Visa 2015 Annual Report Download - page 33

Settlements of, or judgments in pending and future litigation could force us to limit the rates we
set, revise our rules about rates charged to consumers who use Visa-branded payment products or
make other modifications that could harm our overall business.
We may be subject to tax examinations or disputes, or changes in the tax laws.
We exercise significant judgment in calculating our worldwide provision for income taxes and other
tax liabilities. Although we believe our tax estimates are reasonable, many factors may decrease their
accuracy. We are currently under examination by, or in disputes with, the U.S. Internal Revenue
Service and other tax authorities, and we may be subject to additional examinations or disputes in the
future. Relevant tax authorities may disagree with our tax treatment of certain material items and
thereby increase our tax liability. Failure to sustain our position in these matters could result in a
material, adverse effect on our cash flow and financial position. In addition, changes in existing laws,
such as recent proposals for fundamental U.S. and international tax reform, may also increase our
effective tax rate. A substantial increase in our tax payments could have a material, adverse effect on
our financial results. See also Note 19—Income Taxes to our consolidated financial statements
included in Item 8 of this report.
We have limited rights to enforce our Framework Agreement with Visa Europe, which could
expose us to significant liabilities.
While we have entered into an agreement to acquire Visa Europe, until the transaction closes or if
it fails to close, our relationship 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 Framework Agreement even upon Visa Europe’s material, uncured breach. 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 gives rise to such claims. The indemnity obligation could expose us to significant liabilities
for activities over which we have little or no control. Our U.S. retrospective responsibility plan would not
cover these liabilities.
In our view, pursuant to the Framework Agreement, Visa Europe is obligated to indemnify Visa
Inc. and Visa International Service Association (“Visa International”) in connection with the European
Competition Proceedings (i.e., the pending European Commission investigation and the filed or unfiled
claims in the U.K. Merchant Litigation), including payment of any fines or damages that may be
imposed. However, Visa Europe has informed us of its view that it is not obligated to indemnify Visa
Inc. or Visa International for these claims. 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 U.S. retrospective responsibility plan. See Note 20—Legal Matters to our consolidated
financial statements included in Item 8 of this report.
Business Risks
We face intense pressures on client pricing.
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 U.S. In
addition, we offer incentives to certain merchants or acquirers to win routing preference in situations
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