Toshiba 2011 Annual Report Download - page 82

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Management’s Discussion and Analysis
interpretations of laws and regulations by the relevant authorities may also cause difficulty in achieving compliance with
laws and regulations or may result in increased compliance costs. On these grounds, the Group makes every effort to
minimize these risks by making periodic revisions to the internal control systems, continuously monitoring operations,
and so forth.
(3) The environment
The Group is subject to various environmental laws, including laws on air pollution, water pollution, toxic substances,
waste disposal, product recycling, prevention of global warming and energy policies, in its global business activities. While
the Group pays careful attention to these laws and regulations, it is possible that the Group may encounter legal or social
liability for environmental matters, such as liability for the clean up of land at manufacturing bases throughout the world,
regardless of whether the Group is at fault or not, with respect to its business activities, including its past activities. It is
also possible that, in future, the Group will face more stringent requirements on the removal of environmental hazards,
including toxic substances, or on further reducing emissions of greenhouse gases, as a result of the introduction of more
demanding environmental regulations or in accordance with societal requirements.
The Group’s operations require the use of various chemical compounds, radioactive materials, nuclear materials and
other toxic materials. The Group takes maximum care of such materials, giving first priority to human life and safety.
However, the Group may incur damage, or the Group’s reputation may be adversely affected, as a result of a natural
disaster, the threat or occurrence of a terrorist incident, or of an accident or other contingency (including those beyond
the Group’s control) that leads to environmental pollution or the potential for such pollution.
(4) Product quality claims
While the Group makes every effort to implement quality control measures and to manufacture its products in accordance
with appropriate quality-control standards, there can be no assurance that all products are free of defects that may result
in a recall, lawsuits or other claims relating to product quality due to unforeseen reasons or circumstances.
8. Risks related to material legal proceedings
(1) Legal proceedings
The Group undertakes global business operations and is involved from time to time in disputes, including lawsuits and
other legal proceedings, and investigations by relevant authorities. It is possible that such cases may arise in the future.
Due to the differences in judicial systems and the uncertainties inherent in such proceedings, the Group may be subject to
a ruling requiring payment of amounts far exceeding its expectations. Any judgment or decision unfavorable to the Group
could also have a material adverse effect on the Group’s business, operating results or financial condition. In addition, due
to various circumstances, there can be no assurance that lawsuits involving claims for large sums will not be brought, even
if the possibility of receiving orders for such payment is quite low.
In January 2007, the European Commission (the “Commission”) adopted a decision imposing fines on 19 companies,
including the Company, for violating EU competition laws in the gas insulated switchgear market. The Company was
individually fined €86.25 million and was also fined €4.65 million jointly and severally with Mitsubishi Electric
Corporation. The Company contends that it did not violate EU competition laws and appealed the decision to the
European Court of First Instance in April 2007.
Furthermore, the Group is under investigation by the U.S. Department of Justice, the Commission, and other
competition regulatory authorities, for alleged violations of competition laws with respect to products that include
semiconductors, LCD products, cathode ray tubes (CRT), heavy electrical equipment, and optical disc devices, while class
action lawsuits with respect to alleged anti-competitive behavior brought against the Group are currently pending in the
United States.
9. Risks related to directors, employees, major shareholders and affiliates
(1) Alliance in NAND flash memories
The Group has a strategic alliance with a U.S. company, SanDisk Corporation (“SanDisk”), for the production of NAND
flash memories, which includes production joint ventures (equity method affiliates). Under the joint venture agreement,
the Group may purchase SanDisk’s ownership interests in the production joint ventures. In addition, the Company and
SanDisk each provide a 50% guaranty in respect of the lease agreements of production facilities held by the production
joint ventures. In the event that SanDisk’s operating results and financial condition deteriorate, the Company may succeed
to SanDisk’s guaranty obligations or purchase SanDisk’s ownership interests in the relevant production joint ventures, in
which case the production joint ventures will thereafter be treated as consolidated subsidiaries of the Company.
(2) Alliance in nuclear power systems business
The Group acquired Westinghouse group in October 2006. The Company’s ownership interest in Westinghouse group
(including the holding companies) is currently 67%. The remainder is held by three companies in Japan and overseas (the
“Minority Shareholders”).