Legal Proceedings
−Removed: Tanzania Fair Competition Commission Proceeding
−Removed: In June 2012, our Tanzanian subsidiary, Tanzania Leaf Tobacco Company Ltd.
−Removed: (“TLTC”), entered into a two crop-year supply agreement for unprocessed “green” tobacco with a newly-formed Tanzanian subsidiary of one of our major customers.
−Removed: The agreement involved green tobacco purchases from four of the approximately 400 grower cooperatives in Tanzania, which allowed the customer and its Tanzanian subsidiary on a small test basis to evaluate whether it would be a viable alternative for the customer to establish its own vertically integrated supply operations in that market.
−Removed: Prior to that time, the customer’s subsidiary did not exist, and it only purchased processed Tanzanian tobacco from tobacco dealers in specified amounts and only for certain grades and stalk positions.
−Removed: In contrast, the agreement with TLTC required the customer’s subsidiary to purchase green tobacco on a “run of crop” basis.
−Removed: “Run of crop” requires the purchase of all green tobacco produced on the tobacco plant, regardless of grade or stalk position.
−Removed: The agreement, therefore, enabled the customer’s subsidiary on a small test basis to evaluate the quality of green tobacco purchased on a “run of crop” basis and to assess how such tobacco would be suited to the customer's tobacco requirements.
−Removed: The customer unilaterally elected to establish its own vertically integrated supply operations in Tanzania after the expiration of the agreement, and its subsidiary began purchasing green tobacco directly from Tanzanian grower cooperatives during the second crop year thereafter.
−Removed: Despite the pro-competitive object and effect of the agreement between TLTC and the customer’s subsidiary, in October 2016, the Tanzania Fair Competition Commission (“FCC”) notified TLTC and the customer’s subsidiary that it reviewed the agreement and provisionally concluded that it infringed Tanzania antitrust law by having the object and effect of preventing competition in the purchase of unprocessed green tobacco in the area in which the four grower cooperatives were located.
−Removed: The FCC also provisionally concluded that our U.S.
−Removed: subsidiary, Universal Leaf Tobacco Company, Inc.
−Removed: (“ULT”), and additional subsidiaries of the customer, were jointly and severally liable for the actions of TLTC and the customer’s Tanzanian subsidiary, respectively.
−Removed: TLTC and ULT submitted a written response contesting the FCC’s allegations, and on February 27, 2018, the FCC issued its decision to TLTC and ULT which confirmed its initial conclusion that the agreement infringed Tanzanian antitrust law.
−Removed: In its decision, the FCC concluded incorrectly that the parties to the agreement unfairly benefited in the amount of $105 thousand .
−Removed: The FCC arbitrarily assessed a fine jointly against TLTC and ULT of approximately $197 million and a fine jointly against the customer’s Tanzanian subsidiary and another subsidiary of the customer exceeding $1 billion .
−Removed: TLTC and ULT worked closely with expert legal advisors and economists on this matter.
−Removed: Based on these engagements and consultations, the Company firmly believed the FCC’s allegations were frivolous and clearly without merit or support from the facts, law or economic analysis.
−Removed: The Company further believed the FCC’s proceedings were rife with irregularities and did not comply with applicable legal and regulatory procedures with respect to this matter, including failing to establish jurisdiction over ULT or to offer a legal justification for including ULT in the proceeding.
−Removed: To the contrary, the Company believed the facts, law and economic analysis clearly supported the legality and pro-competitive nature of the agreement and supported a proper conclusion that there was no infringement of Tanzania antitrust law, and the agreement had no negative impact on the Tanzania tobacco market.
−Removed: The Company further believed the FCC’s proposed fine is ludicrous, unwarranted and contrary to Tanzania law.
−Removed: TLTC and ULT immediately appealed the FCC findings to the Tanzania Fair Competition Tribunal, which immediately stayed the execution of any FCC fines.
−Removed: On January 22, 2019, the FCC delivered provisional findings regarding two new allegations of antitrust violations.
−Removed: In those two new provisional findings, the FCC manufactured claims against ULT and ULT's subsidiaries in Tanzania, in addition to other parties in Tanzania.
−Removed: ULT and its Tanzania subsidiaries had already begun working closely with expert legal advisors on these matters to prepare and submit to the FCC proper and comprehensive responses.
−Removed: The Company also believed the most recent FCC provisional findings and allegations were frivolous and clearly without merit and lack facts, law or economic analysis to support them.
−Removed: In one of the two new matters, based on the Company's review of the provisional findings and consultation with counsel, the Company believed the FCC was seeking an equally large, ludicrous, unwarranted, and unlawful fine as the one sought in the original matter.
−Removed: The FCC's motivations for initiating these additional, spurious allegations against the Company's subsidiaries were unclear.
−Removed: The FCC contacted TLTC during the pendency of the three matters to initiate settlement discussions in order to resolve and dismiss all outstanding matters.
−Removed: After protracted negotiations with the FCC regarding mutually-agreeable and reasonable procedural aspects of settlement, on March 27, 2020, ULT, its Tanzania subsidiaries and the FCC executed a binding no-fault settlement of the three matters (the “Settlement Agreement”).
−Removed: The terms of the Settlement Agreement included mutual confidentiality obligations and mutual releases which discharged all actions, claims, rights and demands of the FCC, ULT and its Tanzania subsidiaries in all these matters, as well as a settlement amount to be paid to the FCC.
−Removed: Although the confidentiality obligations in the Settlement Agreement do not permit the Company publicly to disclose the settlement amount, such amount was not material to the fourth fiscal quarter or the fiscal year ended March 31, 2020.
−Removed: We are pleased to avoid the cost of further litigating these frivolous matters, and we believe no further related costs will be incurred.
−Removed: Other Contingent Liabilities
−Removed: In addition, some of our subsidiaries are involved in other litigation or legal matters incidental to their business activities.
+Added: Some of our subsidiaries are involved in other litigation or legal matters incidental to their business activities.
While the outcome of these matters cannot be predicted with certainty, we are vigorously defending the matters and do not currently expect that any of them will have a material adverse effect on our business or financial position.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.