Epson 2012 Annual Report Download - page 19

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17. Epson is vulnerable to proceedings relating to antitrust laws and regulations.
With business operations that span the globe, Epson is subject in Japan and overseas to proceedings relating to
antitrust laws and regulations, such as those prohibiting private monopolies and those protecting fair trade.
Overseas authorities sometimes investigate and gather information on certain industries and as part of this,
Epson’s market conditions and sales methods may come under investigation. Such investigations and
proceedings could obstruct Epson’s sales activities and adversely affect Epson’s operating results.
The Company and certain of its consolidated subsidiaries are currently under investigation by the European
Commission and other competition authorities regarding allegations of involvement in a liquid crystal display
price-fixing cartel. It is difficult at this time to predict the outcome of these investigations and when they may be
settled.
18. Epson is at risk of material legal actions being brought against it.
Epson conducts businesses internationally. Its primary businesses are the development, manufacture and sale of
information-related equipment, electronic devices and precision equipment. Given the 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, antitrust laws or environmental regulations.
As of the date it submitted its Annual Securities Report, Epson was contending the following material actions.
In Germany, the organization for collecting copyright fees on behalf of copyright holders,
Verwertungsgesellschaft Wort (“VG Wort”), has brought a series of legal actions seeking payment of copyright
fees against importers and venders of PCs, printers and other digital equipment that is capable of reproducing
copyrighted works.
In January 2004 VG Wort brought a civil action against Epson Deutschland GmbH (“EDG”), a consolidated
subsidiary of the Company, to seek payment of copyright fees on single-function printers. The initial judgment
determined that the aforementioned printer is subject to a copyright fee and decreed that EDG pay the fee at a
rate of between 10 to 256.70 euros per printer depending on the printer’s printable pages per minute. However,
the claim was dismissed by the appeals court and the supreme court. The plaintiff, however, unsatisfied with this
ruling, appealed to the Federal Constitutional Court of Germany. On December 21, 2010, the Federal
Constitutional Court ruled that the August 2008 ruling of the supreme court violates rights set forth in Article 14
of the constitutional law of Germany. It thus dismissed the ruling of the supreme court and referred the case back
to the supreme court for review. Then, in July 2011, the supreme court referred the case to the Court of Justice of
the European Union. Companies in general, including Epson, and industry organizations are showing a
willingness to take a stance against the expansion of the scope of such copyright fees.
Apart from this, civil actions have been brought against the Company and certain of its consolidated subsidiaries
by multiple customers in multiple countries, including the United States, regarding allegations of involvement in
a liquid crystal display price-fixing cartel.
It is difficult at this time to predict the outcome of these civil actions and when they may be settled, but Epson's
operating results and future business could be affected, depending on the outcomes of suits and legal
proceedings.
19. Epson is vulnerable to certain risks in internal control over financial reporting.
Epson has established and operates internal controls to ensure the reliability of financial reporting.
With the establishment and operation of internal controls over financial reporting high on its list of important
management issues, Epson has been pursuing a Group-wide effort to audit and improve corporate oversight of its
subsidiaries and affiliates. However, since there is no assurance that Epson will be able to establish and operate
an effective internal control system on a continuous basis, and since there are inherent limitations to internal
control systems, if the internal controls that Epson implements fail to function effectively, or if there are
deficiencies in internal controls over financial reporting or material weaknesses in the internal controls, it might
adversely affect the reliability of Epson’s financial reporting.
20. Epson is vulnerable to risks inherent in its tie-ups with other companies.
One of Epson’s business strategy options is to enter business tie-ups with other companies. However, the parties
may review the arrangements of tie-ups, and there is a possibility that tie-ups could be dissolved or be subject to
changes. There is also no assurance that the business strategy through the tie-ups will succeed or contribute to
Epson’s operating results exactly as expected.