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Table of Contents VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2012
estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described
below, it could in the future incur judgments or fines or enter into settlements of claims that could have a material adverse effect on
the Company’s results of operations, financial position or cash flows. From time to time, the Company may engage in settlement
discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively
with other parties.
The Company recorded litigation provisions of $4.1 billion , $7 million and $(45) million in fiscal 2012 , 2011 and 2010 ,
respectively. The credit to the provision in fiscal 2010 was primarily the result of a $41 million pre-tax gain recognized related to the
prepayment of the remaining obligations under the settlement agreement in the Retailers' litigation (discussed in Other Litigation
below). The remaining credit balance was due to the release of accruals for certain legal matters settled during fiscal 2010. The
litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case,
advice of counsel to the extent appropriate and management’s best estimate of incurred loss at the balance sheet date.
The following table summarizes the activity related to accrued litigation for both covered and other non-covered litigation for
the years ended September 30, 2012 and 2011 :
Covered Litigation
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the retrospective
responsibility plan, which the Company refers to as the covered litigation. See Note 3—Retrospective Responsibility Plan . An
accrual for the covered litigation and a charge to the litigation provision are recorded when loss is deemed to be probable and
reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to
actions taken by the litigation committee. The Company recorded an additional accrual of $4.1 billion for the covered litigation
during fiscal 2012, which increased its total reserve for the covered litigation from $285 million to $4.4 billion . The current
uncommitted balance of the covered litigation escrow account of $4.4 billion was deposited by the Company primarily with a view
toward resolving the Interchange Litigation. The total accrual related to the covered litigation could be either higher or lower than
the escrow account balance.
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
103
2012
2011
(in millions)
Balance at October 1
$
425
$
697
Provision for unsettled legal matters
4,100
—
Provision for settled legal matters
—
7
Reclassification of settled matters
(1)
—
12
Interest accretion on settled matters
1
11
Payments on settled matters
(140
)
(302
)
Balance at September 30
$
4,386
$
425
(1)
Reclassification of amount previously recorded in accrued liabilities.