In the evolving landscape of corporate accountability, the Koninklijke Philips N.V. (NL) case stands out as a significant example of the consequences of failing to disclose material information to the market. This case, which centers on Philips’ alleged withholding of critical health risks associated with its sleep and respiratory care devices, has far-reaching implications for investors, regulators, and the broader corporate governance landscape. We are proud to be the first to act in this case, leading the first wave of institutional investors. Our team of experts has been meticulously preparing for this litigation, including hiring local counsel in the Netherlands, engaging economic experts, and developing a comprehensive damage methodology.
Three weeks ago we sent the first demand letter to Philips, marking a critical step towards resolution. This letter outlined the claims of our growing group of institutional investors, whose cumulative losses already exceed EUR 800 million. We are actively reviewing additional claims and expect this number to grow significantly in the coming months.
As legal experts and pioneers in global loss recovery, we believe in our duty to inform about such cases to the best of our ability. Below, we provide a detailed analysis of the case, including the stock price declines, the legal implications, and the broader lessons for institutional investors.
The Facts: A Timeline of Philips’ Alleged Misconduct
Philips, a multinational health technology company, manufactures and sells devices such as Continuous Positive Airway Pressure (CPAP) and Bi-Level Positive Airway Pressure (Bi-PAP) machines, which are widely used to treat sleep apnea and respiratory conditions. These devices utilize polyester-based polyurethane (PE-PUR) foam for sound abatement. However, as early as 2015, Philips was allegedly aware that this foam could degrade into carcinogenic particles, posing serious health risks to users, including headaches, dizziness, irritation, and even cancer.
Despite this knowledge, Philips reportedly failed to disclose these risks to the public, regulators, or investors. Instead, the company continued to manufacture, market, and sell these devices, generating substantial profits. It wasn’t until April 2021 that Philips finally disclosed the issue, leading to a series of product recalls and a significant decline in its stock price.
The Fallout: Financial and Legal Consequences
The consequences of Philips’ alleged misconduct have been severe. Between April 2021 and January 2024, Philips’ stock price experienced multiple drops following announcements related to the recalls and regulatory investigations. In total, the company’s market capitalization plummeted by nearly EUR 28 billion, resulting in significant losses for institutional investors.
Philips has also faced regulatory scrutiny from the U.S. Food and Drug Administration (FDA) and the Department of Justice (DOJ). In January 2024, Philips reached a consent decree with the DOJ and FDA, agreeing to halt sales of its sleep and respiratory products in the U.S. until certain conditions are met. The company has also settled multiple consumer class actions and individual personal injury lawsuits, paying over $1.5 billion in settlements to date.
What Now? Legal Action and Investor Recovery
As legal experts in global loss recovery, we believe that institutional investors who suffered losses due to Philips’ alleged misconduct have a strong case for pursuing legal action. Under EU and Dutch law, investors are entitled to assert claims for compensation.
The legal process for pursuing such claims in the Netherlands is well-established. Investors can assert claims through a representative action, similar to a class action, or through a direct action. The Dutch legal system, particularly since the introduction of the Act on the Resolution of Mass Damages in Collective Actions (WAMCA) in 2020, is well-suited for handling mass claims, and DRRT is planning on bringing this case as a private action in hopes of efficiently securing a resolution to this litigation for its clients.
Conclusion: A Call for Vigilance and Action
The Koninklijke Philips N.V. case is a powerful reminder of the importance of corporate transparency and the legal obligations of publicly traded companies to disclose material information. For institutional investors, the case highlights the potential risks associated with investing in companies that fail to meet these obligations and underscores the importance of understanding the legal frameworks that govern corporate disclosures.
As the legal landscape continues to evolve, institutional investors must remain vigilant in protecting their rights and pursuing recovery for losses caused by corporate misconduct. The Philips case represents a significant opportunity for investors to hold a major corporation accountable for its actions and to recover damages caused by its alleged failure to disclose critical information. It’s bigger than a fiduciary duty to recover clients’ losses, it’s a duty to our industry.
For those who believe they may have been affected by Philips’ actions, now is the time to take action.
DRRT: Pioneering Global Loss Recovery. Leading the Way for Institutional Investors.