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Parent Company Financial Report |
EXPLANATORY NOTES
2014 Annual Report
Prysmian Group
312
The provision for contractual and legal risks, amounting to
Euro 11,936 thousand at 31 December 2014, has decreased by
Euro 19,738 thousand since 31 December 2013, mainly due to
a net reduction of Euro 20,803 thousand in the provision for
antitrust investigations in different jurisdictions.
More specifically, the European Commission, the US De-
partment of Justice and the Japanese antitrust Authority
started investigations in late January 2009 into several
European and Asian electrical cable manufacturers to verify
the existence of alleged anti-competitive practices in the
high voltage underground and submarine cables markets.
Subsequently, the Australian Competition and Consumers
Commission ("ACCC") and the New Zealand Commerce Com-
mission also started similar investigations. During 2011, the
Canadian Antitrust Authority also started an investigation
into a high voltage submarine project dating back to 2006.
The investigations in Japan, New Zealand and Canada
have ended without any sanctions for Prysmian; the other
investigations are still in progress, except for the one by the
European Commission, which has ended with the adoption
of the decision described below.
In Australia, the ACCC has filed a case before the Federal
Court arguing that Prysmian Cavi e Sistemi S.r.l. and two
other companies violated antitrust rules in connection with
a high voltage underground cable project awarded in 2003.
Prysmian Cavi e Sistemi S.r.l. has filed its objections and
presented its preliminary defence.
In Brazil, the local antitrust authority has started an investi-
gation into several cable manufacturers, including Prysmian,
that operate in the high voltage underground and submarine
cables market. Prysmian has presented its preliminary
defence, which has been rejected by the local competition au-
thorities in a statement issued during the month of February
2015. The preliminary stage of the proceedings will now
ensue, at the end of which the authorities will publish their
concluding observations, to which the parties may respond
with all their arguments in defence before the final decision
is taken. During the month of December 2013, ABB and one
of this company's senior managers signed an agreement with
the Brazilian Antitrust Authority, under which they admitted
the conduct alleged by the authority and pledged to cooperate
with it and to each pay an agreed fine.
On 2April 2014, the European Commission adopted a decision
under which it found that, between 18 February 1999 and 28
January 2009, the world's largest cable producers, including
Prysmian Cavi e Sistemi S.r.l., adopted anti-competitive
practices in the European market for high voltage submarine
and underground power cables. The European Commission
held Prysmian Cavi e Sistemi S.r.l. jointly liable with Pirelli &
C. S.p.A. for the alleged infringement in the period from 18
February 1999 to 28 July 2005, sentencing them to pay a fine
of Euro 67.3 million, and it held Prysmian Cavi e Sistemi S.r.l.
jointly liable with Prysmian S.p.A. and the Goldman Sachs
Group Inc. for the alleged infringement in the period from
29 July 2005 to 28 January 2009, sentencing them to pay a
fine of Euro 37.3 million. Prysmian has appealed against this
decision to the General Court of the European Union and
has submitted an application to intervene in the appeals
respectively lodged by Pirelli & C. S.p.A. and the Goldman
Sachs Group Inc. against the same decision. Both Pirelli &
C. S.p.A. and the Goldman Sachs Group Inc. have in turn
submitted applications to intervene in the appeal brought
by Prysmian against the European Commission's decision.
Prysmian has not incurred any financial outlay as a result
of this decision having elected, pending the outcome of the
appeals, to provide bank guarantees as security against
payment of 50% of the fine imposed by the European Com-
mission (amounting to approximately Euro 52 million) for
the alleged infringement in both periods. As far as Prysmian
is aware, Pirelli & C. S.p.A. has provided or is nonetheless
preparing to provide the European Commission with a bank
guarantee for 50% of the value of the fine imposed for the
alleged infringement in the period 18 February 1999 - 28 July
2005. Pirelli & C. S.p.A. has also filed a civil action against
Prysmian Cavi e Sistemi S.r.l. in which it demands to be held
harmless for all claims made by the European Commission
in implementation of its decision and for any expenses
related to such implementation. Prysmian Cavi e Sistemi
S.r.l. started legal proceedings in February 2015, requesting
that the claims brought by Pirelli & C. S.p.A. be rejected
in full and that it should be Pirelli & C. S.p.A. which holds
harmless Prysmian Cavi e Sistemi S.r.l., with reference to
the alleged infringement in the period 18 February 1999 - 28
July 2005, for all claims made by the European Commission
in implementation of its decision and for any expenses
related to such implementation. Following a detailed and
careful analysis of the European Commission's ruling, and
nonetheless considering this has been appealed and so
could be submitted to second-instance judgement, as well
as the fact that the investigations initiated by the Canadian
Antitrust Authority have ended without any sanctions
for Prysmian, it has been decided to partially release the
existing provision.
The above events have led to the recognition in the 2014
income statement of a net release of Euro 19,901 thousand,
classified as non-recurring items.
As at 31 December 2014, the amount of the provision reported
by Prysmian S.p.A. is approximately Euro 10,725 thousand.
Despite the uncertainty of the outcome of the investiga-
tions in progress, the amount of this provision is considered
to represent the best estimate of the liability based on the
information now available.