Visa (V), MasterCard (MA) Enter Multi-District Litigation Settlement; Will Pay $8.05B Total

On October 19, 2012, Visa Inc. (NYSE: V); its wholly owned subsidiaries Visa U.S.A. Inc. and Visa International Service Association; MasterCard Incorporated (NYSE: MA); MasterCard International Incorporated; various U.S. financial institution defendants; and the Class Plaintiffs (as defined below) signed a settlement agreement (the “Settlement Agreement”) to resolve the claims of the class plaintiffs (the “Class Plaintiffs”) in the matter styled In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 05-MD-1720 (JG) (JO) (the “Multi-District Litigation”). The claims originally were brought by a class of U.S. retailers in 2005.

The Settlement Agreement includes, 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 Multi-District Litigation.
  
  
• Settlement payments from all defendants in the amount of approximately $6.05 billion, with the Company’s share of the settlement representing approximately $4 billion. The Company’s share will be paid from the previously funded litigation escrow account established pursuant to the Company’s retrospective responsibility plan (the “Retrospective Responsibility Plan”). More information on the Retrospective Responsibility Plan is available in the Company’s filings with the Securities and Exchange Commission.
  
  
• 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. This effective reduction will be distributed by a process designed to ensure that all class retailers, large and small, are able to receive the reduction. 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, or approximately mid-2013.
  
  
• Modifications to the Company’s rules to permit retailers to impose a surcharge on credit transactions subject to a cap and a level playing field with other general purpose card competitors. The rule changes on surcharging likely will be implemented in early 2013.
  
  
• Agreement that the Company will meet with merchant buying groups that seek to negotiate interchange rates collectively (e.g., independent drug stores). The Company retains discretion to accept or reject a proposal based on whether the Company believes it is commercially reasonable.
  
  The Settlement Agreement is the result of extensive negotiations and mediation among the parties. It remains subject to court approval, which the Company cannot assure will be received.

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