Visa 2008 Annual Report Download - page 25

Table of Contents
number of financial institutions willing to participate in our open-loop multi-party payments system, lower overall transaction volumes and/or make closed-
loop payments systems or other forms of payment more attractive. Issuers could also begin to charge higher fees to consumers, thereby making our card
programs less desirable and reducing our transaction volumes and profitability. Acquirers could elect to charge higher merchant discount rates to merchants,
regardless of the level of Visa interchange, leading merchants not to accept cards for payment or to steer Visa cardholders to alternate payment systems. In
addition, issuers or acquirers could attempt to decrease the expense of their card programs by seeking incentives from us or a reduction in the fees that we
charge. Any of the foregoing could have a material adverse impact on our revenues, operating results, prospects for future growth and overall business.
A finding of liability in the interchange litigation may result in substantial damages.
Since 2005, approximately 50 class action and individual complaints have been filed on behalf of merchants against Visa U.S.A., Visa International,
MasterCard and other defendants, including certain Visa U.S.A. member financial institutions, which we refer to as the interchange litigation. Among other
antitrust allegations, the plaintiffs allege that Visa U.S.A.'s and Visa International's setting of default interchange rates violated federal and state antitrust laws.
The lawsuits have been transferred to a multidistrict litigation in the U.S. District Court for the Eastern District of New York. The class action complaints
have been consolidated into a single amended class action complaint and the individual complaints are also being consolidated in the same multidistrict
litigation.
The plaintiffs in the interchange litigation seek damages for alleged overcharges in merchant discount fees, as well as injunctive and other relief. The
plaintiffs have not yet quantified the damages they seek, although several of the complaints allege that the plaintiffs expect that damages will range in the tens
of billions of dollars. Because these lawsuits were brought under the U.S. federal antitrust laws, any actual damages will be trebled and Visa U.S.A. and/or
Visa International may be subject to joint and several liability among the defendants if liability is established, which could significantly magnify the effect of
any adverse judgment. The interchange litigation is part of the covered litigation, which our retrospective responsibility plan is intended to address; however,
the retrospective responsibility plan may not adequately insulate us from the impact of settlements of, or judgments in, the interchange litigation. Failure to
successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could
have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.
In addition, even if our direct financial exposure were covered by our retrospective responsibility plan, settlements or judgments involving the multidistrict
litigation could include restrictions on our ability to conduct business, which could increase our cost of doing business and limit our prospects for future
growth. See "—Our retrospective responsibility plan may not adequately insulate us from the impact of settlements and judgments in the covered litigation
and will not insulate us from other pending or future litigation" and See Note 23—Legal Matters to our consolidated financial statements included in Item 8 in
this report.
Our retrospective responsibility plan may not adequately insulate us from the impact of settlements and judgments in the covered litigation and will
not insulate us from other pending or future litigation.
Our retrospective responsibility plan is intended to address monetary liabilities from settlements of, or final judgments in, the litigation described in
Note 23—Legal Matters to our consolidated financial statements included in Item 8 of this report. The retrospective responsibility plan consists of several
related mechanisms to fund settlements of, or judgments in, the covered litigation, including an escrow account funded with a portion of the net proceeds of
our initial public offering and potential follow-on offerings of our class A common stock, a loss sharing agreement, a judgment sharing agreement and
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