32. Contingencies

32.1 Contingent Liabilities

Bank borrowings to franchisers of the Group are often secured by guarantees given by the Group to the bank. The guarantees given are secured by the activities, store rental contracts, inventories and store furniture of the franchisers. No other guarantees have been given by the Group. No net outflow of cash is expected for the abovementioned guarantees.

The Group is currently in dispute with a lens manufacturer, Zeiss, who participated in, but did not win, the lens tender organized by the Group in 2012. Consequently Zeiss’ existing lens-supply contract expired on the contractual expiration date of 31 October 2013. Zeiss subsequently claimed that GrandVision’s termination of the agreement was unlawful. GrandVision intends to vigorously oppose these actions taken by Zeiss, and has not included a provision. Zeiss formally sued GrandVision France before the Paris Commercial Court on 10 April 10 2014, claiming damages of approximately €57 million on the ground of unlawful termination of the lens purchase agreement. As GrandVision is confident in their legal position in this dispute, no provision is recognized in the consolidated financial statements.

Pursuant to Zeiss’ complaint, the French competition-law body DGCCRF (Direction générale de la concurrence, de la consommation et de la répression des fraudes’) visited the Company’s offices in France in November 2013 and requested documentation regarding GrandVision’s corporate structure and previous lens tenders. Following an interview with management in May 2014, the DGCCRF issued a report that is favorable to GrandVision.

In June 2009, the French competition authority (‘Autorité de la concurrence’) began investigations into certain optical suppliers and optical retailers active in the branded sunglasses and branded frames sector in France, including the Group. The authorities are investigating whether these parties have entered into vertical restraints in relation to the distribution of branded sunglasses and branded frames, in violation of Article L. 420-1 of the French ‘Code de Commerce’ and Article 101-1 of the Treaty on the Functioning of the European Union. In 2012, certain Group employees were interviewed by the French competition authorities, and in 2014 the Group received further written inquiries from the French competition authority. Under French law, there is no formal date by which the French competition authorities are required to complete their investigation. As of the date of these consolidated financial statements, the Group has not been accused of having violated the laws in question; however, the Group may receive a statement of objections (‘notification de griefs’) during 2015, which would be the next step in the procedure. If it is ultimately determined that the Group has violated applicable law, it may be subject to fines. As the Group has not been formally accused, it is unable to estimate the extent of any such fine. At this stage, the Group has not made a provision in its financial statements in relation to this matter. The Group’s practice is to continue to comply with all laws and regulations applicable to its business, including antitrust laws, and it has systems and procedures in place to prevent violations. It is also its practice to cooperate with the relevant regulatory authorities.

In December 2010 the Hungarian Competition Authority, cf. investigated Fotex-Ofotért (F.O. Optikai és Fotocikk Kereskedelmi Kft.) and a number of other parties on suspicion of cartel activity in the Hungarian contact lens market. The Hungarian Competition Authority alleges that the companies were exchanging information disguised as market research undertaken by Kleffmann and Partner, during the period between 2003 and 2010. In November 2013 the Competition Authority shares its statement of objections. According to Fotex-Ofotért this statement of objections is unfounded, and the accused companies defended their position in court on 4 February 2014. The Hungarian Competition Authority requested some additional information which was provided on 14 February 2014. No provision has been recognized locally. At Group level a provision for €0.5 million has been recognized. On 19 June 2014 the defendants were fined. Fotex-Ofotért was fined approximately €161 thousand and this fine has already been paid. However, all the defendants have appealed this decision by the Hungarian Competition Authority.

32.2 Operating Lease Commitments

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

in thousands of EUR

31 December 2014

31 December 2013

Not later than 1 year

229,872

176,322

Later than 1 year and not later than 5 years

523,343

473,900

Later than 5 years

164,466

144,865

917,681

795,087

The lease commitments relate mainly to the lease of stores and offices. For commitments related to associates please refer to note 18. The amount recognized in the Income Statement as rental expenses is €344,961 (2013: €329,895).