Visa 2011 Annual Report Download - page 23

Table of Contents
promulgated under the Credit CARD Act, could result in a decrease in our payments volume and revenues.
• Increased Central Bank Oversight. Several central banks around the world have increased, or are seeking to increase, their formal oversight of
the retail electronic payments industry, in some cases designating them as "systemically important payment systems." Such oversight may lead to
additional regulations. These could include new settlement procedures or other operational rules to address credit and operational risks. They
could also include new criteria for member participation and merchant access to our payments system.
• Safety and Soundness Regulation. Recent federal banking regulations may make some financial institutions less attracted to becoming an issuer
of our cards, because they may be subject to more conservative accounting procedures, increased risk management or higher capital
requirements.
• Regulation of Internet Transactions. Proposed legislation in various jurisdictions may make it less desirable or more costly to complete Internet
transactions using our cards by affecting the legality of those transactions, the law that governs them, their taxation and the allocation of
intellectual property rights.
Litigation Risks
Our retrospective responsibility plan may not adequately insulate us from the impact of settlements or final judgments.
Our retrospective responsibility plan addresses monetary liabilities from settlements of, or final judgments in, the covered litigation, which is described
in Note 21—Legal Matters to our consolidated financial statements included in Item 8 of this report. The retrospective responsibility plan consists of several
related mechanisms to fund settlements or judgments in the covered litigation. These include an escrow account funded with a portion of the net proceeds of
our initial public offering and potential subsequent offerings of our shares of class A common stock (or deposits of cash to the escrow account in lieu of such
offerings), a loss-sharing agreement and a judgment-sharing agreement. In addition, our U.S. members are obligated to indemnify us pursuant to Visa U.S.A.'s
certificate of incorporation and bylaws and in accordance with their membership agreements. These mechanisms are unique, complicated, and tiered, and if
we cannot use one or more of them, this could have a material adverse effect on our financial condition and cash flows, or, in certain circumstances, even
cause us to become insolvent.
The principal remaining covered litigation involves interchange reimbursement fees. Since 2005, approximately 55 class actions and individual
complaints have been filed on behalf of merchants against us, MasterCard and/or other defendants, including certain financial institutions that issue Visa-
branded payment cards and acquire Visa-branded payment transactions in the U.S. We refer to this as the interchange litigation. Among other antitrust
allegations, the plaintiffs allege that Visa's setting of default interchange rates violated federal and state antitrust laws. The lawsuits have been transferred to a
multidistrict litigation in the U.S. District Court for the Eastern District of New York.
The plaintiffs in the interchange litigation seek damages for alleged overcharges in merchant discount fees as well as injunctive and other relief. The
consolidated class action complaint alleges that the plaintiffs estimate that damages will range in the tens of billions of dollars. Because these lawsuits were
brought under the U.S. federal antitrust laws, any actual damages will be trebled. The allocation of any monetary judgment or a settlement among the
defendants is governed by an omnibus agreement dated February 7, 2011. See Note 21—Legal Matters to our consolidated financial statements included in
Item 8 in this report.
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