47. Remaining legal issues
Legal disputes related to Media-Saturn-Holding GmbH
Through its fully owned subsidiary METRO Kaufhaus und Fachmarkt Holding GmbH (METRO KFH), METRO AG (METRO) 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, or METRO KFH, has the right to delegate one more member to the advisory board than the remaining minority shareholder 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 KFH, endorsing the effective establishment of an advisory board and determining that an arbitration court was the responsible authority for all issues of authority and majority requirements of the advisory board. 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. The ruling of the arbitration court was declared enforceable by the Higher Regional Court of Munich on 18 December 2013. On 16 April 2015, the Federal Court of Justice dismissed the appeal filed by the minority shareholder against such ruling, meaning that it now has legal force.
As most recently reported in the consolidated financial statements for financial year 2013/14, members of the advisory board appointed by the minority shareholder had filed several legal actions against MSH and raised questions about decisions taken by the advisory board of MSH. In the meantime, the court has ruled in favour of MSH and METRO and dismissed all of those actions with one exception. In METRO’s view, the prospects for success of the remaining action – which is still being heard by the court of first instance and relates to the decisions taken on the budget for 2013/14 – are low. The plaintiff has since declared his complaint settled.
The minority shareholder has also filed additional complaints against MSH.
After MSH and METRO KFH won the first-instance case before the Regional Court of Ingolstadt relating to decisions taken by the shareholders’ meeting on individual location changes, which have meanwhile been implemented, the Higher Regional Court of Munich upheld the appeal in part and required METRO KFH to vote on the substance of each measure separately in view of the specific circumstances. In a decision dated 13 October 2015, the Federal Court of Justice meanwhile granted leave to appeal based on an according complaint by MSH and METRO KFH. The case is therefore still pending.
On 21 April 2015, the Regional Court of Ingolstadt dismissed the complaint of the minority shareholder through which the shareholder aims to achieve the dismissal of the managing director of MSH installed by METRO KFH. In that case, the Higher Regional Court of Munich announced in a decision of 7 October 2015 that it intended to dismiss the appeal filed by the minority shareholder given the unilateral view of the senate that the case is without merit. The Regional Court of Ingolstadt and the Higher Regional Court of Munich as the court of appeal had already dismissed, with final effect, the minority shareholder’s request for an injunction against the managing director that would have prohibited him from performing his duties.
The minority shareholder has filed an additional complaint against MSH with the Regional Court of Ingolstadt relating to resolutions adopted by the shareholders’ meeting rejecting amendments to MSH’s Articles of Association that had been requested by the minority shareholder. The minority shareholder’s intention in filing the complaint was to effect adoption of the modifications to the Articles of Association. Such modifications relate to the areas of responsibility of the shareholders’ meeting. In METRO’s view, the chances of success of the action are low.
In its ruling from 13 August 2015, the Regional Court of Ingolstadt had already legally dismissed the minority shareholder’s request for a temporary injunction against management action until the court had ruled on the substance of the case. METRO KFH has filed a complaint with the Regional Court of Ingolstadt against shareholder resolutions relating, among other things, to the aforementioned management action. Those shareholder resolutions were adopted by the minority shareholder alone in a shareholders’ meeting that did not even have a quorum pursuant to the Articles of Association and was moreover, in the view of METRO, not responsible for deciding on the management’s action. METRO expects to prevail in the case and for the shareholder resolutions to be deemed ineffective.
Legal actions filed under stock corporation law
In a decision of 11 September 2015, which has meanwhile become final, the Regional Court of Düsseldorf dismissed the complaint filed by a shareholder of METRO AG against, among other things, the resolution adopted by the Annual General Meeting of 8 May 2013 on the appropriation of the balance sheet profit for financial year 2012 and the appointment of the auditor. The Regional Court of Düsseldorf had previously denied a complaint filed by the same shareholder to declare the adopted annual financial statements of METRO AG as of 31 December 2012 invalid and thus also decided in favour of METRO in that decision of 3 April 2014, which was likewise final. These actions were based in particular on 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. In both decisions, the court confirmed all key points of the legal opinion held by METRO AG in full.
The annual financial statements 2012 of METRO AG are therefore deemed to have been prepared pursuant to the accounting regulations of the German Commercial Code and to be legally valid. The same applies to the consolidated financial statements 2012 of METRO AG. METRO AG indirectly holds a majority of the voting rights of the shareholders of Media-Saturn-Holding GmbH (MSH) through its subsidiary METRO Kaufhaus und Fachmarkt Holding GmbH. As such, it exerts irrefutable power over MSH pursuant to § 290 Section 2 No. 1 of the German Commercial Code. As a result, MSH is an affiliated company in the meaning of the commercial law stipulations governing the annual financial statements. The method of consolidation used by the Media-Saturn group of companies in the consolidated financial statements 2012 of METRO AG complies with international accounting standards (the IFRS as adopted by the European Union) and has been implemented accurately.
All of the resolutions of the Annual General Meeting 2013 that had been challenged by way of the complaint – the resolution on the appropriation of profits, the resolution on the appointment of the auditor for the short financial year 2013 and the resolution approving the actions of the Management Board and the Supervisory Board – are likewise free of errors and were adopted with legal effect. The information provided to the plaintiff at the Annual General Meeting 2013 was in proper order and sufficient, thus fulfilling the plaintiff’s right to information under stock corporation law.
Investigations by the Federal Cartel Office
As reported in the consolidated annual financial statements for financial year 2013/14, 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 had extended the scope of the investigation to also include METRO AG, METRO Cash & Carry International GmbH and METRO Dienstleistungs-Holding GmbH. This extension resulted from the merger of MGB METRO Group Buying GmbH into METRO Dienstleistungs-Holding GmbH as part of the decentralisation of central procurement in Germany. As reported, 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 authority had already stopped proceedings for a sub-complex without imposition of measures. Two additional sub-complexes were settled out of court and by mutual agreement with the authority through payment of a fine. In the context of another remaining sub-complex, the authority sent METRO AG a hearing notice in February 2015. In this notification, accusations are levelled concerning practices engaged in by the former MGB METRO Group Buying GmbH in the form of vertical price fixing agreements with a supplier. A comprehensive defence case against these allegations has been launched and appropriate risk provisions have been formed.
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 retailers as part of retail fees.
Further remaining legal issues
In addition, companies of METRO GROUP are parties to other judicial or arbitral and antitrust law proceedings in various European countries. This also includes investigations by the EU Commission into the Media-Saturn group of companies and Redcoon GmbH, which were initiated with searches related to suspected anti-competitive agreements with suppliers in 2013 and 2015, respectively. Insofar as the liability has been sufficiently specified, appropriate risk provisions have been formed for these proceedings.
In addition, METRO GROUP is increasingly exposed to regulatory changes related to procurement and changed sales tax regulations in some countries.