Philips 2012 Annual Report Download - page 160

12 Group financial statements 12.11 - 12.11
160 Annual Report 2012
in connection with inquiries by those regulators into possible
anticompetitive conduct in the LCD industry. Since then various other
authorities have started investigations as well.
Subsequent to the public announcement of these inquiries, a number
of class action antitrust complaints were 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. Both the direct purchaser and indirect
purchaser plaintiffs reached initial settlements with the remaining
defendants earlier this year, and those settlements have been submitted
to the court for final approval.
In addition, a number of plaintiffs have filed separate, individual actions
alleging essentially the same claims as those asserted in the class actions
in which the Company and/or Philips Electronics North America
Corporation were named as defendants. The Company has resolved
these matters or entered into tolling agreements with certain potential
claimants tolling the statute of limitations and currently, no Philips entity
is named as a defendant in any pending LCD action.
Due to the considerable uncertainty associated with certain of these
matters, on the basis of current knowledge the Company has concluded
that potential losses cannot be reliably estimated with respect to these
matters. 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 had 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, the Company 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 the Company,
indicating that it intends to hold it liable for antitrust infringements in
the CRT industry. On May 26 and May 27, 2010, the Company
presented its defense at the Oral Hearing. The Company received a
supplementary Statement of Objections in June 2012 to which it
responded both in writing and at an Oral Hearing. On 5 December
2012, the European Commission issued a decision imposing fines on
(former) CRT manufacturers including the Company. The European
Commission imposed a fine of EUR 313 million on the Company and a
fine of EUR 392 million jointly and severally on the Company and LG
Electronics, Inc. The Company intends to appeal the European
Commission’s decision. In total a payable of EUR 509 million has been
recognized (under other current liabilities). The amount of EUR 313
million has been recorded in the Innovation, Group & Services sector.
50% of the fine of EUR 392 million (i.e. EUR 196 million) was recorded
in the line results relating to investments in associates.
In the US, the Department of Justice has deferred Philips’ obligation to
respond to the grand jury subpoena Philips received in November 2007
and Philips expects that no penalties will result from that proceeding.
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. In April 2012, the authority’s decision was annulled by the
authority’s internal administrative review body.
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 denied 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. The
direct and indirect purchasers stipulated to remove allegations of a
conspiracy in CRT finished products from their complaints. In February
2012, the Company reached an agreement with counsel for direct
purchaser plaintiffs fully resolving all claims of the direct purchaser class
and obtaining a complete release by class members. The settlement
agreement received preliminary approval on May 3, 2012 and final
approval on October 22, 2012.
On October 1, 2012, counsel for indirect purchasers sought
certification of the purported class of indirect purchasers pursuant to
F.R.C.P. 23. Philips opposed plaintiffs motion and a decision is expected
by mid-2013. Discovery is proceeding in the indirect purchaser actions.
Seventeen individual plaintiffs, principally large retailers of CRT
products who sought exclusion from the direct purchaser class
settlement, have filed separate “opt-out” actions against Philips and
other defendants based on the same substantive allegations as the
putative class plaintiff complaints. These cases have all been
consolidated for pre-trial purposes with the putative class actions in the
Northern District of California and discovery is being coordinated with
the putative class cases. Philips’ motions to dismiss the complaints of
the individual plaintiffs are pending before the Court. A decision on the
motion is expected by mid-2013. Actions by other similarly situated
plaintiffs are possible. Philips intends to continue to vigorously defend
these indirect purchaser and individual lawsuits.
In addition, the state attorneys general of California, Florida, Illinois,
Oregon and Washington filed actions against Philips and other
defendants seeking to recover damages on behalf of the states and, in
parens patriae capacity, their consumers. Philips’ motion to dismiss the
Florida complaint as untimely was upheld by the Special Master and
pursuant to a stipulation with Florida the Court ordered the dismissal
of the Florida complaint with prejudice on December 27, 2012. Philips
has answered the Complaints of Washington and Oregon. Philips has
not yet been required to respond to the Complaint filed by Illinois.
These additional actions are pending in the respective state courts of
the plaintiffs. The Courts have not set trial dates and there is no
timetable for the resolution of these cases. 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. In December 2012, the class plaintiffs issued an amended
statement of claim with more detailed allegations against the
defendants. However, at this time, no statement of defense has been
filed, no certification motion has been scheduled and no class
proceeding has been certified as against the Philips defendants. Philips
intends to vigorously oppose these claims.
Due to the considerable uncertainty associated with certain of these
matters, on the basis of current knowledge, the Company has
concluded that potential losses cannot be reliably estimated with
respect to these matters. These investigations and litigation could have
a materially adverse effect on the Company’s consolidated financial
position, results of operations and cash flows.
In addition to the above cases, in 2006 Italian investor Mr. Carlo Vichi
filed a claim against Philips for the repayment of a 2002 EUR 200 million
loan (plus interest and damages) that was given to an affiliate of the CRT
joint venture LG.Philips Displays (“LPD”) that went bankrupt in January
of 2006. The Company vigorously denies that it has any liability for the