Visa 2012 Annual Report Download - page 22

Table of Contents
Limitations on our business resulting from litigation may materially and adversely affect our revenues and profitability.
Certain limitations have been placed on our business in recent years because of litigation. We may also have to change our
business practices in response to pending or future litigation. For example, in the pending settlement agreement in the interchange
litigation, we have agreed, among other things, to permit merchants to add surcharges to credit transactions under certain
circumstances.
These and other settlements of, or judgments in, past, pending and future litigation could force us to limit further the fees we
charge, to revise further our rules about fees charged to consumers who choose to pay with Visa, or to make other modifications to
our business. These modifications could materially and adversely affect our payments volume, revenues, operating results,
prospects for future growth and overall business.
Tax examinations 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 examination by the
U.S. Internal Revenue Service and other tax authorities, and we may be subject to additional examinations in the future. The tax
authorities may disagree with our tax treatment of certain material items and thereby increase our tax liability. Failure to sustain our
position in these matters could result in a material and adverse effect on our cash flow and financial position. 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 20—Income
Taxes to our consolidated financial statements included in Item 8 of 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. The economic pressures on our
clients arising from the Dodd-Frank Act have increased this pressure. See — The Dodd-
Frank Act may continue to have a material,
adverse impact on our financial condition, revenues, results of operations, prospects for future growth and overall business . This
pressure may make the provision of certain products and services less profitable or unprofitable and may materially and adversely
affect our revenues and profits.
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
revenue. Continued pressure on our fees could prevent us from entering into such agreements in the future on favorable terms. We
may also have to modify existing agreements in order to maintain relationships or comply with regulations. Finally, increased pricing
pressure enhances the importance of cost containment and productivity initiatives in areas other than those surrounding client
incentives, and we may not succeed in these efforts.
Intense competition in our industry may cause our business, financial condition, results of operations and
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