Visa 2007 Annual Report Download - page 154

Table of Contents
VISA U.S.A. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The consolidated class action complaint alleges that the setting of interchange violates Section 1 of the Sherman Act; that Visa's "no surcharge" rule and
other alleged Visa rules violate Section 1 of the Sherman Act; and that the rules and interchange together constitute monopolization, violating Section 2 of the
Sherman Act and California's Cartwright Act. The consolidated class action complaint further asserts that Visa ties "Payment Guarantee Services" and
"Network Processing Services" to "Payment Card System Services" and engages in exclusive dealing, both in violation of Section 1 of the Sherman Act and
that offline debit interchange violates Section 1 of the Sherman Act and California's Cartwright Act.
The individual complaints include similar claims and also allege that Visa impermissibly ties services for "Premium Credit Cards" to services for other
Visa-branded payment cards.
On June 9, 2006, Visa answered the consolidated class action complaint and moved to dismiss in part, or strike, claims for pre- January 1, 2004
damages. On July 10, 2007, pursuant to a joint request by the parties, the court entered an amended scheduling order extending the deadline for fact discovery
to June 30, 2008, expert discovery to February 20, 2009 and the deadline for completion of all summary judgment and other pretrial motions to March 27,
2009. No trial date has been set.
On September 7, 2007, the Magistrate Judge in MDL 1720 issued a Report and Recommendation to the District Court recommending that the District
Court grant the defendants' motion to dismiss the putative class plaintiffs' claims for damages incurred prior to January 1, 2004. On October 12, 2007, the
Magistrate Judge granted putative class plaintiffs' request to brief the issue of whether the Report and Recommendation would affect the claims of non-party
members of the putative class who opted out of the In re Visa Check/ MasterMoney Antitrust Litigation class action. Following the submissions, the
Magistrate Judge declined plaintiffs' request to advise on that issue. Putative class plaintiffs filed objections to the Report and Recommendation on
November 14, 2007, and defendants filed their responses to those objections on December 13, 2007.
Retailers' Litigation
Retailers' Litigation
In 1996, a merchant class action was filed in United States District Court for the Eastern District of New York alleging that Visa's "Honor All Cards"
rule and MasterCard's analogous rule violated federal antitrust laws (In re Visa Check/MasterMoney Antitrust Litigation, or Retailers'). On June 4, 2003, a
settlement agreement was executed. Visa agreed to modify its "Honor All Cards" rule such that, effective January 1, 2004, 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 ten years, among other things. The
court approved the settlement on December 19, 2003.
Several objectors appealed the district court's approval of the settlement agreement. In January 2005, the Second Circuit Court of Appeals affirmed the
district court's ruling. The Court of Appeals held that the settlement releases all claims that were or could have been asserted by the class through
December 31, 2003, including claims challenging interchange and bylaw 2.10(e). As such, other pending cases challenging interchange and bylaw 2.10(e)
were released by the settlement. A petition for rehearing was denied on March 1, 2005, as was a petition for writ of certiorari to the United States Supreme
Court. Settlement funds are now being distributed to the class.
Plaintiffs in one action challenging interchange (Reyn's Pasta Bella, filed in 2002) appealed the Northern District of California's dismissal of its case
based on the release in the Retailers' settlement agreement. The
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