Visa 2010 Annual Report Download - page 126

Table of Contents
VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2010
(in millions, except as noted)
(2) This amount includes the Company's October 2009 prepayment of its remaining $800 million in payment obligations in the Retailers' litigation at a
discounted amount of $682 million.
Covered Litigation
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings discussed below that are subject to the retrospective responsibility
plan, which the Company refers to as the covered litigation. See Note 4—Retrospective Responsibility Plan. An accrual for covered litigation is recorded when
loss is deemed to be probable and reasonably estimable. In making this determination the Company evaluates available information, including funding
decisions made by the litigation committee. The accrual related to covered litigation could be either higher or lower than the escrow account balance. The
Company did not record an additional accrual for covered litigation during fiscal 2010.
The Discover Litigation
On October 4, 2004, Discover Financial Services, Inc. filed a complaint against Visa U.S.A., Visa International and MasterCard International
Incorporated (MasterCard). The complaint was filed in the U.S. District Court for the Southern District of New York and was designated as a related case to a
lawsuit brought by the U.S. Department of Justice (DOJ) in 1998. The complaint alleged, among other things, that the implementation and enforcement of
Visa's bylaw 2.10(e) and MasterCard's Competitive Programs Policy, or CPP, which prohibited their respective members from issuing American Express or
Discover cards violated Sections 1 and 2 of the Sherman Act and California's Unfair Competition Law, and sought money damages (subject to trebling) and
attorneys' fees and costs.
On October 13, 2008, Visa, MasterCard and Discover reached an agreement in principle to settle the litigation. The parties executed a final settlement
agreement on October 27, 2008 that became effective on November 4, 2008 upon approval by holders of Visa's class B common stock. Visa's net share of the
settlement totaled $1.8 billion, of which $1.74 billion was paid over four quarters from the escrow account established by the retrospective responsibility plan.
Visa Inc. also paid $80 million toward Visa's share in connection with releases obtained from MasterCard with respect to certain potential claims. Visa Inc.
also paid an additional $65 million, which was refunded by Morgan Stanley, under a separate agreement related to the settlement. Visa's settlement
obligations were fully satisfied with the September 2009 payment to Discover. The Company's consolidated statement of operations reflects a provision of
$1.8 billion for the settlement in fiscal 2008.
The American Express Litigation
On November 15, 2004, American Express filed a complaint against Visa U.S.A., Visa International, MasterCard and several Visa U.S.A. and Visa
International member financial institutions in the U.S. District Court for the Southern District of New York. The complaint alleged that the implementation
and enforcement of Visa U.S.A.'s bylaw 2.10(e) and MasterCard's CPP violated Sections 1 and 2 of the Sherman Act, and sought money damages (subject to
trebling) and attorneys' fees and costs.
Visa Inc., Visa U.S.A. and Visa International entered into a settlement agreement with American Express that became effective on November 9, 2007.
Under the settlement agreement, American Express will receive maximum payments of $2.25 billion, including up to $2.07 billion from Visa Inc.
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