Thursday, June 21, 2007

Mastercard drops two FIFA World Cups for $90m

FIFA appears to to have won its controversial battle to replace Mastercard with Visa as its financial card sponsor with MasterCard Inc's surprising annoicnement that it will accept a US$90 million settlement from FIFA to discontinue its sponsorship claims to FIFA's 2010 and 2014 World Cup tournaments.

MasterCard and football's governing body, the Federation Internationale de Football Association, have been fighting in court over MasterCard's right to the sponsorship. A US district judge ruled in December that FIFA did not honour its agreements with the credit card issuer when it awarded sponsorship rights to rival, Visa International Inc. However, in May, a US federal appeals court asked the lower court judge to review her ruling due to uncertainties over whether a 2006 contract was valid. MasterCard had served as the tournament's official sponsor since 1994.

Mastercard's Chief Marketing Officer Larry Flanagan said the decision to end the relationship with FIFA was based on "irreparable damage" to the company's trust in the organisation. He said MasterCard determined the sponsorship was "basically not worth it, based on the need to have an ongoing, collaborative relationship with the other party."

He said the settlement is in the best interest of shareholders, based on the cost of legal proceedings. The settlement resolves all litigation in the US and in Switzerland, where FIFA had wanted an arbitration panel to decide on the matter. MasterCard's general counsel Noah Hanft said the $90 million settlement payment represents half of the sponsorship amount.

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