Dow Chemical 2012 Annual Report Download - page 133

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It is the opinion of Dow’s management that it is reasonably possible that the cost of Union Carbide disposing of its
asbestos-related claims, including future defense costs, could have a material impact on the Company’s results of operations
and cash flows for a particular period and on the consolidated financial position of the Company.
Synthetic Rubber Industry Matters
In 2003, the U.S., Canadian and European competition authorities initiated separate investigations into alleged anticompetitive
behavior by certain participants in the synthetic rubber industry. Certain subsidiaries of the Company (but as to the
investigation in Europe only) have responded to requests for documents and are otherwise cooperating in the investigations.
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 have filed an appeal of this decision to the Court of Justice of the European Union. 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 (approximately $64 million). 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 has appealed this decision to the European Court of Justice. Based on the Company’s allocation
agreement with DuPont, the Company’s share of this fine, regardless of the outcome of the appeals, will not have a material
impact on the Company’s consolidated financial statements.
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.