46. Other legal issues

Legal disputes in relation to Media-Saturn-Holding GmbH

Through its fully owned subsidiary METRO Kaufhaus und Fachmarkt Holding GmbH (METRO KFH), METRO AG indirectly holds 78.38 per cent 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 one 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 an arbitration court is the responsible authority for all issues of authority and majority requirements of the advisory board. The Higher Regional Court of Munich (appellate court) dismissed the action of the non-controlling shareholder on 9 August 2012. On 9 July 2013, the German Federal Court of Justice rejected the non-controlling shareholders’ challenge of the non-admission of this appeal by the Higher Regional Court of Munich.

Upon the appeal of METRO KFH, the arbitration court endorsed key aspects of METRO’s position in its arbitral ruling of 8 August 2012: the advisory board can take decisions by simple majority in number on operational transactions proposed by the executive board of MSH that require approval. 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 non-controlling shareholder of MSH has appealed for a rejection of METRO KFH’s application and the cancellation of the arbitral verdict. METRO expects the Higher Regional Court of Munich to follow its application and declare the arbitral ruling enforceable.

In METRO’s opinion, the legally binding decision of the Higher Regional Court of Munich in the non-controlling shareholder’s action and the arbitral ruling have clarified the issue of the control of the Media-Saturn group of companies. As a result, the company continues to fully consolidate the Media-Saturn group in accordance with IFRS regulations.

The advisory board of MSH has been established and administrates its functions defined in the by-laws. However, members of the advisory board delegated by the non-controlling shareholder have filed several legal actions against MSH before the Regional Court of Ingolstadt in which they challenge advisory board resolutions – including the budget resolutions for 2012/13 and 2013/14. They criticise, in particular, that a majority of 80 per cent is required in the advisory board and that this majority had not been reached, representing a violation of the division of authorities determined in the articles of incorporation.

One of these challenges – in connection with the approval of the annual financial statements of MSH as of 30 September 2012 – has already been rejected in the first instance. In METRO’s view, the chances of success of the other challenges are also low. In particular, METRO does not expect the courts to deviate from the arbitration court’s decision regarding the majority voting requirement in the advisory board.

Legal actions filed under stock corporation law

A METRO AG shareholder filed a nullity plea regarding the approved annual financial statements of METRO AG as of 31 December 2012 citing an alleged infringement of the regulations governing the structure of the annual financial statements due to allegedly flawed consolidation of the Media-Saturn group of companies in the consolidated financial statements of METRO AG. The same shareholder also challenged the resolution of the Annual General Meeting of 8 May 2013 regarding the appropriation of the balance sheet profit for the financial year 2012 as well as the election of the auditor. This legal action is also based essentially on the alleged nullity of the annual financial statements of METRO AG and the alleged erroneous consolidation of the Media-Saturn group of companies in the consolidated financial statements of METRO AG. METRO AG sees no reason to doubt the validity of the annual financial statements, the resolution of the Annual General Meeting regarding the appropriation of the balance sheet profit for the financial year 2012 that was based on these financial statements or the other resolutions of the Annual General Meeting; in METRO AG’s opinion, the plaintiff’s arguments are of no avail. The annual financial statements of METRO AG have been prepared on the basis of the accounting regulations of the German Commercial Code. METRO AG indirectly holds a majority of voting rights through its subsidiary METRO Kaufhaus und Fachmarkt Holding GmbH. As such, it exerts irrefutable power over Media-Saturn-Holding GmbH pursuant to § 290 Section 2 No. 1 of the German Commercial Code. As a result, there can be no doubt that MSH is an associated company in the meaning of the commercial law stipulations governing the annual financial statements. Incidentally, METRO AG continues to believe in the appropriateness of the consolidation of the Media-Saturn group of companies in the past as well as in the consolidated financial statements as of 30 September 2013, which were prepared in accordance with international financial reporting standards (IFRS as they are to be applied within the EU). However, even if the consolidation of the Media-Saturn group of companies in the consolidated financial statements of METRO AG had been erroneous, this would have no impact on the validity of the annual financial statements of METRO AG as only the commercial law stipulations and not the international accounting standards apply to these annual financial statements.

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.

Antitrust law proceedings in Ukraine

The Ukrainian antitrust authority is currently conducting an antitrust proceeding against METRO Cash & Carry Ukraine and a large portion of the modern retail industry in Ukraine. In the relevant complaints, METRO Cash & Carry Ukraine has been accused of forming a procurement and selling price cartel by coordinating its actions with a large number of retailers and cooperating with a market research firm. With regard to possible sanctions, the complaints refer to the – internationally customary – legal fine of up to 10 per cent of annual sales. METRO and its legal advisers believe that these allegations are untenable both in legal terms and in terms of competition economics. A comprehensive defence against these allegations has been launched.

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 interbank 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.