Sharp 2011 Annual Report Download - page 35

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Annual Report 2011
Risk Factors
(7) Product Liability
Sharp manufactures products in accordance with strict
quality control standards to ensure the utmost in quali-
ty. In order to fulfill its responsibility as a manufacturer
in case product defects do arise, Sharp has taken out
insurance to cover compensations based on product lia-
bility. Nonetheless, there is still a risk of a large-scale
product recall or litigation caused by unforeseen events,
which may adversely affect Sharp’s brand image or influ-
ence its business results and financial position.
(8) Laws and Regulations
The business activities of Sharp are subject to various
regulations in countries where it operates, including
business and investment approval, export regulations,
tariffs, accounting standards and taxation. Sharp must
also adhere to various laws and regulations concerning
trading, antitrust practices, product liability, consumer
protection, intellectual property rights, product safety,
the environment and recycling, and internal control.
Changes in such laws and regulations, and additional
expenses to comply with the amendments may affect
Sharp’s business results and financial position. Further,
in a case where an accident occurs related to one of
Sharp’s products, report of said incident, based on the
Consumer Product Safety Law and related regulations in
Japan, and disclosure of the accident information based
on a system for public announcements could diminish
Sharp’s brand image.
(9) Litigation and Other Legal Proceedings
Sharp conducts business activities around the world, and
as such, there is a risk that Sharp could become involved
with litigation and other legal proceedings in each coun-
try. If Sharp becomes involved in litigation or other legal
proceedings, with the different legal and judicial systems
in each country, depending on the case, Sharp may be
ordered to pay a significant amount in damages or fines.
Sharp is subject to investigations conducted by the
Directorate-General for Competition of the European
Commission, etc., with respect to its TFT LCD business.
In addition, civil lawsuits seeking monetary damages
resulting from alleged anticompetitive behavior have
been filed in North America and Europe against Sharp.
Sharp also received a cease and desist order and a sur-
charge payment order from the Japan Fair Trade
Commission. However, Sharp has submitted a complaint
to the Commission and the complaint is pending. It is dif-
ficult to predict the result of these proceedings and
litigation at this stage. An adverse result could affect
Sharp’s business results and financial position.
(10) Leakage of Personal Data and Other
Information
Sharp retains personal data and other confidential infor-
mation concerning its customers, business partners and
employees. Extreme care is taken to protect this infor-
mation. A company-wide management system promotes
employee education, internal auditing, and other meas-
ures aimed at ensuring compliance with management
regulations. If information is leaked, however, it may
reduce confidence in Sharp or result in substantial costs
(associated with leakage prevention measures or indem-
nification for damages, for instance), which may affect
Sharp’s business results and financial position.
(11) Other Key Variable Factors
In addition to the aforementioned risks, Sharp’s busi-
ness results may be significantly affected by accidents
and natural calamities such as earthquakes or typhoons;
human calamities, such as conflicts, insurrections or ter-
rorism; the spread of a new strain of influenza or other
infectious disease; or major fluctuations in the stock and
bond markets.