Visa 2014 Annual Report Download - page 35

We have limited rights to enforce our agreement with Visa Europe, which includes indemnity
obligations that could expose us to significant liabilities.
The relationship between Visa and Visa Europe is governed by the Framework Agreement. In the
event Visa Europe fails to meet its obligations under the Framework Agreement, our remedies are
limited. We are unable to terminate the agreement even upon Visa Europe’s material, uncured breach.
We also have a call option to acquire Visa Europe, which can be triggered only under extremely limited
circumstances. See Note 2—Visa Europe to our consolidated financial statements included in Item 8 of
this report.
Under the Framework Agreement, we may be required to indemnify Visa Europe for losses
resulting from all claims outside its region arising from our or their actions relating to the payments
business. This obligation applies even if neither we nor any of our related parties or agents engaged in
the actions giving rise to such claims. The indemnity obligation could expose us to significant liabilities
for activities over which we have little or no control. Our retrospective responsibility plan would not
cover these liabilities.
Visa Europe is obligated to indemnify Visa Inc. and Visa International Service Association (Visa
International) in connection with the European Competition Proceedings, in our opinion, including
payment of any fines or damages that may be imposed. However, Visa Europe has informed us of its
position that it is not obligated to indemnify us or Visa International for any claim in the European
Competition Proceedings, including claims asserted in either the European Commission matter or the
filed or unfiled claims in the U.K. Merchant Litigation. If Visa Europe continues in its refusal to
indemnify us and we cannot enforce the indemnity, we could be exposed to significant liabilities which
would not be covered under our retrospective responsibility plan. See Note 20—Legal Matters to our
consolidated financial statements included in Item 8 of this report.
Business Risks
The intense pressure we face on client pricing may materially and adversely affect our
revenues and profits.
Pressure on client pricing poses challenges for our business. In order to stay competitive, we offer
incentives to our clients to increase payments volume, enter new market segments and expand their
Visa-branded card base. These include up-front cash payments, fee discounts, credits, performance-
based incentives, marketing and other support payments. We have continued to increase the use of
incentives such as up-front cash payments and fee discounts in many countries, including the United
States. In addition, we offer incentives to certain merchants or acquirers to win routing preference in
situations where our products co-reside with other networks and merchants have a choice of network
routing options. The economic pressures on our clients arising from the Dodd-Frank Act have also
increased our use of incentives. See —The Dodd-Frank Act may continue to have a material, adverse
impact on our financial condition, revenues, results of operations, prospects for future growth and
overall business. As a result, the provision of certain products and services may be less profitable or
unprofitable, which may materially and adversely affect our revenues and profits.
If we continue to increase incentives to our clients, we will need to find ways to offset the financial
impact by increasing payments volume, increasing the amount of fee-based services we provide or
both. We may not succeed in doing so, particularly, in the current regulatory environment. In addition,
we benefit from long-term contracts with certain clients, including those that are large contributors to
our revenue. Continued pressure on our fees could prevent us from maintaining such agreements in
the future on the same or favorable terms. We may also have to modify existing agreements in order to
maintain relationships or comply with regulations. While we may implement cost containment and
productivity initiatives in areas other than those surrounding client incentives, we may not be
successful in our efforts or they may not offset the decreases in our revenues.
21