Epson 2005 Annual Report Download - page 49

50 Seiko Epson Annual Report 2005
(20) Epson faces risks related to procedures taken under anti-monopoly laws
There are occasions when Epson’s businesses are subject to procedures under anti-monopoly laws
or ordinances, such as the Law Concerning the Prohibition of Private Monopolization and Mainte-
nance of Fair Trade. Overseas authorities also sometimes conduct surveys or gather information on
specific fields of business, and as a part of that effort Epson will occasionally participate in, for example,
surveys of a general nature related to market situations or sales methods etc. If Epson is subject to
such surveys or procedures, its sales activities might be interfered with and they might adversely
affect Epson’s results.
(21) Epson is at risk of material legal actions being brought against it
Epson conducts its businesses both in Japan and overseas, its primary businesses being the develop-
ment, manufacture, and sales of information-related equipment, electronic devices, and precision equip-
ment. Given the special nature of its businesses, there is a possibility that an action could be brought or
legal proceedings could be started against it regarding, for example, intellectual property rights, product
liability, anti-monopoly laws, and environment regulations. Should that happen, society’s trust in Epson
might be harmed, and resolving and responding to the issue might require considerable expenses and
management resources. The results of the action or legal proceedings might also adversely affect Epson’s
results or the development of Epson’s business in the future.
The material actions involving Epson that are pending are as follows:
1. United States class action concerning an Epson inkjet printer
Consolidated class action complaints are pending against Epson America, Inc. in the United States,
wherein a certified class is seeking an injunction and unspecified damages arising from the adequacy
of Epson’s communication of ink levels in Epson ink jet cartridges.
2. Action concerning payment of copyright fees in Germany
The German organization for collecting copyright fees, VerwertungsGesellschaft WORT, has brought
an action against Epson Deutschland GmbH, a consolidated subsidiary of the company, to seek
payment of copyright fees, claiming that a type of printer that Epson sells corresponds to equipment
for the private copying of copyright works, which is subject to copyright fees. A draft of an arbitration
petition has been submitted to the arbitration commission, which is where preliminary proceedings
for this action are being held, that seeks a set payment of copyright fees for each printer sold by
Epson Deutschland GmbH, but both parties have rejected it as unsatisfactory.
Although it is difficult to predict the result of the action or even when the decision will be handed
down, if the decision is unfavorable to Epson, Epson’s results might consequently be affected.
(22) Epson is vulnerable to risks inherent in its tie-ups with other companies
One of Epson’s options for business strategies is to enter tie-ups with other companies. But if any sort
of adverse situation arises between the parties in the tie-up, there is a possibility the tie-ups will be
dissolved. There is also no assurance that the business strategy will succeed through the tie-ups ex-
actly as expected or that they will contribute to Epson’s results.
On March 16, 2005, Epson entered into with Toyo Communication Equipment Co., Ltd. a Business
Merger Agreement and a Corporate Split Agreement, whereby as of October 1, 2005 (scheduled date),
both companies will spin off their Quartz businesses by corporate split and integrate them into one
business. The aim of this business integration is to make the new company a leader in the Quartz
business by strengthening the fields in which both companies excel and increasing their synergies.
There is a possibility of the same risk as is described in paragraph one of this Section 22 affecting this
business integration, which if it did might adversely affect Epson’s results.