Visa 2007 Annual Report Download - page 59

Table of Contents
On October 9, 2001, the District Court issued an opinion upholding the legality and pro-competitive nature of dual governance. However, the court also
held that Visa U.S.A.'s bylaw 2.10(e) and MasterCard's CPP constituted unlawful restraints of trade under the federal antitrust laws.
On November 26, 2001, the court issued a final judgment that ordered Visa U.S.A. to repeal bylaw 2.10(e) and enjoined Visa U.S.A. and Visa
International from enacting or enforcing any bylaw, rule, policy or practice that prohibits its issuers from issuing general purpose credit or debit cards in the
United States on any other general purpose card network. The final judgment also provided that from the effective date of the final judgment (October 15,
2004) until October 15, 2006, Visa U.S.A. and Visa International were required to permit any issuer with which they had entered into an agreement prior to
the effective date of the final judgment, pursuant to which agreement the issuer committed to maintain a certain percentage of its general purpose card
volume, new card issuance, or total number of cards in force in the United States on the Visa network, to terminate that agreement without penalty, provided
that the reason for the termination was to permit the issuer to enter into an agreement with American Express or Discover. The final judgment imposed
parallel requirements on MasterCard.
Visa U.S.A. and Visa International appealed the judge's ruling with respect to bylaw 2.10(e). On September 17, 2003, a three-judge panel of the Second
Circuit issued its decision upholding the District Court's decision. On October 4, 2004, the Supreme Court denied Visa U.S.A. and Visa International's petition
for certiorari, thereby exhausting all avenues for further appeal in this case. The final judgment became effective by court order on October 15, 2004.
Discover filed suit against Visa U.S.A. and Visa International in the U.S. District Court for the Southern District of New York alleging, among other
things, that Visa bylaw 2.10(e) and MasterCard's CPP caused it injury under the U.S. federal antitrust laws. In connection with its claim, Discover requested
that the District Court give collateral estoppel effect to the District Court's findings in the judgment of the 1998 DOJ litigation. See "—Retrospective
Responsibility Plan—Covered Litigation—The Discover Litigation."
American Express filed a suit similar to the Discover litigation against Visa U.S.A., Visa International and certain Visa U.S.A. member financial
institutions. We, Visa U.S.A. and Visa International entered into a settlement agreement with American Express that became effective on November 9, 2007.
The settlement agreement in the American Express litigation will be funded through our retrospective responsibility plan. See "—Retrospective Responsibility
Plan—Covered Litigation—The American Express Litigation."
On January 10, 2005, MasterCard filed a motion in the U.S. District Court for the Southern District of New York in connection with the DOJ litigation,
renewing an earlier challenge to a Visa U.S.A. bylaw that provides for a settlement service fee. To ensure payment of Visa U.S.A.'s settlement obligation in
the In re Visa Check/MasterMoney Antitrust Litigation case, see "—Retailers' Litigation," Visa U.S.A. adopted the settlement service fee bylaw in June 2003.
The bylaw provided that the settlement service fee is to be paid by certain Visa U.S.A. members that shift a substantial portion of their offline debit volume to
another debit brand unless that shift is to the American Express or Discover brands. MasterCard contended that the settlement service fee violated the final
judgment in the DOJ litigation by effectively prohibiting Visa U.S.A. members from issuing MasterCard debit cards.
On August 18, 2005, the court issued an order appointing a special master to hear evidence regarding MasterCard's challenge. An evidentiary hearing
before the special master occurred in December 2005. In July 2006, the special master submitted his Findings of Fact and Conclusions of Law to the court, in
which he concluded that Visa U.S.A. did not violate the final judgment in the DOJ action before October 15, 2004—the effective date of the Final Judgment
—but that Visa U.S.A. did violate the final judgment by continuing to enforce the settlement service fee after October 15, 2004. Visa U.S.A. filed objections
to the special master's report and MasterCard asked the court to adopt the special master's findings and conclusions. The court heard oral argument with
respect to the proper scope of any remedy on April 23, 2007.
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