Visa 2013 Annual Report Download - page 125

VISA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2013
omnibus agreement would be treated as a Visa portion. Visa would have no liability for the monetary
portion of any judgment assigned to MasterCard-related claims in accordance with the omnibus
agreement, and if a judgment is not assigned to Visa-related claims or MasterCard-related claims in
accordance with the omnibus agreement, then any monetary liability would be divided into a
MasterCard portion at 33.3333% and a Visa portion at 66.6667%. The Visa portion of a settlement or
judgment covered by the omnibus agreement would be allocated in accordance with specified
provisions of the Company’s retrospective responsibility plan. The litigation provision on the
consolidated statements of operations is not impacted by the execution of the omnibus agreement.
On October 19, 2012, the Company and the individual plaintiffs whose claims were consolidated
with the MDL (the “Individual Plaintiffs”) signed a settlement agreement to resolve the Individual
Plaintiffs’ claims against the Company for approximately $350 million. This payment was made from
the litigation escrow account under the retrospective responsibility plan on October 29, 2012. On
November 6, 2012, the court entered an order dismissing the Individual Plaintiffs’ claims with prejudice.
In addition, on October 19, 2012, Visa Inc., its wholly-owned subsidiaries Visa U.S.A. and Visa
International, MasterCard Incorporated, MasterCard International Incorporated, various U.S. financial
institution defendants, and the class plaintiffs signed a settlement agreement (the “Settlement
Agreement”) to resolve the class plaintiffs’ claims.
The terms of the Settlement Agreement include, among other terms:
• A comprehensive release from participating class members for liability arising out of claims
asserted in the litigation, and a further release to protect against future litigation regarding
default interchange and the other U.S. rules at issue in the MDL;
• Settlement payments from the Company of approximately $4.0 billion, to be paid from the
Company’s previously funded litigation escrow account established under the retrospective
responsibility plan, see Note 3—Retrospective Responsibility Plan;
• Distribution to class merchants of an amount equal to 10 basis points of default interchange
across all credit rate categories for a period of eight consecutive months, which otherwise
would have been paid to issuers and which effectively reduces credit interchange for that
period of time. The eight month period for the reduction would begin within 60 days after
completion of the court-ordered period during which individual class members may opt out
of this settlement;
• Certain modifications to the Company’s rules, including modifications to permit surcharging
on credit transactions under certain circumstances, subject to a cap and a level playing field
with other general purpose card competitors; and
• Agreement that the Company will meet with merchant buying groups that seek to negotiate
interchange rates collectively.
The district court entered the preliminary approval order of the Settlement Agreement on
November 27, 2012. On November 27, 2012, certain objectors filed a notice of appeal from the
preliminary approval order in the U.S. Court of Appeals for the Second Circuit. On December 10, 2012,
the court of appeals entered an order deferring briefing for the appeal until after the district court enters
an order of final approval and final judgment with respect to the settlement, or otherwise concludes the
matters by entry of a final judgment.
On December 10, 2012, Visa paid approximately $4.0 billion from the litigation escrow account
into a settlement fund established pursuant to the Settlement Agreement.
117