1141391--2/28/2007--MASTERCARD

related topics

{regulation, government, change}

{provision, law, control}

{operation, international, foreign}

{product, market, service}

{system, service, information}

{competitive, industry, competition}

{stock, price, share}

{financial, litigation, operation}

{stock, price, operating}

{cost, contract, operation}

{customer, product, revenue}

{regulation, change, law}

{condition, economic, financial}

{product, liability, claim}

{loss, insurance, financial}

{acquisition, growth, future}

Interchange fees are subject to increasingly intense legal and regulatory scrutiny worldwide, which may have a material adverse impact on our revenue, our prospects for future growth and our overall business. If we are found liable in any of the cases brought by American Express or Discover, we may be forced to pay substantial damages. If the settlements of our currency conversion cases are not ultimately approved and we are unsuccessful in any of our various lawsuits relating to our currency conversion practices, our business may be materially and adversely affected. If we are found liable in any of the other litigations that have been brought against us or in any other litigation to which we may be subject in the future, we may be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our revenue and profitability. If we determine in the future that we are required to establish reserves or we incur liabilities for any litigation that has been or may be brought against us, our results of operations, cash flow and financial condition could be materially and adversely affected. Limitations on our business and other penalties resulting from litigation or litigation settlements may materially and adversely affect our revenue and profitability. The payments industry is generally the subject of increasing global regulatory focus, which may impose costly new compliance burdens on us and our customers and lead to decreased transaction volumes through our systems. Existing and proposed regulation in the areas of consumer privacy, data use and/or security could decrease the number of payment cards issued and could increase our costs. We face increasingly intense competitive pressure on the prices we charge our customers, which may materially and adversely affect our revenue and profitability. Consolidation or other changes affecting the banking industry could result in a loss of business for MasterCard and may create pressure on the prices we charge our customers, which may materially and adversely affect our revenue and profitability. Our revenue would decline significantly if we lose one or more of our most significant customers, which could have a material adverse impact on our business. Merchants are increasingly focused on the costs of accepting card-based forms of payment, which may lead to additional litigation and regulatory proceedings and may increase the costs of our incentive programs, which could materially and adversely affect our profitability. Our operating results may suffer because of substantial and increasingly intense competition worldwide in the global payments industry. A significant portion of the revenue we earn outside the United States is generated from cross-border transactions and a decline in cross-border business and leisure travel could adversely affect our revenues and profitability. We have repealed our Competitive Programs Policy ( CPP ) in the United States as a result of a final judgment in our litigation with the U.S. Department of Justice, and our business may suffer as a result. We depend significantly on our relationships with our customers to manage our payment system. If we are unable to maintain those relationships, or if our customers are unable to maintain their relationships with cardholders or merchants that accept our cards for payment, our business may be materially and adversely affected. If we are unable to grow our debit business, particularly in the United States, we may fail to maintain and increase our revenue growth. Global economic, political and other conditions may adversely affect trends in consumer spending, which may materially and adversely impact our revenue and profitability. As a guarantor of certain obligations of principal members and affiliate debit licensees, we are exposed to risk of loss or illiquidity if any of our members default on their MasterCard, Cirrus or Maestro settlement obligations. Following our ownership and governance change, we no longer have the right to impose special assessments for extraordinary events upon the members of MasterCard International, which could leave us exposed to significant losses that could materially and adversely affect our results of operations, cash flow and financial condition, or, in certain circumstances, even cause us to become insolvent. If our transaction processing systems are disrupted or we are unable to process transactions efficiently or at all, our revenue or profitability would be materially reduced. Account data breaches involving card data stored by us or third parties could adversely affect our reputation and revenue. An increase in fraudulent activity using our cards could lead to reputational damage to our brands and could reduce the use and acceptance of our cards. If we are not able to keep pace with the rapid technological developments in our industry to provide customers, merchants and cardholders with new and innovative payment programs and services, the use of our cards could decline, which would reduce our revenue and income. We may face increased competition resulting from a change in ownership of our competitors, which could have an adverse impact our revenue. Adverse currency fluctuations and foreign exchange controls could decrease revenue we receive from our international operations. Any acquisitions that we make could disrupt our business and harm our financial condition. Changes in the regulatory environment may adversely affect our benefit plans. Risks Related to our Class A Common Stock and Governance Structure Future sales of our shares of Class A common stock could depress the market price of our Class A common stock. The trading market for our Class A common stock could be adversely affected because provisions of our certificate of incorporation will make it in many cases difficult for broker-dealers that are members or affiliates of members of MasterCard International to make a market in our Class A common stock. Anti-takeover provisions in our charter documents and Delaware law could delay or prevent entirely a takeover attempt or a change in control. A substantial portion of our voting power is held by the Foundation, which is restricted from selling shares for an extended period of time and therefore may not have the same incentive to approve a corporate action that may be favorable to the other public stockholders. In addition, the ownership of Class A common stock by the Foundation and the restrictions on transfer could discourage or make more difficult acquisition proposals favored by the other holders of the Class A common stock. The holders of our Class M common stock have the right to elect up to three of our directors and to approve significant corporate transactions, and their interests in our business may be different than our other shareholders. Certain aspects of our European operations are managed by the European Board which has been elected by the European holders of Class M common stock and which may reach different decisions than our Global Board of Directors. Our ability to pay regular dividends to our holders of Class A common stock and Class B common stock is subject to the discretion of our board of directors and will be limited by our ability to generate sufficient earnings and cash flows.

Full 10-K form ▸

1141391--2/28/2007--MASTERCARD_INC