Visa 2007 Annual Report Download - page 60

Table of Contents
On June 7, 2007, the court issued an Opinion and Order holding that the settlement service fee violated the final judgment in the DOJ case at
October 15, 2004. On June 15, 2007, the court issued an Amended Opinion and Order, clarifying the remedy in the ruling. First, the court ordered Visa U.S.A.
to repeal the settlement service fee bylaw. Second, the court gave any Visa U.S.A. debit issuer subject to the settlement service fee prior to its repeal that
entered into an agreement that includes offline debit issuance with Visa U.S.A. on or after June 20, 2003 the right to terminate its agreement, provided that the
issuer has entered into an agreement to issue MasterCard branded debit cards and the issuer repays to Visa U.S.A. any unearned benefits or financial
incentives under its Visa U.S.A. agreement. On June 13, 2007, the parties entered into an agreement to toll the statute of limitations on certain potential claims
MasterCard may have against Visa U.S.A. in connection with the settlement service fee.
Pursuant to the court's order, the settlement service fee bylaw was rescinded as of the effective date of the order. On June 29, 2007, Visa U.S.A. filed a
notice of appeal to the Second Circuit Court of Appeals. Visa U.S.A. also sought a stay pending appeal as to the contract termination portion of the court's
remedy, which the District Court denied.
On August 17, 2007, Discover moved the District Court to intervene in the settlement service fee matter. Discover also sought to have the District Court
modify its June 15, 2007 order to (1) extend the contract termination remedy to issuers entering into agreements with Discover; and (2) void certain provisions
of Visa U.S.A.'s debit agreements. The court denied Discover's motion on October 12, 2007.
On September 11, 2007, Discover filed a motion to intervene in the settlement service fee case in the Second Circuit and asked the Second Circuit to
remand the case to the District Court. Visa U.S.A. opposed Discover's motion. Briefing is complete but no decision has been issued by the Second Circuit.
Global Interchange Proceedings
Interchange represents a transfer of value between the financial institutions participating in an open-loop payments network such as ours. On purchase
transactions, interchange passes from acquirers to issuers, reflecting the costs issuers bear and the value they provide to the Visa system by bringing
cardholders into the Visa system, guaranteeing payments, servicing accounts and performing other activities that support cardholder spending. In ATM
transactions, the situation is typically reversed and interchange fees pass from issuers to acquirers to offset the acquirers' costs of ATM deployment and the
value they provide in establishing ATM networks of attractive geographic scale and functionality. We establish default interchange rates, and our customers
may choose to establish different rates for transactions among themselves. Although we administer the collection and remittance of interchange fees through
the settlement process, we generally do not receive any portion of the interchange fees. As described more fully below, our interchange rates and those of our
customers are subject to regulatory or legal review and/or challenges in a number of jurisdictions. The increasing legal and regulatory scrutiny of interchange
fees worldwide may have a material adverse impact on our revenues, our prospects for future growth and our overall business. See Item 1A – "Risk Factors—
Risks Related to Our Business—Legal and Regulatory Risks."
United States. Approximately 50 class action and individual complaints have been filed on behalf of merchants against Visa U.S.A., Visa International
and certain Visa U.S.A. member financial institutions alleging that their setting of interchange rates violates federal and state antitrust laws, among other
antitrust allegations. The lawsuits have been transferred to a multidistrict litigation in the Eastern District of New York. See "—Retrospective Responsibility
Plan—Covered Litigation—Interchange Litigation."
New Zealand. The Commerce Commission, New Zealand's competition regulator, filed a civil Statement of Claim in the High Court in Wellington on
November 9, 2006, alleging that, among other things, the fixing of default interchange rates by Cards NZ Limited, Visa International, MasterCard and certain
Visa International member financial institutions contravenes the New Zealand Commerce Act. On November 27, 2006, a group of
59