Page 314 - 2012 Annual Report

314 VIVENDI l 2012 l Annual Report
FINANCIAL REPORT – CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE
CONSOLIDATED FINANCIAL STATEMENTS – STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS –
STATUTORY FINANCIAL STATEMENTS 4
4
III - CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 27 Litigation
Competition Authority’s decision dated September 20, 2011. As part of this
procedure, Canal+ Group had filed two Priority Constitutional Questions
(QPCs) concerning this decision, which were referred to the French
Constitutional Council by the French Council of State on July 17, 2012. On
October 12, 2012, the French Constitutional Council declared that the legal
and statutory provisions in question were constitutional.
On July 23, 2012, the French Competition Authority issued its decision
on this new notification. It authorizes the acquisition of TPS and
CanalSatellite by Vivendi and Canal+ Group, subject to compliance with
a certain number of injunctions. These injunctions are primarily focused
on the acquisition of film rights from American studios and French
producers, the participation of Canal+ Group in Orange Cinema Series,
the distribution of premium channels and non-linear services (video on
demand and subscription video on demand).
On August 30, 2012, Vivendi and Canal+ Group filed an appeal before the
French Council of State to obtain the cancellation of the July 23, 2012
decision. In addition, Vivendi and Canal+ Group have filed two motions,
one seeking a suspension of the September 20, 2011 decision and the
other seeking a suspension of the July 23, 2012 decision.
The French Council of State rejected these requests for suspension on
September 17, 2012 and October 22, 2012, respectively. A hearing on the
merits of the cancellation of the French Competition Authority’s decisions
of September 20, 2011 and July 23, 2012 was held on December 14, 2012.
On December 21, 2012, the French Council of State essentially confirmed
the two decisions of the French Competition Authority; however, it reduced
the fine of €30 million to €27 million because two of the alleged breaches
were unfounded.
COMPLAINTS AGAINST MUSIC INDUSTRY MAJORS IN
THE UNITED STATES
Several complaints have been filed before the Federal Courts in New York
and California against Universal Music Group and the other music industry
majors for alleged anti-competitive practices in the context of sales of CDs
and Internet music downloads. These complaints have been consolidated
before the Federal Court in New York. The motion to dismiss filed by
the defendants was granted by the Federal Court, on October 9, 2008,
but this decision was reversed by the Second Circuit Court of Appeals
on January 13, 2010. The defendants filed a motion for rehearing which
was denied. They filed a petition with the US Supreme Court which was
rejected on January 10, 2011. The discovery process is underway.
FBT & EMINEM AGAINST UMG
On May 21, 2007, FBT (the label owned by Eminem) filed suit against UMG
claiming breach of contract in connection with the production of an album
and requesting that the court order additional payment of royalties for
on-line sales of music downloads and ringtones. On March 6, 2009, the
Los Angeles Court dismissed FBT’s claims and FBT appealed. The Court of
Appeal overturned the lower court’s decision. On March 21, 2011, the U.S.
Supreme Court, without ruling on the merits of the case, refused to hear
an appeal from UMG, which is within its judicial discretion. In a decision
dated June 27, 2012, the Court allowed FBT and Eminem to broaden the
scope of their complaint and challenge the calculation of royalties on
music downloads outside the United States. On October 19, 2012, the
parties entered into a settlement agreement that ended this litigation.
COMPLAINTS AGAINST UMG REGARDING ROYALTIES FOR
DIGITAL DOWNLOADS
Since 2011, as has been the case with other music industry majors,
several purported class action complaints have been filed against UMG
by recording artists generally seeking additional royalties for on-line sales
of music downloads and master ringtones. UMG contests the merits of
these actions.
STUDIO INFINITY WARD, SUBSIDIARY OF ACTIVISION
BLIZZARD
After concluding an internal human resources inquiry into breaches of
contract and insubordination by two senior employees at Infinity Ward,
Activision Blizzard terminated the employment of Jason West and Vince
Zampella on March 1, 2010. On March 3, 2010, West and Zampella filed a
complaint against Activision Blizzard in the Los Angeles Superior Court for
breach of contract and wrongful termination. On April 9, 2010, Activision
Blizzard filed a cross complaint against West and Zampella, asserting
claims for breach of contract and fiduciary duty. In addition, 38 current
and former employees of Infinity Ward filed a complaint against Activision
Blizzard in the Los Angeles Superior Court on April 27, 2010 for breach
of contract and violation of the Labor Code of the State of California. On
July 8, 2010, an amended complaint was filed which added a further seven
plaintiffs. They claim that the company failed to pay bonuses and other
compensation allegedly owed to them.
On December 21, 2010, Activision Blizzard filed a consolidated cross
complaint to add Electronic Arts as a party, the discovery having shown
the complicity of Electronic Arts in the case. The Los Angeles Court,
following Activision Blizzard’s request, agreed to transfer the case to the
Complex Division. On May 31, 2012, the parties entered into a settlement
agreement that ended this dispute.
TELEFONICA AGAINST VIVENDI IN BRAZIL
On May 2, 2011, TELESP, Telefonica’s Brazilian subsidiary, filed a claim
against Vivendi before the Civil Court of São Paulo (3ª Vara Cível do Foro
Central da Comarca da Capital do Estado de São Paulo). The company is
seeking damages for having been blocked from acquiring control of GVT
and damages in the amount of BRL15 million (approximately €5.5 million)
corresponding to the expenses incurred by TELESP in connection with
its offer for GVT. At the beginning of September, 2011, Vivendi filed an
objection to jurisdiction, challenging the jurisdiction of the courts of São
Paulo to hear a case involving parties from Curitiba. This objection was
dismissed on February 14, 2012, which was confirmed on April 4, 2012
by the Court of Appeals. On the merits, Vivendi refuted all of Telefonica’s
claims. In particular, Vivendi believes that Telefonica cannot claim to have
suffered any “loss of chance” considering that its President confirmed in
a public statement that it did not want to outbid Vivendi. Vivendi has also
filed a counterclaim seeking to be compensated for damages suffered as
a result of the “smear campaign” carried out against Vivendi by Telefonica
since late 2009.