Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Mastercard Inc (1141391) 10-K published on Feb 13, 2019 at 10:03 am
Reporting Period: Dec 30, 2018
payment from the defendants. We took a charge during 2018 to reflect our share of this payment. Under the agreement, Mastercard and its customer financial institutions will receive a release of all damages claims that were alleged, or could have been alleged by the merchant class members concerning our interchange and fee structure and merchant acceptance rules. This release covers all retrospective claims, as well as prospective claims for a period of five years after the resolution of all appeals relating to court approval of the agreement. In January 2019, the district court issued an order granting preliminary approval of the settlement. The agreement does not relate to the merchants' claims seeking changes to business practices. Separate settlement negotiations for those claims are ongoing. See Note 20 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for further discussion.
Lack of visibility of our brand in our products and services, or in the products and services of our partners who use our technology, may materially and adversely affect our business.
As more players enter the global payments system, the layers between our brand and consumers and merchants increase. In order to compete with other powerful consumer brands that are also becoming part of the consumer payment experience, we often partner with those brands on payment solutions. These brands include large digital companies and other technology companies who are our customers and use our networks to build their own acceptance brands. In some cases, our brand may not be featured in the payment solution or may be secondary to other brands. Additionally, as part of our relationships with some issuers, our payment brand is only included on the back of the card. As a result, our brand may either be invisible to consumers or may not be the primary brand with which consumers associate the payment experience. This brand invisibility, or any consumer confusion as to our role in the consumer payment experience, could decrease the value of our brand, which could adversely affect our business.
We may not be able to attract, hire and retain a highly qualified and diverse workforce, or maintain our corporate culture, which could impact our ability to grow effectively.
Our performance largely depends on the talents and efforts of our employees, particularly our key personnel and senior management. We may be unable to retain or to attract highly qualified employees. The market for key personnel is highly competitive, particularly in technology and other skill areas significant to our business. Additionally, changes in immigration and work permit laws and regulations and related enforcement have made it difficult for employees to work in, or transfer among, jurisdictions in which we have operations and could impair our ability to attract and retain qualified employees. Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain a corporate culture that fosters innovation, creativity and teamwork could harm our overall business and results of operations.
Financial instruments - In January 2016, the FASB issued accounting guidance to amend certain aspects of recognition, measurement, presentation and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in income. This guidance is required to be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Amendments related to equity securities without readily determinable fair values should be applied prospectively to equity investments that exist as of the date of adoption. The guidance is effective for periods beginning after December 15, 2017. The Company adopted this guidance effective January 1, 2018. The cumulative effect of the adoption of the standard was de minimis to the Company’s balance sheet upon adoption. For the year ended December 31, 2018, the Company recorded a gain on non-marketable equity investments, which resulted in a pre-tax increase of $12 million.
Europe. In July 2015, the European Commission (“EC”) issued a Statement of Objections related to Mastercard’s interregional interchange fees and central acquiring rule within the European Economic Area (the “EEA”). The Statement of Objections, which followed an investigation opened in 2013, included preliminary conclusions concerning the alleged anticompetitive effects of these practices. In December 2018, Mastercard announced the anticipated resolution of the EC’s investigation. With respect to interregional interchange fees, Mastercard made a settlement proposal whereby it would make changes to its interregional interchange fees. The proposed settlement is subject to market testing by the EC before it is made binding in an EC decision. The EC has announced that Visa has entered into a parallel proposed settlement. In addition, with respect to Mastercard’s historic central acquiring rule, the EC issued a negative decision in January 2019. The EC’s negative decision covers a period of time of less than two years before the rule’s modification. The rule was modified in late 2015 to comply with the requirements of the EEA Interchange Fee Regulation. The decision does not require any modification of Mastercard’s current business practices but includes a fine of €571 million. Mastercard incurred a charge of $654 million in the fourth quarter of 2018 in relation to this matter.