The Benetton Group Annual Report 1996

29. TRANSACTIONS WITH RELATED PARTIES
The Benetton Group engages in commercial and financial transactions with subsidiaries of Edizione
Holding S.p.A. (the ultimate parent company) and other companies which, either directly or indirectly,
are linked by common interests with the ultimate parent company.
The conditions of such transactions are fully consistent with those applied in the ordinary course of
business.
The effect of such transactions is summarized below:
1995 1996
Accounts receivable 11,800 6,018
Accounts payable 4,800 2,639
Purchase of raw materials 8,900 9,452
Other costs and services 22,900 22,770
Sales of products 10,100 7,325
Services provided and other income 3,600 5,260
30. LEGAL MATTERS
Benetton has been a party to a number of lawsuits, primarily with customers, arising in the normal
course of business.
In particular, Benetton has been a party to a number of lawsuits with French and German customers
alleging a drop in sales caused by Benetton's advertising campaigns and refusing to pay for goods
supplied on a regular basis. So far, all judgements rendered by German and French Courts have been
in favour of Benetton. An additional provision of Lire 4,000 million has nonetheless been prudently
recorded to cover risks which might arise from these legal disputes. The amount is considered adequate
in view of the above legal pronouncements and because the amounts due by these customers have
been written down to their estimated realisable value in the 1996 consolidated financial statements.
Benetton International N.V. ("BINV") is a party to various disputes with Eco Swiss China Time Ltd. ("Eco")
and Bulova Corporation ("Bulova"), arising from a trademark licensing agreement entered into by the
companies in 1986. The agreement provided for the manufacture and sale by Eco of timepieces
carrying the Benetton and Bulova trademarks. BINV attempted to terminate the agreement in 1991,
prior to its expiration date in 1994, but an arbitral tribunal in The Netherlands subsequently held that it
was not entitled to do so. In June 1995, the tribunal awarded Eco approximately US$ 23.7 million and
Bulova US$ 2.8 million, together with interest and costs. (Also see note 20 to the Consolidated Financial
Statements).
BINV has challenged the awards in two separate proceedings in the courts of the Netherlands. The
merits of the challenges have still not been finally determined by the Netherlands courts, although a
District Court has initially denied one of them. This order is currently on appeal. In the interim, after
previously denying a stay in one of the two proceedings, the Court of Appeal of the Hague on March
28, 1996, granted a stay of enforcement in the other proceeding of the principal award made to Eco.
The principal ground of the Court of Appeal’s decision was that the 1986 licensing agreement was void
and unenforceable as a matter of the competition law of the European Union. The award made to
Bulova had previously been paid by BINV, although it is subject to recovery if BINV ultimately prevails
on the merits of its challenges to the arbitral awards. In March 1997 the Supreme Court in The Hague, in
the context of the stay proceedings, referred to the European Court of Justice in Luxembourg five
preliminary questions of EU Competition Law, thus suspending the stay proceedings. BINV anticipates
that the full merits of its various challenges to the awards, including the application of European Union
competition law, will be the subject of lengthy additional proceedings in the Netherlands courts.