Visa 2010 Annual Report Download - page 26

Table of Contents
network brand or to any card product, such as a "non-reward" Visa credit card. See Note 22—Legal Matters to our consolidated financial statements included
in Item 8 of this report. The agreement does not address surcharging or the setting of default interchange, and does not preclude the DOJ from pursuing a
future investigation of these or other topics. Similarly, as a result of the June 2003 settlement of a U.S. merchant lawsuit against Visa U.S.A., merchants are
able to reject our consumer debit cards in the United States while still accepting other Visa-branded cards, and vice versa.
These and other limitations on our business that were the result of settlements of, or judgments in, litigation could limit the fees we charge and reduce
our payments volume, which could materially and adversely affect our revenues, operating results, prospects for future growth and overall business.
Tax audits or disputes, or changes in the tax laws applicable to us, could materially increase our tax payments.
We exercise significant judgment in calculating our worldwide provision for income taxes and other tax liabilities. Although we believe our tax
estimates are reasonable, many factors may decrease their accuracy. We are currently under audit by the U.S. Internal Revenue Service and other tax
authorities, and we may be subject to additional audits in the future. The tax authorities may disagree with our tax treatment of certain material items and
thereby increase our tax liability. In addition, changes in existing laws, such as recent proposals for fundamental U.S. and international tax reform, may also
increase our effective tax rate. A substantial increase in our tax burden could have a material, adverse effect on our financial results. See also Note 21—
Income Taxes to our consolidated financial statements included in Item 8 in this report.
Our agreement with Visa Europe includes indemnity obligations that could expose us to significant liabilities.
Under our framework agreement with Visa Europe, we indemnify it for losses resulting from all claims outside its region arising from our or their
activities and relating to our or their payments business. This obligation applies even if neither we, nor any of our related parties or agents, participated in the
actions giving rise to such claims. Such an obligation could expose us to significant liabilities for activities over which we have little or no control. Our
retrospective responsibility plan would not cover these liabilities.
Business Risks
The intense pressure we face on client pricing may materially and adversely affect our revenues and profits.
We offer incentives to clients in order to increase payments volume, enter new market segments and expand our card base. These include up-front cash
payments, fee discounts, credits, performance-based incentives, marketing support payments and other support. Over the past several years, we have increased
the use of incentives such as up-front cash payments and fee discounts in many countries, including the United States. In order to stay competitive, we may
have to continue to increase our use of incentives. This pressure may make the provision of certain products and services less profitable or unprofitable and
materially and adversely affect our operating revenues and profitability.
Pressure on client pricing also poses indirect risks, presenting the potential for the same adverse effects. If we continue to increase incentives to our
clients, we will need to find ways to offset the financial impact by increasing payments volume, the amount of fee-based services we provide or both. We may
not succeed in doing so, particularly in the current regulatory environment. In addition, we benefit from long-term contracts with certain clients, including
those that are large contributors to our
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