Sara Lee 2011 Annual Report Download - page 104

NOTES TO FINANCIAL STATEMENTS
Competition Law
During the past few years, competition authorities
in various European countries and the European Commission have initiated investigations into the conduct of consumer products com- panies. These investigations usually continue for several years and, if violations are found, may result in substantial fines. In connec- tion with these investigations, Sara Lee’s household and body care business operating in Europe has received requests for information, made employees available for interviews, and been subjected to unannounced inspections by various competition authorities. Sara Lee has been imposed fines in three instances (a €4.0 million fine
imposed by the Italian Cartel Authority in the second quarter of 2011, a €3.7 million fine imposed by the Spanish Competition
Authorities in the second quarter of 2010, and a €5.5 million fine
imposed by the German cartel authorities in February 2008), but no formal charges have been brought against Sara Lee concerning the substantive conduct that is the subject of these other inves- tigations. Our practice is to comply with all laws and regulations applicable to our business, including the antitrust laws, and to cooperate with relevant regulatory authorities.
Charges for fines that already have been imposed against the
corporation or were probable of being imposed have been reflected in the Consolidated Statements of Income in the period we were notified of the fines or it was probable that a loss was incurred. The total amount accrued for remaining competition matters is €7.7 million as of July 2, 2011 which represents an accrual for the fine imposed by the Spanish Competition authorities. The fines imposed by the Italian Cartel Authorities and the German Cartel Authorities have been paid by the corporation. A previous accrual of €20 million for an investigation in the Netherlands has been
released as the corporation was found not to have violated any competition laws in connection with this matter and the matter has been concluded without an imposition of a fine. Except for fines previously assessed or accrued by the corporation, we are unable to estimate the impact on our financial statements of additional fines, if any, that may be imposed against the corporation. The corporation has completed the divestiture of most of its household and body care business; however the corporation has retained any potential liability for these matters.
Multi-Employer Pension Plans
The corporation participates in
various multi-employer pension plans that provide retirement benefits to certain employees covered by collective bargaining agreements (MEPP). Participating employers in a MEPP are jointly responsible for any plan underfunding. MEPP contributions are established by the applicable collective bargaining agreements; however, the MEPPs may impose increased contribution rates and surcharges based on the funded status of the plan and the provisions of the Pension Protection Act, which requires substantially underfunded MEPPs to implement rehabilitation plans to improve funded status. Factors that could impact funded status of a MEPP include investment perform- ance, changes in the participant demographics, financial stability of contributing employers and changes in actuarial assumptions.
In addition to regular contributions, the corporation could be
obligated to pay additional contributions (known as a complete or partial withdrawal liability) if a MEPP has unfunded vested benefits. These withdrawal liabilities, which would be triggered if the corpora- tion ceases to make contributions to a MEPP with respect to one or more collective bargaining units, would equal the corporation’s proportionate share of the unfunded vested benefits based on the year in which the liability is triggered. The corporation believes that certain of the MEPPs in which it participates have unfunded vested benefits, and some are significantly underfunded. Withdrawal liabil- ity triggers could include the corporation’s decision to close a plant or the dissolution of a collective bargaining unit. Due to uncertainty regarding future withdrawal liability triggers, we are unable to deter- mine the amount and timing of the corporation’s future withdrawal liability, if any, or whether the corporation’s participation in these MEPPs could have any material adverse impact on its financial condi- tion, results of operations or liquidity. Disagreements over potential withdrawal liability may lead to legal disputes.
The corporation’s regularly scheduled contributions to MEPPs
related to continuing operations totaled approximately $3 million in 2011, $4 million in 2010 and $5 million in 2009. The corporation’s regularly scheduled contributions to MEPPs related to its discontin- ued North American fresh bakery operations totaled approximately $45 million in 2011, $43 million in 2010 and $42 million in 2009. The corporation also recognized charges (credits) for partial withdrawal liabilities related to MEPPs, which are reported in discontinued oper- ations, of approximately $(3) million in 2011, $23 million in 2010 and $31 million in 2009. The $3 million credit in 2011 is an adjustment of an estimate made in 2010.