Toshiba 2012 Annual Report Download - page 87

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TOSHIBA Annual Report 2012
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 General Court of the
European Union in April 2007. In July 2011, the General Court of the European Union annulled the fine imposed on the
Company entirely, while the Commission's decision claiming that EU competition laws were violated by the Company was
supported. However, because the content of such judgment is different from the Company's recognition of fact, the
Company appealed to the Court of Justice of the European Union in September 2011. The Company will assert its opinion
in the appellate instance.
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.
Because the contract with the Ministry of Defense regarding the business of development of a reconnaissance system
for the F-15 fighter was unilaterally cancelled by the other party, the Company filed a suit in the Tokyo District Court in
July 2011, claiming payment therefor. Because the Company believes that it properly conducted its business in accordance
with the contract and considers the relevant cancellation of contract to be unjust, the Company will assert its opinion in
the suit.
9. Risks related to directors, employees, major shareholders and affiliates
(1) Alliance in NAND flash memory
The Group has a strategic alliance with a U.S. company, SanDisk Corporation (“SanDisk”), for the production of NAND flash
memory, 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”).
While the shareholders' agreements restrict the Minority Shareholders from transferring their respective ownership