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 claim 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 (FCJ) dismissed the appeal filed by the minority shareholder against such ruling, meaning that this ruling now also has legal force.

As most recently reported in the consolidated financial statements for financial year 2014/15, 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. These legal actions have now finally been rejected or declared settled in favour of MSH and METRO.

The minority shareholder has also filed additional complaints against MSH:

After MSH and METRO KFH won their case at first instance before the Ingolstadt Regional Court (RC) in proceedings initiated by the minority shareholder over resolutions at MSH’s shareholder meeting regarding particular store-location measures that have since been implemented, the Higher Regional Court (HRC) in Munich found partly in favour of the plaintiff on appeal. In its ruling on 12 April 2016, the FCJ reversed the decision of the appellate court and reaffirmed the judgement of the Ingolstadt RC in favour of MSH and METRO KFH. The complaint of the minority shareholder is thereby dismissed in a legally binding manner.

On 21 April 2015, the Ingolstadt RC 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. The HRC in Munich dismissed the appeal lodged by the minority shareholder through its decision of 2 December 2015 and did not allow a further appeal. On 11 January 2016, the minority shareholder filed a complaint with the Federal Court of Justice against the denial of leave to appeal. The proceedings continue accordingly, although METRO considers the chances of success to be slim. The Ingolstadt RC and the Munich HRC as the court of appeal had already dismissed, with final effect, the minority shareholder’s request for an injunction against the respective managing director that would have prohibited him from performing his duties.

In another complaint filed against MSH at the Ingolstadt RC, the minority shareholder requests that dismissed resolutions at the MSH shareholder meeting in April 2015 – in relation to the minority shareholder’s demands to have MSH's Articles of Association amended – be declared null and void, and that the corresponding resolution be positively agreed as adopted. Such modifications relate to the areas of responsibility of the shareholders’ meeting. The Ingolstadt RC dismissed the complaint in its ruling on 16 February 2016. The minority shareholder filed an appeal against the ruling on 16 March 2016. In its ruling on 13 September 2016, the HRC in Munich rejected this appeal.

Another action of the minority shareholder, who filed for a preliminary injunction at the Ingolstadt RC to seek a temporary ban on a measure taken by management, was dismissed in a legally binding manner in a ruling on 13 August 2015. In its ruling of 5 April 2016, the Ingolstadt RC upheld a complaint filed at the court by METRO KFH, involving shareholder resolutions – including those relating to the above-mentioned measure taken by management – that are composed by the minority shareholder alone in a shareholder meeting that does not constitute a quorum in accordance with MSH Articles of Association and that furthermore has no competence, in METRO’s opinion, in relation to the measure taken by management. The minority shareholder filed an appeal against the ruling on 9 June 2016. The case is therefore still pending. In METRO’s view, the chances of success of the appeal are low.

In another complaint filed at the Ingolstadt RC, METRO KFH seeks to have declared invalid a supposed resolution of the MSH shareholder meeting in December 2015 on the continued employment of retired MSH managers in other positions. In its ruling on 29 April 2016, the Ingolstadt RC upheld the complaint filed by METRO KFH. The minority shareholder filed an appeal against the ruling on 10 May 2016. The case is therefore still pending. In METRO’s view, the chances of success of the appeal are low.

Another action of the minority shareholder – for a preliminary injunction against the MSH manager delegated by METRO KFH, in which the minority shareholder again sought to ban the manager in question from working in the post – was dismissed by the Ingolstadt RC in its ruling on 8 March 2016. The minority shareholder filed an appeal against the ruling on 15 March 2016. In its ruling on 26 July 2016, the Munich HRC rejected this appeal. In the main proceedings, the minority shareholder is pursuing the dismissal of the MSH manager delegated by METRO KFH through another complaint filed against MSH on 28 January 2016, at the Ingolstadt RC, seeking voidance, annulment, and a positive resolution finding, involving dismissed resolutions of the MSH shareholder meeting in December 2015 in relation to the minority shareholder’s demands to recall and suspend the manager in question. In METRO’s view, the chances of success of the action are slim.

In another complaint about deficiencies in the resolution, filed on 10 February 2016 against MSH at the Ingolstadt RC, involving other dismissed resolutions of the MSH shareholder meeting in December 2015, the minority shareholder seeks to enforce damages claims that in the opinion of the minority shareholder exist against MSH management for alleged breach of duty. The Ingolstadt RC dismissed the complaint in its ruling on 18 November 2016.

For more information, see the risk and opportunity report in the combined management report.

Investigations by the Federal Cartel Office

As reported in the consolidated annual financial statements for financial year 2014/15, 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 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 2016, the last remaining sub-complex was also settled by mutual agreement with the authority.

International tax audit

In 2011, income tax arrears in the double-digit million range were incurred at an international group company in connection with a tax audit dating back to 2006. As reported, the company was involved in a legal dispute regarding the legality of the tax assessment note. On 6 April 2016, a binding ruling was issued in favour of the METRO GROUP company. As a result, the claims for recourse asserted against the consultant will have largely been settled once the wrongly imposed taxes have been repaid.

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 Mastercard. 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.