Visa 2008 Annual Report Download - page 26

Table of Contents
the indemnification obligation of Visa U.S.A. members pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and in accordance with their
membership agreements. These mechanisms are unique and complex. If we are prevented from using one or more of these mechanisms under our
retrospective responsibility plan, we could have difficulty funding the payment of a settlement or final judgment against us in a covered litigation, which
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.
Since the retrospective responsibility plan was implemented, we have settled the lawsuits brought by American Express and Discover, both of which
are part of the covered litigation. The American Express and Discover suits each alleged, among other things, that Visa U.S.A. restrained competition by
prohibiting its member financial institutions from issuing certain payment cards that compete with Visa-branded cards (such as American Express and
Discover) and that each was thereby injured. We, Visa U.S.A. and Visa International entered into a settlement agreement with American Express that became
effective on November 9, 2007 and is being funded through our retrospective responsibility plan. We, Visa U.S.A., Visa International, and MasterCard
International executed a settlement agreement with Discover on October 27, 2008 that became effective on November 4, 2008, upon approval by Visa's class
B shareholders. The settlement will be funded primarily through the retrospective responsibility plan. Visa Inc. will also make a payment related to a separate
agreement with MasterCard to obtain releases from claims related to the settlement service fee litigation and other potential claims. See Note 23—Legal
Matters to our consolidated financial statements included in Item 8 in this report.
The retrospective responsibility plan does not address litigation other than the covered litigation that we currently face, including state court litigation
relating to interchange, and will not cover litigation that we may face in the future, except for cases that include claims for damages relating to the period prior
to our initial public offering that are transferred for pre-trial proceedings or otherwise included in the interchange litigation. In addition, our retrospective
responsibility plan is designed to cover only the potential monetary liability from settlements of, or judgments in, the covered litigation. Settlements and
judgments in covered litigation may require us to modify the way we do business in the future, which could adversely affect our revenues, increase our
expenses and/or limit our prospects for growth. Therefore, even if our retrospective responsibility plan adequately safeguards us from the monetary impact of
settlements of, or judgments in, the covered litigation, it may not be sufficient to insulate us from all potential adverse consequences of settlements of, and
judgments in, the covered litigation.
If the settlements of Visa U.S.A.'s and Visa International's currency conversion cases are not ultimately approved and we are unsuccessful in any of
the various lawsuits relating to Visa U.S.A.'s and Visa International's currency conversion practices, our business may be materially and adversely
affected.
Visa U.S.A. and Visa International are defendants in several state and federal lawsuits alleging that their currency conversion practices are or were
deceptive, anti-competitive or otherwise unlawful. In particular, a trial judge in California found that the former currency conversion practices of Visa U.S.A.
and Visa International were deceptive under California state law, and ordered Visa U.S.A. and Visa International to require their members to disclose the
currency conversion process to cardholders in cardholder agreements, applications, solicitations and monthly billing statements. The judge also ordered
unspecified restitution to credit card holders. The decision was reversed on appeal on the ground that the plaintiff lacked standing to pursue his claims. After
the trial court's decision, several putative class actions were filed in California state courts challenging Visa U.S.A.'s and Visa International's currency
conversion practices for credit and debit cards. A number of putative class actions relating to Visa U.S.A.'s and Visa International's former currency
conversion practices were also filed in federal court. The federal actions have been coordinated or consolidated in the U.S.
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