45. Other legal issues

Status of appraisal processes

In the context of the incorporation of ASKO Deutsche KAUFHAUS AG (ASKO) and Deutsche SB-Kauf AG (DSBK) into METRO AG in 1996, appraisal processes were pending in district courts located in Saarbrücken and Frankfurt am Main. The petitioners maintained that the respective exchange ratios were set too low, putting them at a disadvantage. Both legal challenges have now been concluded by means of court-enforced out-of-court settlements that took effect on 19 December 2012. In the settlements, METRO AG pledged to make another cash payment to all former outside investors of ASKO and DSBK who exchanged their shares in ASKO or DSBK for METRO AG shares in the context of the incorporation.

Control of Media-Saturn-Holding GmbH

METRO AG indirectly – through its subsidiary METRO KAUFHAUS und Fachmarkt Holding GmbH (METRO KFH) – holds 75.41 percent of the shares in Media-Saturn-Holding GmbH (MSH). In March 2011, the shareholders’ general meeting of MSH decided, with the votes of METRO KFH, to create an advisory board to strengthen the governance structures at MSH. The advisory board takes decisions by simple majority in number on operational measures proposed by the executive board of MSH that require approval. According to the Articles of Association of MSH, METRO AG, or METRO KFH, has the right to delegate 1 more member to the advisory board than the collective body of shareholders and therefore has a majority by number on the advisory board.

The appellate court dealing with the appeal of a non-controlling shareholder ruled fully in favour of METRO AG, endorsing the effective establishment of an advisory board and determining that the arbitration court is the responsible authority for all issues of authority and majority requirements of the advisory board. The arbitration court to which METRO KFH had appealed also decided in favour of METRO AG in key aspects. The advisory board can take decisions by simple majority in number on transactions proposed by the executive board of MSH that require approval.

The details of the legal dispute are as follows: In March 2011, a non-controlling shareholder of MSH had initiated legal action to rescind the shareholders’ decision to create an advisory board and initiated an action for a declaratory judgement to obtain a judgement to have the advisory board declared not responsible for certain transactions requiring approval and obligate the board to take all decisions with an 80 percent majority in the shareholders’ general meeting. From the very start, METRO AG rigorously countered these attacks, in particular because, from METRO AG’s perspective, they also wrongfully attacked a statutory body of MSH. For this reason, METRO KFH also submitted an arbitration action in March 2011 with the aim of having the advisory board of MSH declared the body responsible for transactions requiring approval and of enabling it to take decisions in these areas by simple majority.

The Higher Regional Court of Munich (appellate court) dismissed the action of the non-controlling shareholder on 9 August 2012, confirming the lawful creation of the advisory board of MSH. In addition, the Higher Regional Court of Munich decided that the arbitration court to which METRO KFH had appealed is the sole body responsible for the determination of the authority of the advisory board and its majority requirements. As a result, METRO AG’s interpretation of the law fully prevailed and was confirmed in all key aspects decided upon by the Higher Regional Court of Munich, which has also not permitted an appeal. In September 2012, the non-controlling shareholder filed an appeal against denial of leave to appeal at the Federal Court of Justice. The chances of success of this appeal, including its admission, are low.

Upon the appeal of METRO KFH, the arbitration court decided on 8 August 2012 that the advisory board must approve transactions requiring approval that are proposed by the executive board of MSH. The advisory board’s approval authority includes the acquisition and sale of land, companies and/or interests in companies as well as the conclusion of material leases by MSH, the annual budget (particularly sales, investment, personnel and financial planning), the appointment and removal of managing directors at all national holding and management companies, the preparation of the annual financial statements and management report and the preparation of and amendments to the by-laws of the executive board of MSH. In addition, the arbitration court decided, in line with METRO AG’s initial position, that such transactions requiring approval can be approved by simple majority in number. This means that METRO AG prevailed in the key question of majority requirements. In August 2012, METRO KFH filed an application for leave to issue execution of this arbitral verdict to the Higher Regional Court of Munich.

The decisions of the Higher Regional Court of Munich and the arbitration court have settled the issue of control of the Media-Saturn Group. In accordance with IFRS regulations, the Media-Saturn Group is therefore fully consolidated.

The first meeting of the advisory board of MSH took place on 3 December 2012. 1 member of the advisory board filed suit against the advisory board’s resolution on approving the budget, another member of the advisory board filed suit against the advisory board’s resolution on approving the adoption of the annual financial statements of MSH as of 30 September 2012. They criticise, in particular, the fact that an 80 percent voting majority is required on the advisory board and that this majority was not achieved, that the meeting took place in Munich and that dependent METRO GROUP representatives participated in the meeting. In METRO’s view, the chances of success of this challenge are low. In particular, the arbitration court has already clarified the majority voting requirement.

Investigations by the Federal Cartel Office

On 14 January 2010, the Federal Cartel Office searched former business premises of MGB METRO GROUP Buying GmbH. On 19 December 2011, the Federal Cartel Office extended the scope of the investigation to also include METRO AG, METRO Cash & Carry International GmbH and METRO Dienstleistungs-Holding GmbH. This extension results from the merger of MGB METRO GROUP Buying GmbH into METRO Dienstleistungs-Holding GmbH as part of the decentralisation of central procurement in Germany. The Federal Cartel Office used this as a reason to extend the investigation to the parent or Group holding company in view of the risk that the legal opponent may cease to exist due to a corporate restructuring with a change of legal form. The Federal Cartel Office’s investigation is ongoing; to date, the authority has raised no concrete and individualised allegations against any METRO GROUP company. As a result, the Company is unable to comment on the possible impact of these investigations on the consolidated financial statements of METRO AG at this point in time.

International tax audit

In 2011, income tax arrears in the double-digit millions were incurred at an international Group company in connection with a tax audit dating back to 2006. The case is currently pending. An assertion for possible claims for recourse is currently being made.

Claims for damages due to interbank fees in violation of antitrust law

METRO GROUP companies have filed suit in a London court against companies of the MasterCard group. The legal challenge asserts claims for damages based on a decision of the EU Commission which found that the cross-border interbank fees imposed by MasterCard in the period 1992 to 2007 as part of its credit card system, which also impacted national inter­bank fees, violated European antitrust law. Traditionally, retailers’ banks charge inter-bank fees to the retailer as part of retail fees.

Remaining legal issues

In addition, companies of METRO GROUP are parties to other judicial or arbitrational and antitrust law proceedings in various European countries. At the present time, however, METRO GROUP does not expect the legal issues that are not detailed separately in this section to have a material effect on its asset, financial and earnings position.

In addition, METRO GROUP is increasingly exposed to regulatory changes related to procurement and changed sales tax regulations in some countries.