Philips 2010 Annual Report Download - page 181

13 Group financial statements 13.11 - 13.11
Annual Report 2010 181
The Company and/or its subsidiaries have recognized environmental
remediation provisions for sites in various countries. In the United
States, subsidiaries of the Company have been named as potentially
responsible parties in state and federal proceedings for the clean-up of
certain sites.
Legal proceedings
The Company and certain of its group companies and former group
companies are involved as a party in legal proceedings, including
regulatory and other governmental proceedings, including discussions
on potential remedial actions, relating to such matters as competition
issues, commercial transactions, product liability, participations and
environmental pollution. In respect of antitrust laws, the Company and
certain of its (former) group companies are involved in investigations by
competition law authorities in several jurisdictions and are engaged in
litigation in this respect. Since the ultimate disposition of asserted claims
and proceedings and investigations cannot be predicted with certainty,
an adverse outcome could have a material adverse effect on the
Company’s consolidated financial position, results of operations and
cash flows.
Provided below are disclosures of the more significant cases:
LG Display
On December 11, 2006, LG Display Co. Ltd (formerly LG Philips LCD
Co. Ltd.), a company in which the Company then held a minority
common stock interest, announced that officials from the Korean Fair
Trade Commission had visited the offices of LG Display and that it had
received a subpoena from the United States Department of Justice
(DOJ) and a similar notice from the Japanese Fair Trade Commission in
connection with inquiries by those regulators into possible
anticompetitive conduct in the LCD industry. The Company sold its
remaining shareholding in LG Display on March 11, 2009 and
subsequently no longer holds shares in LG Display.
On March 6, 2009, the Washington State Attorney General’s Office
(the ‘Washington AG’) issued a Civil Investigative Demand (CID) to
Philips Electronics North America Corporation (PENAC) pursuant to
which PENAC was requested, among other things, to produce
documents and to provide answers to interrogatories concerning the
sale of thin-film transistor liquid crystal display panels (TFT-LCD panels)
and the sale of TFT-LCD products. PENAC was also requested to
provide to the Washington AG any documents previously produced to
the DOJ as part of the DOJ’s ongoing investigation into the TFT-LCD
industry. After discussions with the Washington AG, the Washington
AG agreed to allow PENAC, instead of responding to the CID, to
provide the limited amount of aggregate sales data and component data
that was previously provided to the plaintiffs in the direct purchaser
plaintiff’s class action. On March 27, 2009, PENAC produced that
information to the Washington AG. Thereafter, PENAC provided the
same information to the Missouri Attorney General’s Office and the
Illinois Attorney General’s Office in response to a CID and subpoena
issued, respectively, on March 18, 2009 and April 2, 2009 to PENAC.
On May 28, 2009, the Company received a Statement of Objections
from the European Commission. In this document the European
Commission alleges that the Company is jointly and severally liable for
the anticompetitive conduct of LG Display, in the market of LCDs, for
the period in which the Company, according to the European
Commission, exercised joint control. On July 28, 2009, the Company
filed its Reply to the Statement of Objections, in which it vigorously
opposed this allegation. On December 8, 2010, the European
Commission announced its decision and imposed fines on six LCD
panel producers but not on the Company. No Philips group company
was an addressee of the decision and, as such, no finding of anti-
competitive behavior has been made against any Philips group company.
On February 11, 2011, the European Commission has formally closed
the proceedings against the Company.
Subsequent to the public announcement of these inquiries, certain
Philips group companies were named as defendants in a number of class
action antitrust complaints filed in the United States courts, seeking,
among other things, damages on behalf of purchasers of products
incorporating TFT-LCD panels, based on alleged anticompetitive
conduct by manufacturers of such panels. Those lawsuits were
consolidated in two master actions in the United States District Court
for the Northern District of California: one, asserting a claim under
federal antitrust law, on behalf of direct purchasers of TFT-LCD panels
and products containing such panels, and another, asserting claims
under federal antitrust law, as well as various state antitrust and unfair
competition laws, on behalf of indirect purchasers of such panels and
products. On November 5, 2007 and September 10, 2008, the
Company and certain other companies within the Philips group
companies that were named as defendants in various of the original
complaints entered into agreements with the indirect purchaser
plaintiffs and the direct purchaser plaintiffs, respectively, that generally
toll the statutes of limitations applicable to plaintiffs’ claims, following
which the plaintiffs agreed to dismiss without prejudice the claims
against the Philips defendants. On December 5, 2008, following the
partial grant of motions to dismiss consolidated class action complaints
in the master actions, the plaintiffs filed amended consolidated class
action complaints, asserting essentially the same legal claims as those
alleged in the prior complaints. On December 2, 2009, the direct
purchaser plaintiffs filed a third consolidated class action complaint
under seal. None of the companies within the Philips group of
companies currently is named as a defendant in the pending amended
complaints, although the Company and PENAC are named as co-
conspirators with named defendants in the indirect purchaser case, but
the litigation is continuing.
In addition, a number of plaintiffs have filed separate, individual actions
alleging essentially the same claims as those asserted in the class actions.
The Company and PENAC are named as defendants in the actions
brought by Best Buy Co. Inc. (and related entities) and Costco
Wholesale Corporation, and PENAC also is named as a defendant in
the action brought by Nokia Corporation and Nokia, Inc. Most of these
actions have been designated as related to the consolidated actions
already pending before Judge Illston in the United States District Court
for the Northern District of California and have been consolidated for
pre-trial purposes with the class actions.
On November 23, 2009, Nokia Corporation also filed a claim in the UK
courts against 25 defendants including three Philips entities (Koninklijke
Philips Electronics N.V., Philips Components B.V. and Philips
Components International B.V.). Nokia Corporation is seeking
damages in respect of alleged losses it suffered as a result of alleged
anti-competitive behavior of manufacturers of LCD-TFT panels.
Due to the considerable uncertainty associated with these matters, on
the basis of current knowledge, the Company has concluded that
potential losses cannot be reliably estimated with respect to these
matters. An adverse final resolution of these investigations and litigation
could have a materially adverse effect on the Company’s consolidated
financial position, results of operations and cash flows.
Cathode-Ray Tubes (CRT)
On November 21, 2007, the Company announced that competition law
authorities in several jurisdictions have commenced investigations into
possible anticompetitive activities in the Cathode-Ray Tubes, or CRT
industry. As one of the companies that formerly was active in the CRT
business, Philips is subject to a number of these ongoing investigations.
The Company has assisted the regulatory authorities in these
investigations. In November 2009, the European Commission sent a
Statement of Objections to Philips, indicating that it intends to hold
Philips liable for antitrust infringements in the CRT industry. On May, 26
and May, 27, 2010, Philips presented its defense at the Oral Hearing.
The EC decision is expected sometime in 2011. In the US, the
Department of Justice has deferred Philips’ obligation to respond to the
grand jury subpoena Philips received in November of 2007. On August
27, 2010, the Czech competition authority issued a decision in which it
held that the Company had been engaged in anticompetitive activities
with respect to Color Picture Tubes in the Czech Republic between
September 21, 1999 and June 30, 2001. This decision is currently under
appeal. No fine was imposed because the statute of limitation for the
imposition of fine had expired.
Subsequent to the public announcement of these investigations in 2007,
certain Philips group companies were named as defendants in over 50
class action antitrust complaints filed in various federal district courts in
the United States. These actions allege anticompetitive conduct by
manufacturers of CRTs and seek treble damages on behalf of direct and
indirect purchasers of CRTs and products incorporating CRTs. These
complaints assert claims under federal antitrust law, as well as various
state antitrust and unfair competition laws and may involve joint and
several liability among the named defendants. These actions have been
consolidated by the Judicial Panel for Multidistrict Litigation for pre-trial
proceedings in the United States District Court for the Northern
District of California.
On March 30, 2010, the District Court adopted the Special Master’s
Report and Recommendation denying the bulk of the motions to
dismiss filed on behalf of all Philips entities in response to both the direct