MasterCard 2010 Annual Report Download - page 38

• In Hungary, in addition to the legislative activity described above, MasterCard Europe is appealing the
Hungarian Competition Office December 2009 decision (which has been stayed) ruling that MasterCard
Europe’s historic domestic interchange fees violate Hungarian competition law and fining MasterCard
Europe approximately U.S. $3 million.
• In Italy, MasterCard Europe is appealing the November 2010 decision of the Italian Competition
Authority ruling that MasterCard Europe’s domestic interchange fees violate European Union
competition law and fining MasterCard 2.7 million euro.
• In Canada, in addition to the legislative activity described above, in December 2010 the Canadian
Competition Bureau filed an application with the Canadian Competition Tribunal to strike down rules
related to MasterCard’s interchange fees, including its “honor all cards” and “no surcharge” rules.
• In South Africa, in September 2010, MasterCard was informed by the South African Reserve Bank that
it intended to appoint an independent consultant to make a recommendation on a simplified interchange
structure for all payment systems in South Africa.
See Note 22 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II,
Item 8 for a detailed description of regulatory proceedings and inquiries into interchange fees. We believe that
regulators are increasingly cooperating on interchange matters and, as a result, developments in any one
jurisdiction may influence regulators’ approach to interchange fees in other jurisdictions. See “Risk Factors—
Legal and Regulatory Risks—New regulations in one jurisdiction or of one product may lead to new regulations
in other jurisdictions or of other products” in this Part I, Item 1A.
Additionally, merchants are seeking to reduce interchange fees through litigation. In the United States,
merchants have filed approximately 50 class action or individual suits alleging that MasterCard’s interchange
fees and acceptance rules violate federal antitrust laws. These suits allege, among other things, that our purported
setting of interchange fees constitutes horizontal price-fixing between and among MasterCard and its member
banks, and MasterCard, Visa and their member banks in violation of Section 1 of the Sherman Act, which
prohibits contracts, combinations or conspiracies that unreasonably restrain trade. The suits seek treble damages,
attorneys’ fees and injunctive relief. See Note 22 (Legal and Regulatory Proceedings) to the consolidated
financial statements included in Part II, Item 8 for more details regarding the allegations contained in these
complaints and the status of these proceedings.
If issuers cannot collect, or we are forced to reduce, interchange fees, issuers may be unable to recoup a
portion of the costs incurred for their services. This could reduce the number of financial institutions willing to
participate in our four-party payment card system, lower overall transaction volumes, and/or make proprietary
end-to-end networks or other forms of payment more attractive. Issuers also could charge higher fees to
consumers, thereby making our card programs less desirable to consumers and reducing our transaction volumes
and profitability, or attempt to decrease the expense of their card programs by seeking a reduction in the fees that
we charge. This could also result in less innovation and product offerings. We are devoting substantial
management and financial resources to the defense of interchange fees in regulatory proceedings, litigation and
legislative activity. The potential outcome of any legislative, regulatory or litigation action could have a more
positive or negative impact on MasterCard relative to its competitors. If we are ultimately unsuccessful in our
defense of interchange fees, any such legislation, regulation and/or litigation may have a material adverse impact
on our revenue, our prospects for future growth and our overall business, financial condition and results of
operations. In addition, regulatory proceedings and litigation could result in MasterCard being fined and/or
having to pay civil damages.
The Wall Street Reform and Consumer Protection Act may have a material adverse impact on our
revenue, our prospects for future growth and our overall business, financial condition and results of
operations.
The Wall Street Reform and Consumer Protection Act recently enacted in the United States establishes
regulation and oversight by the U.S. Federal Reserve Board of debit interchange rates and certain other network
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