Visa 2012 Annual Report Download - page 109

Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
On October 19, 2012, the class plaintiffs filed a motion for preliminary approval of the Settlement Agreement. Objections to
preliminary approval were filed before the preliminary approval hearing, which was held on November 9, 2012. The court granted
preliminary approval of the Settlement Agreement on November 9, 2012. Until the Settlement Agreement is finally approved by the
court and any appeals are finally adjudicated, no assurance can be provided that the Company will be able to resolve the class
plaintiffs' claims as contemplated by the Settlement Agreement.
In addition, on October 19, 2012, the Company and the individual plaintiffs whose claims were consolidated with the MDL for
coordination of pre-trial proceedings (the “Individual Plaintiffs”) signed a settlement agreement to resolve the Individual Plaintiffs'
claims against the Company for approximately $350 million . This payment was made from the litigation escrow account under the
retrospective responsibility plan on October 29, 2012. On November 6, 2012, the court entered an order dismissing the Individual
Plaintiffs ' claims with prejudice.
For the quarter ended June 30, 2012, the Company recorded a litigation provision of $4.1 billion , which increased its total
reserve for the covered litigation from $285 million to $4.4 billion , to reflect the class plaintiffs' Settlement Agreement and the
resolution of the Individual Plaintiffs' claims.
Other Litigation
In re Visa Check/MasterMoney Antitrust Litigation ("the Retailers' litigation").
Beginning in October 1996, several antitrust class
action lawsuits were brought by U.S. merchants against Visa U.S.A. and MasterCard. The suits were later consolidated in the U.S.
District Court for the Eastern District of New York, In re Visa Check/MasterMoney Antitrust Litigation . Among other claims, the
plaintiffs alleged that Visa U.S.A.'s “Honor All Cards” rule, which required merchants that accepted Visa cards to accept for
payment every validly presented Visa card, and a similar MasterCard rule, constituted an illegal tying arrangement in violation of
Section 1 of the Sherman Act. On June 4, 2003, the parties signed a settlement agreement that was approved by the court on
December 19, 2003. Pursuant to the settlement agreement, Visa agreed to modify its “Honor All Cards” rule such that a merchant
may accept only Visa check cards, only Visa credit cards, or both. Visa also agreed to pay approximately $2.0 billion to the
merchant class over 10 years in equal annual installments of $200 million per year, among other things.
On August 31, 2009, Visa entered into an agreement to prepay its remaining $800 million in settlement payments for $682
million . On October 2, 2009, the court entered a final order approving the prepayment agreement, and Visa made the prepayment
on October 5, 2009. Pursuant to its terms, the prepayment agreement became final after no appeals to the approval order were
filed within the 30-day appeal period.
“Indirect Purchaser” Actions. Complaints were also filed in 19 different states and the District of Columbia alleging state
antitrust, consumer protection and common law claims against Visa U.S.A. and MasterCard (and, in California, Visa International)
on behalf of consumers. The claims in these class actions included allegations mirroring those made in the U.S. merchant lawsuit
and asserting that merchants, faced with excessive merchant discount fees, passed on some portion of those fees to consumers in
the form of higher prices on goods and services sold. Plaintiffs seek money damages and injunctive relief. Visa U.S.A. has been
successful in the majority of these cases, as courts in 17 jurisdictions have granted Visa U.S.A.'s motions to dismiss for failure to
state a claim or plaintiffs have voluntarily dismissed their complaints. In New Mexico, the court granted Visa U.S.A.'s motion to
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• Settlement payments from the Company of approximately $4.0 billion , to be paid from the Company's previously
funded litigation escrow account established under the retrospective responsibility plan, see Note 3—
Retrospective
Responsibility Plan ;
• Distribution to class merchants of an amount equal to 10 basis points of default interchange across all credit rate
categories for a period of eight consecutive months, which otherwise would have been paid to issuers and which
effectively reduces credit interchange for that period of time. The eight month period for the reduction would begin
within 60 days after completion of the court
-ordered period during which individual class members may opt out of
this settlement;
• Certain modifications to the Company's rules, including modifications to permit surcharging on credit transactions
under certain circumstances, subject to a cap and a level playing field with other general purpose card competitors;
and
• Agreement that the Company will meet with merchant buying groups that seek to negotiate interchange rates
collectively.