34 Commitments and contingencies continued
Ahold
Annual Report 2011
Group at a glance^^^^^^^^H Performance (Sovernance
Notes to the consolidated financial statements continued
Investors
Other contingent liabilities
ICA tax claims
The Swedish Tax Agency has decided to disallow interest deductions to a Dutch ICA Group company in 2004-2008. In December 2010,
the County Administrative Court affirmed the Tax Agency's ruling and denied interest deductions of SEK 3,358 million (€373 million). The
tax claim amounts to SEK 1,187 million (€132 million), including penalties and interest. ICA is convinced that the deductions complied with
applicable tax laws. This assessment is shared by outside counsel, which has analyzed the Tax Agency's argument and the legal
principles applied by the court. ICA has appealed the County Administrative Court's decision to the Administrative Court of Appeal. The
Tax Agency has denied ICA's request to defer payment, due to which SEK 1,187 million (€132 million) was paid in January 2011. The
amount paid has been booked as a receivable from the Tax Agency.
Legal proceedings
Ahold and certain of its subsidiaries are involved in a number of legal proceedings, which include litigation as a result of divestments, tax,
employment, and other litigation and inquiries. The legal proceedings discussed below, whether pending, threatened, or unasserted, if
decided adversely or settled, may result in liability material to Ahold's financial condition, results of operations, or cash flows. Ahold may
enter into discussions regarding settlement of these and other proceedings, and may enter into settlement agreements, if it believes
settlement is in the best interests of Ahold's shareholders. In accordance with IAS 37 "Provisions, Contingent Liabilities, and Contingent
Assets," Ahold has recognized provisions with respect to these proceedings, where appropriate, which are reflected on its balance sheet.
U.S. Foodservice - Waterbury litigation
In October 2006, a putative class action was filed against U.S. Foodservice by Waterbury Hospital and Cason, Inc. and Frankie's
Franchise Systems Inc. with the United States District Court for the District of Connecticut in relation to certain U.S. Foodservice pricing
practices (the Waterbury Litigation). Two additional putative class actions were filed in 2007 by customers of U.S. Foodservice, Catholic
Healthcare West, and Thomas King, Inc., in the U.S. District Courts for the Northern District of California and the Southern District of
Illinois, respectively. These two new actions involved the same pricing practices as those in the Waterbury Litigation. The new actions also
named Ahold and two individuals as defendants. In accordance with the decision of the Judicial Panel on Multidistrict Litigation, in 2008
the actions were consolidated with the Waterbury litigation before the U.S. District Court in Connecticut. Ahold was (among other parties)
named as defendant. In July 2009, the Plaintiffs filed a motion to certify a Plaintiff class in the action. Both Ahold and U.S. Foodservice
filed a motion to dismiss against the complaint and also filed motions opposing the certification of a class in the action. In December 2009,
the Court in Connecticut granted Ahold's motion to dismiss, as a result of which Ahold is no longer party in the proceedings. U.S.
Foodservice's motion to dismiss was partially rejected by the Court, as a result of which U.S. Foodservice remains defendant in the
ongoing proceedings. On November 30, 2011, the U.S. District Court granted the Plaintiffs' motion to certify a class in the action which, if
not reversed during the proceedings, would increase the potential liability exposure. The Court certified a class consisting of any person in
the United States who purchased products from U.S. Foodservice pursuant to an arrangement that defined a sale price in terms of a cost
component plus a markup ("cost-plus contract"), and for which U.S. Foodservice used a so-called "Value Added Service Provider" or
"VASP" transaction to calculate the cost component. On December 14, 2011U.S. Foodservice filed a petition with the Second Circuit
Court of Appeals seeking permission to appeal the class certification order. That petition is pending. Ahold cannot at this time provide a
reasonable estimate of any of its potential liability in connection with the indemnification obligation mentioned in the table above. Ahold will
continue to vigorously defend its interests in these proceedings.
U.S. Foodservice - Governmental regulatory investigations
The Civil Division of the U.S. Department of Justice was conducting an investigation, which related to certain past pricing practices of U.S.
Foodservice for sales made to the U.S. government prior to the date of completion of the divestment of U.S. Foodservice (July 3, 2007).
In September 2010, a settlement was reached with the Department of Justice under which U.S. Foodservice was obliged to pay an
amount of $33 million (€24 million) to the U.S. government. Ahold paid, under its indemnification agreement with U.S. Foodservice,
an amount of $23 million (€17 million), of which $12 million (€9 million) had already been provided for in 2009. Ahold cannot exclude
the possibility of further indemnification obligations resulting from other governmental or regulatory actions.
Uruguayan litigation
Ahold, together with Disco S.A. (Disco) and Disco Ahold International Holdings N.V. (DAIH), is a party to three legal proceedings in
Uruguay related to Ahold's 2002 acquisition of Velox Retail Holdings' shares in the capital of DAIH. The damages alleged by the plaintiffs,
alleged creditors of certain Uruguayan and other banks, amount to approximately $70 million (€54 million) plus interest and costs. As part
of the sale of Disco to Cencosud in 2004, Ahold has indemnified Cencosud and Disco against the outcome of these legal proceedings.
The proceedings are ongoing. Ahold continues to believe that the plaintiffs' claims are without merit and will continue to vigorously oppose
such claims.
