MasterCard 2009 Annual Report Download - page 131

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
appeal were filed. With regard to other state court currency conversion actions, MasterCard has reached
agreements in principle with the plaintiffs for a total of $3,557, which has been accrued. Settlement agreements
have been executed with plaintiffs in the Ohio, Pennsylvania, Florida, Texas, Arkansas, Tennessee, Arizona,
New York, Minnesota, Illinois and Missouri actions. At this time, it is not possible to predict with certainty the
ultimate resolution of these matters.
U.S. Merchant and Consumer Litigations
Commencing in October 1996, several class action suits were brought by a number of U.S. merchants
against MasterCard International and Visa U.S.A., Inc. challenging certain aspects of the payment card industry
under U.S. federal antitrust law. Those suits were later consolidated in the U.S. District Court for the Eastern
District of New York. The plaintiffs claimed that MasterCard’s “Honor All Cards” rule (and a similar Visa rule),
which required merchants who accept MasterCard cards to accept for payment every validly presented
MasterCard card, constituted an illegal tying arrangement in violation of Section 1 of the Sherman Act. Plaintiffs
claimed that MasterCard and Visa unlawfully tied acceptance of debit cards to acceptance of credit cards. On
June 4, 2003, MasterCard International signed a settlement agreement to settle the claims brought by the
plaintiffs in this matter, which the Court approved on December 19, 2003. On January 24, 2005, the Second
Circuit Court of Appeals issued an order affirming the District Court’s approval of the settlement agreement thus
making it final. On July 1, 2009, MasterCard International entered into an agreement with the plaintiffs to prepay
MasterCard International’s remaining payment obligations under the settlement agreement at a discount. On
August 26, 2009, the court entered a final order approving the prepayment agreement. The agreement became
final pursuant to its terms on September 25, 2009 as there were no appeals of the court’s approval, and the
prepayment was made on September 30, 2009. See Note 19 (Obligations under Litigation Settlements) for
additional discussion.
In addition, individual or multiple complaints have been brought in 19 different states and the District of
Columbia alleging state unfair competition, consumer protection and common law claims against MasterCard
International (and Visa) on behalf of putative classes of consumers. The claims in these actions largely mirror the
allegations made in the U.S. merchant lawsuit and assert that merchants, faced with excessive merchant discount
fees, have passed these overcharges to consumers in the form of higher prices on goods and services sold.
MasterCard has been successful in dismissing cases in seventeen of the jurisdictions as courts have granted
MasterCard’s motions to dismiss for failure to state a claim or plaintiffs have voluntarily dismissed their
complaints. However, there are outstanding cases in New Mexico and California. The parties are awaiting a
decision on MasterCard’s motion to dismiss in New Mexico. In December 2008, MasterCard reached an
agreement in principle to resolve the California state court actions described above for a payment by MasterCard
of $6,000. As discussed above under “Department of Justice Antitrust Litigation and Related Party Litigations,”
in connection with the Attridge action, on September 14, 2009, the parties to the California state court actions
executed a settlement agreement which the parties believe would resolve the actions, subject to approval by the
California state court. On January 5, 2010, the court executed an order preliminarily approving the settlement. A
hearing on final approval of the settlement is set for July 16, 2010.
At this time, it is not possible to determine the outcome of, or, except as indicated above in the California
consumer action, estimate the liability related to, the remaining consumer cases and no provision for losses has
been provided in connection with them. The consumer class actions are not covered by the terms of the
settlement agreement in the U.S. merchant lawsuit.
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