reach into the trillions when you're talking about Visa, which together with MasterCard controls much of the payments infrastructure, the so-called rails, that facilitates modern commerce. Visa handles more than 60 percent of the more than$4 trillion in U.S. debit transactions that are made each year, a position it has abused, the government claims. Toby, another day, another antitrust lawsuit from the Biden administration. How strong is their case?

5:37I mean, it's pretty strong because it's so wide ranging. Visa's conduct affects not just the price of some things, but the DOJ says it affects the price of nearly everything because debit cards are just the most prevalent payment system in the United States. And the case represents or kind of hinges on the fact that they think that they are abusing this monopoly power. They're abusing their ubiquity. to make merchants kind of stay within their ecosystem. They do say that they use it as leverage, that they impose these very big disloyalty penalties if you don't hit a certain amount of volume on their network.

6:15And then that in turn discourages these merchants from breaking away from Visa and using a cheaper or a smaller alternative or competitor. So I do think the DOG certainly has a case here just because of how wide-ranging Visa is and how ubiquitous it is. Yeah, they pointed out several deals that Visa made with certain upstart competitors that are very well-known names that may have blocked them from entering the market. Have you heard of PayPal, which has Venmo? You've heard of Apple Pay. You've heard of Cash App from Square. The DOJ is accusing Visa a couple years ago of going up to these companies who are launching these apps that allow you to pay from your bank account directly inside Visa's network.

7:02and say, no, no, no, don't do that. Like, we'll pay you hundreds of millions of dollars. We'll give you discounts on fees as long as you route all of your payments through Visa's network, or at least you give them the option to pay with a debit card. Because the way you're going about it now by sidestepping us and, you know, going through your direct from bank to payment is not going to fly with us and we hold too much power. So the DOJ is saying they engage in these restrictive agreements, which we've seen the DOJ go after other companies in antitrust lawsuits for. And that is what the main part of their case is that they're going after these upstart fintech companies and saying, you're about to challenge us.

7:38No, we'll just, here's$100 million. Do not do that. Let's get a deal going so we can keep our perch up here. Another thing that the Justice Department is looking at is the fact that Visa has this proprietary tokenization technology. So what it does is when you make a payment, Visa swaps your card numbers, that 16-digit card number with a token that can only be used with specific devices or with a particular merchant. So it's designed to improve the security of any payment, but effectively what it does is that it locks you into that network. You can only use Visa's tokens if you use Visa's payment network as well.

8:14And that tokenization technology is very, very wide ranging and widespread. So this lawsuit may force Visa to maybe divest that token service. It could create opportunities for some lower price and smaller competitors, which is really like the goal here to open up the market here. So another thing that this could affect is, remember, Capital One has this deal to acquire a Visa competitor, Discover. Discover is one of those smaller players in the credit card payment processing network along Visa, along MasterCard. So maybe they've already seen antitrust scrutiny around that. So depending on how this Visa suit goes, we could see that deal break down as well.

8:52We should mention Visa's response here. And according to their general counsel, they say anyone who has bought something online or checked out at a store knows there is an ever-expanding universe of companies offering new ways to pay for goods and services. They say this lawsuit doesn't have merit. And they say, hey, you can literally pay with any types of these new apps that are coming online. Walmart just rolled out a service that lets you pay straight from bank to Walmart. So they're saying you're not looking at this ecosystem broadly enough. You're just looking at debit card transactions. But anyone who's ever bought something online knows that there's a plethora of options.

9:30There's only increasing amount of competition in this space. So that is a preview of their defense. The DOJ hasn't said what sort of remedies that they'd be seeking against Visa. But again, just another blow to big companies that the Biden administration has gone after. And specifically, they're going after middlemen. That's been the theme recently with Live Nation, with the FTC sued pharmacy benefit managers last week, and now they're going after Visa. One of the last chapters in the FTX saga has just been written, and it did not end well for Caroline Ellison. The former CEO of Almeda Research, who helped Sam Bankman-Fried build the crypto empire that came crashing down, was sentenced to two years in prison yesterday.

10:13Despite the critical role Ellison played in aiding her ex-boyfriend SBF and defrauding investors and misusing customer funds, some are still surprised she is seeing jail time. Ellison entered into a cooperation agreement with the government at the tail end of 2022 and cooperate she did. I've seen a lot of cooperators over the years and I've never seen one quite like Ms. Ellison, the judge presiding over the case said. U.S. District Judge Louis Kaplan called her a cornerstone of the trial who handed over critical evidence that led to the speedy conviction of Sam Bankman-Fried. But he also said he couldn't hand her a literal get-out-of-jail-free card, hence the sentencing.

10:53Neil, this did come as a bit of surprise, but also not that big of a surprise. Exactly. I think the fact that she participated in one of the biggest frauds of all time, which led$8 billion to be swiped from customer funds to be used to fund risky bets in Sam Bankman-Fried's personal piggy bank, like buying real estate in the Bahamas, was just too much for the judge to say, you can get off, even though you cooperated more than any other witness that I've ever seen in my career. You still have to go to jail because this fraud was so big. Of course, it's a lot less than Sam Aikman-Fried. He got 25 years in prison, which he started last year.

11:30But Caroline Ellison, just a very fascinating story that I think she became one of the, probably one of the biggest characters in this entire saga. There was so much scrutiny over her as she was going to the witness stand. There's a lot of scrutiny and discussion online about her relationship with Sam Bakeman-Fried and how that influenced or manipulated her into participating in this fraud. But I think at the end of the day, the judge said, look, you were a willing participant in an$8 billion fraud. You have to spend some time in jail. It was crazy, though, because everyone involved in this case was singing her praises by how well she cooperated.

12:05John Ray, who was the new CEO who came in and was in charge with cleaning up the FTX mess that she said he said that she was extremely valuable in recovering some of those assets that went missing and then also the court said that in big contrast to Sam Bankman Freed Ellison did appear to actually be regretful about her role in her fraud like there was this zoom call that she recorded talking to her staff what she didn't know was recorded where she expressed clear remorse which is something that Sam Bankman Freed clearly did not so hence the difference in their sentencings. But you're right. There was just too much to ignore here.

12:41They are calling it like the greatest fraud perpetrated against the American public pretty much ever. So you cannot just let that slide without any sort of jail sentencing time. But you are right that Caroline Allison in particular faced a ton of backlash and a ton of scrutiny. Her journal entries were published by the New York Times. So she has certainly had... SBF leaked those. Right, yes. She has been up against it. Her ex-boyfriend linked her journal entries to the mainstream media. Her psychiatrist actually gave an interview to Michael Lewis for his book, Going Infinite. And then clearly the crypto community also turned on her pretty viciously, pretty misogynistically as well.

13:21So these were all factors that led to an interesting sentencing of two years. Yesterday, Bernie Sanders said something almost unthinkable. Elon Musk is right. Now, on what subject would Bernie and Elon, two people who don't like each other very much, agree on? That weight loss drugs like Ozempic are way too expensive in the United States and that bringing down prices to expand access would have huge positive health benefits for Americans. The issue of weight loss drug pricing was front and center in D.C. yesterday when Senator Sanders hauled in the CEO of Nova Nordisk, the maker of blockbuster drugs, Wagovi and Ozempic, for a hearing on why these potentially revolutionary drugs are so pricey in the U.S.

14:01and the U.S. uniquely. Here, before insurance, Novo's diabetes drug Ozempic costs almost$969 per month, while its weight loss cousin Wigowi costs more than$1 ,300. In Germany, Ozempic costs$59 a month. In the U.K., it costs$92. Sanders said that the CEOs of major generic pharma companies he talked to could sell a version of Ozempic for less than$100 a month at a profit. All we're saying, Mr. Jorgensen, Bernie said to Novo's CEO, is treat the American people the same way that you treat people all over the world. Stop ripping us off. But for Bernie, other lawmakers, health experts, and insurers, it's not just about feeling hurt from getting ripped off.

14:40The solvency of the entire U.S. healthcare system is at stake. They say the demand for these weight loss drugs is so high that it could bankrupt Medicare. Yeah, there is billions of dollars of revenue on the line here. Novo Nordisk has made about$50 billion off the backs of these two drugs since 2018. Roughly 72 % of that revenue comes from the United States. So clearly these high drug prices are leading to record profits for Novo, Nordisk. Jorgensen says that 99 % of commercial insurance actually do now cover Ozempic and around half cover Wagovi. So he's saying around 80 % of patients with insurance actually pay less than$25 for a month's supply.

15:2090 % pay less than$50. But then Sanders said, fired back and said, under your best case scenario, the price you are charging Americans for a Zempick is still nearly$600. That's with all the rebates and all the discounts, which is still over nine times as much as the people in Germany do. So it was a tough look for Jorgensen to cite these numbers when Bernie Sanders can fire back and say, look at other places around the world are getting charged a lot less, even under your ideal scenario. Right. I mean, it is this is a very unique situation where something that is so widely used by the public is so expensive.

15:53Just look at the best selling drug in the world for many years. That was Pfizer's Lipitor that cost around one hundred and fifty dollars a month before it lost its patent protection in 2011, which is the equivalent of 215 in today's dollars. So the fact that these list prices and again, there's a lot of negotiations that go on that go on when it comes to what you actually pay out of pocket. And we were just talking about the DOJ going after middlemen like pharmacy benefit managers who negotiate drug prices. It does come down, but it still is more expensive than that two hundred and fifteen dollars that Lipitor cost.

16:25So these these drug prices are uniquely high. And Novo Nordisk and Eli Lilly, who makes a competitor, say, look, that just reflects the amount of the billions of dollars that we spent developing these drugs. They provide huge benefits because down the line that you're taking these, you're not going to have to go to the hospital or get treatment for other illnesses that come with obesity that we're helping you out with now. So they say it reflects the value. But lawmakers and and others, other critics are saying this is just too dang high. You're making 50 billion dollars in profits. You got to figure this out.

16:58Up next, order your Christmas presents now because a strike at East Coast ports is looming. Tuesday on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On brand with Jimmy Fallon. Series premiere Tuesday on NBC. I'm Christian McCaffrey, pro running back, and Abercrombie is an official fashion partner of the NFL.

17:41I'm not kidding when I say NFL by Abercrombie broke the internet last year, and I think this season's lineup is even cooler. And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

18:06You know, Toby, I was just thinking last week that we haven't had a major supply chain disruption in the past year or so after they were everywhere during COVID. And of course, that was a total announcer jinx because come October 1st, less than a week from today, operations at three dozen American ports could come to a complete halt. That's because about 45 ,000 dock workers at U.S. East and Gulf Coast ports are threatening to strike over a contract dispute, which would close 36 ports that handle about half of the country's maritime cargo. Depending on how long the strike lasts, consumers may see higher prices or shortages for some goods like bananas, while shipping traffic could become more congested than a Schuylkill during rush hour.

18:49The workers who belong to the International Longshoremen's Union are at labor loggerheads with the United States Maritime Alliance, which represents the ports, about pay raises and automation. The two sides aren't exactly on speaking terms, having not met since June. So this strike seems to have a high likelihood of happening, barring a miracle. So brace for impact. The strike could cost the U.S. economy$5 billion a day, according to JP Morgan, or about 6 % of GDP expressed daily. And for each day the ports are shut down, it would take about six days to clear the backlog. You do not want U.S. ports to shut down because you're right.

19:26It does create supply chain disruptions that reverberate for much longer than the actual ports, like the actual days that the ports themselves are shut down. You can divert some shipments to West Coast ports where they are actually under the dock workers. They are under a different union contract, so they are still open. The ports of Long Beach and Los Angeles have been reporting record amounts of volume because people are already preparing for this shutdown. And also, we're pulling out the COVID playbook again because that was the last time we had massive supply chain disruptions like this. So some ports are telling these boats to slow down or just to park outside the harbor as they are kind of trying to prepare for this eventual shutdown.

20:09But you never want to pull out the COVID playbook. We are better prepared this time around because we experienced that. But yeah, definitely something that you – a strike like this would be incredibly and extremely disruptive. Let's talk about what these workers want. So they currently earn$39 per hour, which is up 11 percent since the start of their six-year contract that is currently expiring. And many of them, 60 percent, make between$100 ,000 and$200 ,000 a year with overtime. But at the same time, they tell you, OK, wages are up 11 percent. But over the same period, inflation is up 24 percent, which is why it is not it's it's a secret about what they're actually seeking.

20:50But it is reported that they want a 77 percent wage increase over the next six years of the contract to make up for all of those wage losses that that were the result of inflation. Then another big part of this is that automation, ports all over the world are automating because you have these big cranes. You have self-driving trucks and forklifts that are moving everything around, a very dangerous port. And ports in Europe like Rotterdam and Asia like Shanghai are already way ahead of the United States in automation. Even the West Coast ports like Long Beach are moving ahead with automation. But the East Coast ports rely much more heavily on manpower rather than automation.

21:30And the labor union wants protections going forward that there is that they don't automate as quickly as they want to and provide protections for workers. So that automation thing is really one of the biggest parts of this contract. And they really don't want to see all of these robots running ports. One thing that is happening, too, is that they are reaching out to federal mediators to try to get the two sides to talk to each other. And one aspect that's been floated is that Biden could kind of implement and force the dock workers back to work using the Taft-Hartley Act, which authorizes himself, him the ability to actually force them back to work.

22:06But Biden said we are not doing that. Part of it is because he is pro-union, the administration's pro-union, so it would be a bad look. But also, if the dock workers were forced back to work, they could just slow down when they're working, and it would probably lead to supply chain disruptions anywhere, and you would just have a lot of unhappy workers. So it is fascinating to see what levers you have to kind of make these two sides come to an agreement. But right now, there's not a lot of movement here. There's not a lot of talks going on. There's not. And I think you should, if you're wondering what's going to happen to my Christmas presents, well, a lot of them are already at ports because shippers got ahead of this.

22:43They saw it coming. They've sent all their holiday goods. But one item or one category that could see shortages or price increase is produce and specifically bananas, which go into Wilmington, Delaware, which is going to be shut down because there's a big Chiquita and Dole distribution center. So I'm not saying stockpile bananas, but we could see, well, depending on how long this strike less there could be some interesting things happening in the produce department so buy those green bananas usually i avoid them because i don't like waiting but buy the green bananas now in maybe two months they'll be ready yeah banana bread is coming when you are the most famous tech reviewer on the internet and you launch a product you better nail it or else the internet is going to come for you well marquez brownlee aka mkbhd unfortunately has the entire internet coming for him the man who has made and broken the fortunes of companies through the reviews he posts to his YouTube channel, stepped into the arena himself this week, launching an app called Panels that you can use to browse and download HD wallpapers for your phone.

23:44The internet immediately decried Panels for its lack of ambition and how it smelled of a cash grab that MKBHD himself would most likely not approve of. Plus, as his haters gleefully pointed out, it's not even a good app in its current form. It costs$11.99 a month to access the premium version, while the free tier is riddled with ads and doesn't let you download anything with high resolution. Now, in Brownlee's defense, when you Google, where does MKBHD get his blank, it autofills wallpapers. So clearly people were searching for something like this, but launching a whole paid app to curate wallpapers that are widely available for free online, it just felt too safe and really tanked his credibility in a lot of people's eyes.

24:26It did. I mean, there was certainly a whiff of hypocrisy according to critics because one drum that mkbhd has been sounding recently as he's been reviewing various products has been stop releasing things that aren't ready and he did this with the fisker vehicle he went out and got the one on the market and fisker said hey we're not ready with that yet and we'll do the update just wait for the next update and he said no i'm gonna review the one that you put out on the market and he did that with several other gadgets and that's been a theme that he sounded over his recent reviews and sort of something similar is happening with this particular product.