MasterCard to Receive $90 Million From FIFA in World Cup Sponsor Dispute
22/06/2007 |
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MasterCard Inc. said soccer's ruling body will pay it $90 million to settle a dispute over World Cup sponsorships, paving the way for rival Visa International Inc. to win the rights for the world's most-watched sporting event.
The Federation Internationale de Football Association will make the payment to MasterCard, the second-biggest credit-card company behind Visa, in return for an agreement ending MasterCard's claim to the 2010 and 2014 World Cup games, Purchase, New York-based MasterCard said in a regulatory filing and statement.
MasterCard sued after FIFA in 2006 awarded the World Cup to Visa, arguing the deal violated an existing contract that gave it right of first refusal to renew its sponsorship for the four-year event. The U.S. 2nd Circuit Court of Appeals dealt MasterCard a setback on May 25, when it reversed a lower court ruling that let the company continue as official sponsor until 2014.
``Substantial financial compensation to MasterCard along with severing the relationship between our two companies was in the best interest of MasterCard's customers and shareholders,'' Noah Hanft, MasterCard's general counsel, said during a conference call today.
Visa spokesman Steve Hickok declined to comment on the status of Visa's contract with FIFA.
``We look forward to full resolution of this matter in the near future,'' Visa said in a statement. ``We are pleased to see that FIFA has worked with MasterCard to resolve this issue.''
`Dishonesty and Deceit'
In the lower court ruling, U.S. District Judge Loretta Preska wrote that FIFA negotiators failed to act in good faith, lying repeatedly to MasterCard and Visa when talks with both were under way. The sports body breached its obligation to give the right to renew the contract to MasterCard, which spent almost $100 million over 16 years as official sponsor, she wrote.
MasterCard was an official sponsor for the 1994, 1998, 2002 and 2006 men's soccer tournaments.
The settlement ``takes into account'' Judge Preska's findings, which ``tell a story of a level of dishonesty and deceit'' in FIFA's negotiations with MasterCard and Visa, Hanft said.
FIFA lawyer Turner Smith declined to comment.
Both parties agreed to end legal proceedings in the U.S. and Switzerland.
FIFA will pay MasterCard $87.5 million this quarter and $2.5 million in the third quarter, the company said. MasterCard shares rose $1.23, or 0.8 percent, to $164.69 at 4 p.m. in New York Stock Exchange composite trading.
The lower court case is MasterCard International Inc. v. Federation Internationale de Football Association, 1:06-cv-3036, U.S. District Court, Southern District of New York (Manhattan).
(Source: Bloomberg.com)
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