Dow Chemical 2013 Annual Report Download - page 127

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On June 10, 2005, the Company received a Statement of Objections from the European Commission (the “EC”) stating that it
believed that the Company and certain subsidiaries of the Company (the “Dow Entities”), together with other participants in the
synthetic rubber industry, engaged in conduct in violation of European competition laws with respect to the butadiene rubber
and emulsion styrene butadiene rubber businesses. In connection therewith, on November 29, 2006, the EC issued its decision
alleging infringement of Article 81 of the Treaty of Rome and imposed a fine of Euro 64.575 million (approximately
$85 million at that time) on the Dow Entities; several other companies were also named and fined. As a result, the Company
recognized a loss contingency of $85 million related to the fine in the fourth quarter of 2006. The Company appealed the EC’s
decision and a hearing was held before the Court of First Instance on October 13, 2009. On July 13, 2011, the General Court
issued a decision that partly affirmed the EC's decision with regard to the amount of the fine and the liability of the parent
company, but rejected the EC's decision regarding the length of the conspiracy and determined that it was of a shorter duration.
The Dow Entities filed an appeal of this decision to the Court of Justice of the European Union. This appeal was denied on July
18, 2013. The Dow Entities paid the fine, including accrued interest, on August 12, 2013. This proceeding is now considered
resolved. Subsequent to the imposition of the fine in 2006, the Company and/or certain subsidiaries of the Company became
named parties in various related U.S., United Kingdom and Italian civil actions. The U.S. matter was settled in March 2010
through a confidential settlement agreement, with an immaterial impact on the Company’s consolidated financial statements.
The United Kingdom and Italian civil actions are still pending.
Additionally, on March 10, 2007, the Company received a Statement of Objections from the EC stating that it believed that
DuPont Dow Elastomers L.L.C. (“DDE”), a former 50:50 joint venture with E.I. du Pont de Nemours and Company
(“DuPont”), together with other participants in the synthetic rubber industry, engaged in conduct in violation of European
competition laws with respect to the polychloroprene business. This Statement of Objections specifically names the Company,
in its capacity as a former joint venture owner of DDE. On December 5, 2007, the EC announced its decision to impose a fine
on the Company, among others, in the amount of Euro 48.675 million ($66 million equivalent at September 30, 2013). The
Company previously transferred its joint venture ownership interest in DDE to DuPont in 2005, and DDE then changed its
name to DuPont Performance Elastomers L.L.C. (“DPE”). In February 2008, DuPont, DPE and the Company each filed an
appeal of the December 5, 2007 decision of the EC. On February 2, 2012, the European General Court denied the appeals of the
December 5, 2007 decision. The Company appealed this decision to the Court of Justice of the European Union. This appeal
was denied on September 26, 2013. Based on the Company's 2004 Allocation Agreement with DuPont, the Company's share of
this fine (which DuPont previously caused to be paid) did not have a material impact on the Company's consolidated financial
statements and there was no financial impact to Dow as a result of this final ruling. This matter is now considered resolved.
Rohm and Haas Pension Plan Matters
In December 2005, a federal judge in the U.S. District Court for the Southern District of Indiana (the "District Court") issued a
decision granting a class of participants in the Rohm and Haas Pension Plan (the "Rohm and Haas Plan") who had retired from
Rohm and Haas Company ("Rohm and Haas"), now a wholly owned subsidiary of the Company, and who elected to receive a
lump sum benefit from the Rohm and Haas Plan, the right to a cost-of-living adjustment ("COLA") as part of their retirement
benefit. In August 2007, the Seventh Circuit Court of Appeals (the "Seventh Circuit") affirmed the District Court’s decision,
and in March 2008, the U.S. Supreme Court denied the Rohm and Haas Plan’s petition to review the Seventh Circuit’s decision.
The case was returned to the District Court for further proceedings. In October 2008 and February 2009, the District Court
issued rulings that have the effect of including in the class all Rohm and Haas retirees who received a lump sum distribution
without a COLA from the Rohm and Haas Plan since January 1976. These rulings are subject to appeal, and the District Court
has not yet determined the amount of the COLA benefits that may be due to the class participants. The Rohm and Haas Plan
and the plaintiffs entered into a settlement agreement that, in addition to settling the litigation with respect to the Rohm and
Haas retirees, provides for the amendment of the complaint and amendment of the Rohm and Haas Plan to include active
employees in the settlement benefits. The District Court preliminarily approved the settlement on November 24, 2009 and,
following a hearing on March 12, 2010, issued a final order approving the settlement on April 12, 2010. A group of objectors to
the settlement filed an appeal from the final order. In November 2010, the District Court issued an order approving class
counsel’s fee award petition in an amount consistent with the terms of the settlement. The same objectors also appealed this
order. On September 2, 2011, the Seventh Circuit affirmed the approval of the settlement and award of attorneys' fees. A lone
objector filed a petition for rehearing, which was denied on October 17, 2011. The objector continued the appeal process by
timely filing a petition for a writ of certiorari to the U.S. Supreme Court, which was denied on April 16, 2012, rendering the
settlement and award of attorneys' fees final.
A pension liability associated with this matter of $185 million was recognized as part of the acquisition of Rohm and Haas on
April 1, 2009. The liability, which was determined in accordance with the accounting guidance for contingencies, recognized
the estimated impact of the above described judicial decisions on the long-term Rohm and Haas Plan obligations owed to the
applicable Rohm and Haas retirees and active employees. The Company had a liability associated with this matter of
$50 million at December 31, 2012. The remaining liability will be resolved over time through the administration of the Rohm
and Haas Plan.