Merck is exposed to litigation risks. These include in particular risks in the areas of product liability, competition and antitrust law, pharmaceutical law, patent law, tax law, and environmental protection. As a research-based company, Merck has a valuable portfolio of industrial property rights, such as patents and brand names. These can become the target of attacks and infringements.
We are engaged in legal proceedings and government investigations, the outcome of which is currently not certain. We also continue to bear the risks from certain proceedings against companies of the Generics group that we sold to Mylan in 2007. Therefore, in this connection, Merck continues to be responsible for risks arising from cases concerning drug pricing in the United States. In connection with the divested Generics business, the European Commission opened administrative fine proceedings against Merck. It is alleged that Merck engaged in anticompetitive behavior in connection with the market launch of the product citalopram. In Germany, Merck is involved in antitrust proceedings concerning its exclusive distribution agreement with the laboratory wholesale distributor VWR International. Owing to a decision by the German Federal Antitrust Office, Merck is obliged to supply a number of products from its Laboratory business to other laboratory wholesale distributors in Germany. In the United States and Israel, certain risks exist with respect to patent rights and the related licenses and agreements. These cases could have a considerable impact on the financial and earnings position.
The company has taken all possible measures to protect its own legal position. To the extent we deemed it necessary in individual cases, we have set up provisions for risks in the event of an unfavorable outcome of judicial proceedings and government investigations. Further information on legal proceedings can be found in the notes to the consolidated financial statements. Generally, Merck strives to minimize and manage its legal risks. We have taken the necessary precautions to identify threats and defend our rights where necessary.
A compliance program applies for our employees worldwide, which enjoins them to comply with laws and guidelines, as well as provides them with the relevant training and support. The core of the program is the Merck Code of Conduct, which defines ethical behavior guidelines.
Insofar as possible and practical, the company limits liability and damage risks through insurance coverage, the type and scope of which is continually adjusted to current requirements.