Visa 2014 Annual Report Download - page 138

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VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2014
In addition, Visa Inc., Visa U.S.A., Visa International, MasterCard Incorporated, MasterCard
International Incorporated, various U.S. financial institution defendants, and the class plaintiffs signed a
settlement agreement (the “Settlement Agreement”) to resolve the class plaintiffs’ claims. The terms of
the Settlement Agreement include, among other terms:
• A comprehensive release from participating class members for liability arising out of
claims asserted in the litigation, and a further release to protect against future litigation
regarding default interchange and the other U.S. rules at issue in the MDL;
• Settlement payments from the Company of approximately $4.0 billion;
• 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.
On December 10, 2012, Visa paid approximately $4.0 billion from the litigation escrow account
into a settlement fund established pursuant to the Settlement Agreement.
On January 14, 2014, the court entered a final judgment order approving the settlement, from
which a number of objectors have appealed. Until the 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. On January 27, 2014, Visa’s portion of the takedown payments related to
the opt-out merchants (referenced above), which was calculated to be approximately $1.1 billion, was
deposited into the litigation escrow account.
Consumer Interchange Litigation
On December 16, 2013, a putative class action was filed in federal district court in California
against certain financial institutions alleging that they conspired to fix interchange fees and imposed
other alleged restraints on competition. The complaint was filed on behalf of an alleged class of all Visa
and MasterCard payment cardholders in the United States since January 1, 2000. Although no Visa
entity is named as a defendant, the complaint identifies Visa U.S.A., MasterCard, and certain non-
defendant financial institutions as co-conspirators, and plaintiffs assert that they may seek leave to
amend the complaint to add the co-conspirators as defendants. Plaintiffs seek injunctive relief,
attorneys’ fees, and treble damages allegedly to compensate the purported class for more than $54.0
billion dollars in purported overcharges imposed on them each year by defendants and their alleged
co-conspirators. The defendants have filed a motion to dismiss. The case has been transferred to MDL
1720.
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