Dow Chemical 2014 Annual Report Download - page 127

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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 (as to the investigation in
Europe) responded to requests for documents and otherwise cooperated 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. After appeals were exhausted, the
Dow Entities paid the fine, including accrued interest, on August 12, 2013, and 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 and the
United Kingdom and Italian matters were settled in May 2014. Each of the settlement agreements was confidential and had an
immaterial impact on the Company's consolidated financial statements.
Urethane Matters
On February 16, 2006, the Company, among others, received a subpoena from the U.S. Department of Justice ("DOJ") as part
of a previously announced antitrust investigation of manufacturers of polyurethane chemicals, including methylene diphenyl
diisocyanate, toluene diisocyanate, polyether polyols and system house products. The Company cooperated with the DOJ and,
following an extensive investigation, on December 10, 2007, the Company received notice from the DOJ that it had closed its
investigation of potential antitrust violations involving these products without indictments or pleas.
In 2005, the Company, among others, was named as a defendant in multiple civil class action lawsuits alleging a conspiracy to
fix the price of various urethane chemical products, namely the products that were the subject of the above-described DOJ
antitrust investigation. These lawsuits were consolidated in the U.S. District Court for the District of Kansas (the “District
Court”) or have been tolled. On July 29, 2008, the District Court certified a class of purchasers of the products for the six-year
period from 1999 through 2004. Shortly thereafter, a series of “opt-out” cases were filed by a number of large volume
purchasers; these cases are substantively identical to the class action lawsuit, but expanded the time period to include 1994
through 1998. In January 2013, the class action lawsuit went to trial in the District Court with the Company as the sole
remaining defendant, the other defendants having previously settled. On February 20, 2013, the jury returned a damages verdict
of approximately $400 million against the Company, which ultimately was trebled by the District Court under applicable
antitrust laws - less offsets from other settling defendants - resulting in a judgment entered in July 2013 in the amount of
$1.06 billion. The Company appealed this judgment to the U.S. Tenth Circuit Court of Appeals ("Tenth Circuit" or "Court of
Appeals"), which heard oral arguments on the matter on May 14, 2014. On September 29, 2014, the Court of Appeals issued an
opinion affirming the District Court judgment. On October 14, 2014, the Company filed a petition for Rehearing or Rehearing
En Banc (collectively the "Rehearing Petition") with the Court of Appeals, which the Circuit Court denied on
November 7, 2014.
The Company will file a petition for writ of certiorari ("Writ Petition") with the U.S. Supreme Court in March 2015, seeking
judicial review by the U.S. Supreme Court and requesting that the Supreme Court ultimately correct fundamental errors in the
Circuit Court opinion. While it is unknowable whether or not the U.S. Supreme Court will accept the Writ Petition for review,
there are several compelling reasons why the U.S. Supreme Court should grant the petition for writ of certiorari, and if the
petition for writ of certiorari is accepted, the Company believes it is likely that the District Court judgment would be vacated.
Specifically, it is the Company’s position that the Tenth Circuit decision violates the law as expressed by the U.S. Supreme
Court as set out in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) and Comcast Corp. v. Behrend, 133 S. Ct. 1426
(2013). The Tenth Circuit also did not follow accepted law from other federal circuits on dispositive case issues, including legal
precedent from the U.S. First, Second, Third, Fifth, Ninth and D.C. Circuit Courts. Finally, the erroneous law applied by the
Tenth Circuit is not supported by any other circuit court.
The Company has consistently denied plaintiffs’ allegations of price fixing and, as outlined above, the Company will continue
to vigorously defend this litigation. As part of the Company’s review of the jury verdict, the resulting judgment and the Court of
Appeals’ opinions, the Company assessed the legal and factual circumstances of the case, the trial record, the appellate record,
and the applicable law including clear precedent from the U.S. Supreme Court. Based on this review and the reasons stated
above, the Company believes the judgment and decisions from the Court of Appeals are not appropriate. As a result, the
Company has concluded it is not probable that a loss will occur and, therefore, a liability has not been recorded with respect to
these matters. While the Company believes it is not probable a loss will occur, the existence of the jury verdict, the Court of