Philips 2011 Annual Report Download - page 157

12 Group financial statements 12.11 - 12.11
Annual Report 2011 157
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 currently are named as defendants in the
actions brought by Jaco Electronics, Inc. Additionally, PENAC is named
as a defendant in the actions brought by Motorola Mobility, Inc. and T-
Mobile U.S.A., Inc. and in the action brought collectively by Target
Corp, Sears, Roebuck and Co, Kmart Corp, Old Comp Inc, Good Guys,
Inc. RadioShack Corp., and Newegg Inc. Each of these actions has 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.
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 in
various jurisdictions. 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 2012. In
the US, the Department of Justice has deferred Philips’ obligation to
respond to the grand jury subpoena Philips received in November 2007.
On August 26, 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. No fine was imposed
because the statute of limitation for the imposition of fine had expired.
On September 14, 2011, the Slovakian 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
Slovakia between March 30, 1999 and June 30, 2001. 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 pretrial
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
and indirect purchaser actions in the federal class actions pending in the
Northern District of California. Following a preliminary ruling by the
magistrate judge to strike from the Consolidated Amended Complaint
plaintiff’s claims regarding an alleged conspiracy in products containing
CRTs, the direct and indirect purchasers have both stipulated to
remove allegations of a conspiracy in CRT finished products from their
complaints. These cases have now proceeded to discovery. Certain
individual plaintiffs, who otherwise would be members of the putative
class have filed independent actions against Philips and other defendants
based on the same allegations as the putative class plaintiffs. In addition,
the State of Florida has filed an action against Philips and other
defendants seeking to recover damages on behalf of the State of Florida
and its consumers. Philips has not yet been required to respond to the
Complaints filed by the individual plaintiffs of the State of Florida. These
additional actions have been consolidated for pre-trial purposes with
the class action in the Northern District of California. The Court has
not set a trial date and there is no timetable for the resolution of these
cases.
In February, 2012, Philips entered into a settlement agreement with the
purported class of Direct Purchaser Plaintiffs in these actions. The
settlement agreement must be submitted to the Court for approval.
Under US legal procedure, individual members of the Direct Purchaser
Plaintiff class may choose not to participate in the settlement by “opting
out”, seeking to be excluded from the settlement class, or filing
independent actions as noted above. Philips will pay into a settlement
fund an amount depending on the Direct Purchaser Plaintiffs that
participate in the settlement and the proportion of Philips’ sales
represented by these participating Direct Purchaser Plaintiffs once the
settlement has been finally approved. This settlement agreement
release does not extinguish liability as to the purported indirect
purchaser class, the individual plaintiffs, or the State of Florida. Philips
intends to continue to vigorously defend these remaining lawsuits.
Certain Philips group companies have also been named as defendants,
in proposed class proceedings in Ontario, Quebec and British
Columbia, Canada, along with numerous other participants in the
industry. Philips intends to vigorously oppose these claims, and the
proceedings remain at a preliminary stage. In Canada, the plaintiffs have
reached a settlement with the Chunghwa defendants, and the
settlement has received final court approval. At this time, no class
proceeding has been certified as against the Philips defendants and no
statement of defense has been filed.
Due to the considerable uncertainty associated with these matters, on
the basis of current knowledge, the Company has concluded that total
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.
Optical Disc Drive (ODD)
On October 27, 2009, the Antitrust Division of the United States
Department of Justice confirmed that it had initiated an investigation
into possible anticompetitive practices in the Optical Disc Drive (ODD)
industry. Philips Lite-On Digital Solutions Corp. (PLDS), a joint venture
owned by the Company and Lite-On IT Corporation, as an ODD
market participant, is included in this investigation. PLDS is also subject
to similar investigations outside the US relating to the ODD market.
PLDS and Philips intend to cooperate with the authorities in these
investigations.
Subsequent to the public announcement of these investigations in 2009,
the Company, PLDS and Philips & Lite-On Digital Solutions USA, Inc.,
were named as defendants in numerous class action antitrust
complaints filed in various federal district courts in the United States.
These actions allege anticompetitive conduct by manufacturers of
ODDs and seek treble damages on behalf of direct and indirect
purchasers of ODDs and products incorporating ODDs. 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.
Consolidated amended complaints were filed on August 26, 2010.
Motions to dismiss these complaints were filed by various other
defendants. On August 3, 2011, the Court dismissed the Consolidated
Amended Complaints of the direct and indirect purchaser plaintiffs for
failing to state a cognizable claim, but gave leave to plaintiffs reinstituting
the claims. Certain defendants have moved to dismiss the Second
Consolidated Complaints, and a hearing has been set. The motions seek
to dismiss all claims against these defendants on various grounds. The
Company, PLDS and Philips & Lite-On Digital Solutions USA, Inc. have
not yet been required to move to dismiss or otherwise respond to the
Second Consolidated Complaints. Discovery is being permitted to
move forward, but is in preliminary stages. Philips intends to vigorously
defend these actions.
The Company and certain Philips group companies have also been
named as defendants, in proposed class proceedings in Ontario,
Quebec, British Columbia, and Manitoba, Canada along with numerous
other participants in the industry. These complaints assert claims
against various ODD manufacturers under federal competition laws as
well as tort laws and may involve joint and several liability among the
named defendants. Philips intends to vigorously defend these lawsuits.