Following an investigation, on April 11, 2012, 16 state
Attorneys General led by Texas and Connecticut (the "AGs") filed a
similar action against certain publishers and Apple, Inc. in the
Western District of Texas. On April 26, 2012, the AGs' action was
transferred to Judge Cote. On May 17, 2012, 33 AGs filed a second
amended complaint. As a result of a memorandum of understanding
agreed upon with the AGs for Texas and Connecticut, HarperCollins
was not named as a defendant in this action. Pursuant to the terms
of the memorandum of understanding, HarperCollins entered into a
settlement agreement with the AGs for Texas, Connecticut and Ohio
on June 11, 2012. By August 28, 2012, forty-nine states (all but
Minnesota) and five U.S. territories had signed on to that
settlement agreement. On August 29, 2012, the AGs simultaneously
filed a complaint against HarperCollins and two other publishers, a
motion for preliminary approval of that settlement agreement and a
proposed distribution plan. On September 14, 2012, Judge Cote
granted the AGs' motion for preliminary approval of the settlement
agreement and approved the AGs' proposed distribution plan. Notice
was subsequently sent to potential class members, and a fairness
hearing scheduled for February 8, 2013. If the settlement agreement
receives final approval, it would resolve all damage claims of
individual citizens from those states and territories, including
those represented in the purported class actions.
While the settlement agreement with the AGs is still subject to
final approval by the court, New News Corporation believes that the
proposed settlement, as currently drafted, will not have a material
impact on the results of operations or the financial position of
New News Corporation. However, New News Corporation can make no
assurances that the proposed settlement will receive final
approval.
On October 12, 2012, HarperCollins received a Civil
Investigative Demand from the Attorney General from the State of
Minnesota. HarperCollins complied with the Demand on November 16,
2012 and is cooperating with that investigation. While it is not
possible to predict with any degree of certainty the ultimate
outcome of the inquiry, HarperCollins believes it was compliant
with applicable antitrust laws.
The European Commission conducted an investigation into whether
certain companies in the book publishing and distribution industry,
including HarperCollins, violated the antitrust laws by virtue of
the switch
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NEW NEWS CORPORATION
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
to the agency model for eBooks. HarperCollins settled the matter
with the European Commission on terms substantially similar to the
settlement with the DOJ. On December 13, 2012, the European
Commission formally adopted the settlement.
Commencing on February 24, 2012, five purported consumer class
actions were filed in the Canadian provinces of British Columbia,
Quebec and Ontario, which relate to the decisions by certain
publishers, including HarperCollins, to begin selling their eBooks
in Canada pursuant to an agency relationship. The actions seek as
relief special, general and punitive damages, injunctive relief and
the costs of the litigations. While it is not possible to predict
with any degree of certainty the ultimate outcome of these class
actions, especially given their early stages, HarperCollins
believes it was compliant with applicable antitrust and competition
laws and intends to defend itself vigorously.
In early July 2012, HarperCollins Canada, a wholly-owned
subsidiary of HarperCollins, learned that the Canadian Competition
Bureau ("CCB") had commenced an inquiry regarding the sale of
eBooks in Canada. HarperCollins currently is cooperating with the
CCB with respect to its inquiry. While it is not possible to
predict with any degree of certainty the ultimate outcome of the
inquiry, HarperCollins believes it was compliant with applicable
antitrust and competition laws.
Other
New News Corporation's operations are subject to tax in various
domestic and international jurisdictions and as a matter of course,
New News Corporation is regularly audited by federal, state and
foreign tax authorities. New News Corporation believes it has
appropriately accrued for the expected outcome of all pending tax
matters and does not currently anticipate that the ultimate
resolution of pending tax matters will have a material adverse
effect on its combined financial condition, future results of
operations or liquidity. Each member of the Parent consolidated
group, which includes Parent, New News Corporation and Parent's
other subsidiaries, is jointly and severally liable for the U.S.
federal income tax liability of each other member of the
consolidated group. Consequently, New News Corporation could be
liable in the event any such liability is incurred, and not
discharged, by any other member of the Parent consolidated group.
The tax sharing and indemnification agreement will require Parent
to indemnify New News Corporation for any such liability. Disputes
or assessments could arise during future audits by the IRS in
amounts that New News Corporation cannot quantify.
New News Corporation establishes an accrued liability for legal
claims when it determines that a loss is both probable and the
amount of the loss can be reasonably estimated. Once established,
accruals are adjusted from time to time, as appropriate, in light
of additional information. The amount of any loss ultimately
incurred in relation to matters for which an accrual has been
established may be higher or lower than the amounts accrued for
such matters. Legal fees associated with litigation and similar
proceedings that are not expected to provide a benefit in future
periods are expensed as incurred. Any fees, expenses, fines,
penalties, judgments or settlements which might be incurred by New
News Corporation in connection with the various proceedings could
affect New News Corporation's results of operations and financial
condition. For the contingencies disclosed above for which there is
at least a reasonable possibility that a loss may be incurred, New
News Corporation was unable to estimate the amount of loss or range
of loss.
NOTE 10. PENSION AND OTHER POSTRETIREMENT BENEFITS
Plans in the U.S., U.K. and Australia that are sponsored by
entities included in New News Corporation ("Direct Plans") are
accounted for as defined benefit pension plans and these costs are
included in the net periodic benefit costs-Direct below. Certain of
our U.S. employees participate in defined benefit pension plans
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NEW NEWS CORPORATION
NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
("Shared Plans") sponsored by Parent, which include participants
of other Parent subsidiaries and these costs are included in the
net periodic benefit costs-Employees participation in Parent plans
below. In addition, a portion of the remaining Shared Plans expense
was allocated to New News Corporation and these costs are included
in net periodic benefit costs-Corporate allocations.
The components of net periodic benefits costs were as
follows:
Postretirement
Pension benefits benefits
-------------------------- --------------------
For the three months ended
September 30,
-------------------------------------------------
2012 2011 2012 2011
------------- ---------- --------- -----
(in millions)
Service cost benefits earned during
the period $ 5 $ 5 $ - $ 1
Interest costs on projected benefit
obligations 15 19 2 2
Expected return on plan assets (19) (21) - -
Amortization of deferred losses 5 4 - -
Other - - (2) (4)
Net periodic benefits costs-Direct 6 7 - (1)
Employees participation in Parent
plans 5 2 N/A N/A
Corporate allocations 1 1 N/A N/A
Net periodic benefits costs-Total $ 12 $ 10 $ - $ (1)
Cash contributions $ 9 $ 7 $ 3 $ 3
N/A-not applicable
NOTE 11. SEGMENT INFORMATION
New News Corporation manages and reports its businesses in the
following four segments:
-- News and Information Services - The News and Information Services segment
includes the global product offerings of The Wall Street Journal and Barron's
publications, The Wall Street Journal Digital Network ("WSJDN") and New
News Corporation's suite of information services including Dow Jones Newswires
and Factiva. In addition to WSJ.com and Barrons.com, WSJDN includes MarketWatch,
AllThingsD and related services. New News Corporation also owns, among
other publications, The Australian , Herald Sun , The Daily Telegraph and
The Courier Mail in Australia, The Times , The Sunday Times and The Sun
in the U.K. and The New York Post in the U.S. This segment also includes
the integrated marketing services business, News America Marketing Group
("NAMG"), a leading provider of free-standing coupon inserts, in-store
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