Second Circuit Squeezes the Juice Out of Vitamin C Jury Verdict

Orange Fruit Slices Vitamin C Antitrust Litigation

On September 20, 2016, the U.S. Court of Appeals for the Second Circuit issued an opinion in In re Vitamin C Antitrust Litigation, reversing the district court’s eight year-old decision not to grant a motion to dismiss the case, based on international comity.  The Second Circuit vacated the $147 million judgment against the two defendants that took the case to trial in 2013, and remanded with instructions to dismiss the complaint with prejudice.  The court did not opine on the defendants’ other grounds for dismissal – the foreign sovereign compulsion, act of state, and political question doctrines.  In re Vitamin C Antitrust Litig., No. 13-4791 (2d Cir. Sept. 20, 2016).

In 2005, the plaintiffs brought several class action complaints against the major Chinese vitamin C manufacturers, alleging that the manufacturers illegally fixed the price and output levels of vitamin C that they exported to the United States. The cases, which were consolidated in the Eastern District of New York, marked the first time that Chinese companies had been sued in a U.S. court for violation of the Sherman Act.

For context, the Chinese Government regulates the vitamin C industry through the China Chamber of Commerce of Medicines & Health Products Importers & Exporters (“Chamber”), which itself is an arm of the Ministry of Commerce of the People’s Republic of China (“Ministry”). The Ministry is China’s equivalent of the U.S. Department of Commerce.  The Chamber created an entity called the vitamin C Subcommittee (“Subcommittee”), which included representatives from the major Chinese vitamin C manufacturers.  The Subcommittee members, at the Ministry’s Direction, set and coordinated vitamin C prices and export levels to help the Chinese vitamin C industry remain stable as the country transitioned from a centrally-planned economy to one that is more market-based in accordance with China’s obligations to the World Trade Organization (“WTO”).  Under a 2002 Notice issued by the Ministry, in order to export vitamin C, a manufacturer was required to submit documentation to the Chamber indicating the amount and price of vitamin C it desired to export.  If the Chamber found the price and quantity in line with the levels set by the Subcommittee, it would “verify” the contract and affix a “chop” (a type of seal) to the contract, indicating that the Chamber had reviewed and approved the transaction.

The plaintiffs, for their part, viewed the Chamber and the Subcommittee as more akin to a trade association than a government entity, and argued that the language contained in 2002 Notice did not require the manufacturers to agree on price and output.

The defendants moved to dismiss the consolidated complaint on grounds of foreign sovereign compulsion, international comity, and the act of state doctrine. In what the Second Circuit called “an historic act,” the Ministry filed an amicus brief in support of the defendants’ dismissal motion – the first time any Chinese Government entity appeared as an amicus in any U.S. court.  The Ministry’s brief explained the structure and operation of the vitamin C industry in China, and made clear that the manufacturers were, in fact, required by Chinese law to coordinate on the price and output of vitamin C.  The district court, however, refused to defer to the Ministry’s explanation of Chinese law and denied the motion.  The district court denied the defendants’ summary judgment motions, and a jury trial took place in 2013.  Plaintiffs prevailed in the trial, which resulted in a $147 million judgment post-trebling.

The Second Circuit, eight years after the district court denied the defendants’ motion to dismiss, held that because the Chinese Government appeared before the district court and made a statement under oath that Chinese law required the defendants to set prices and limit quantities of vitamin C sold in the United States, and because the defendants could not simultaneously comply with Chinese law (as explained to the court by the Ministry) and with the U.S. antitrust laws, the district court should have declined to exercise jurisdiction over the case.  The court did not reach the question of whether the foreign sovereign compulsion, act of state or political question defenses also provide grounds for dismissing the case.

The appellate court held that the district court should have deferred to the Ministry’s statement that Chinese law required the defendants to coordinate the price and output of vitamin C. It “reaffirm[ed] the principle that when a foreign government, acting through counsel or otherwise, directly participates in U.S. court proceedings by providing a sworn evidentiary proffer regarding the construction and effect of its laws and regulations, which is reasonable under the circumstances presented, a U.S. court is bound to defer to those statements.”  The Second Circuit further stated:  “Not extending deference in these circumstances disregards and unravels the tradition of according respect to a foreign government’s explication of its own laws, the same respect and treatment that we would expect our government to receive in comparable matters before a foreign court.”

Accepting the Ministry amicus submission as true, the Second Circuit determined that under the verification and chop regime, the defendants would only be allowed to export vitamin C to the United States. if they did so after coordinating on price and output.  That coordination constitutes an antitrust violation in the United States, which put the defendants in the impossible position of being unable to comply with Chinese law and with U.S. law at the same time.  As such, the district court should have declined to exercise subject matter jurisdiction over the case and should have dismissed it.

Of particular note, the Second Circuit stated that deference to the Chinese government is especially important in this case “because of the unique and complex nature of the Chinese legal- and economic-regulatory system and the stark differences between the Chinese system and ours.”  Further, the appellate court explained that the plaintiffs are not without a remedy – they can address their complaint through diplomatic channels and the World Trade Organization’s processes. Allowing the district court to order the vitamin C manufacturers to comply with conflicting legal requirements, however, “is an untenable outcome.”

For defendants, the Second Circuit’s decision underscores that in advancing arguments based on international comity concerns, it may be prudent, or even necessary, to seek the assistance of the relevant foreign government to create an evidentiary record of the foreign country’s laws that are in conflict with U.S. laws.

 

Disclosure Statement: The authors represented one of the defendant vitamin C manufacturers in In re Vitamin C Antitrust Litigation.  Although Orrick and its client worked with the Ministry and briefed and argued the motion to dismiss on comity and other grounds in the District Court, its client was not involved in the appeal to the Second Circuit.

Third Circuit Jump-starts Class Action, Holding that an Indirect Purchaser Can Bring Federal Antitrust Claims as a Direct Purchaser Based on Assignment of the Claims Even Without Consideration

Antitrust Class Action Truck Transmissions

On September 15, 2016, the Third Circuit jump-started a federal antitrust class action involving truck transmissions, holding that a direct purchaser’s assignment of its federal antitrust claims to an indirect purchaser is valid as long as the assignment was written and express—even if there was no consideration for the assignment. The Third Circuit also held that a proposed class representative’s motion to intervene is presumptively timely if made before class certification.  Wallach, et al. v. Eaton Corp., et al., No. 15-3320 (Sept. 15, 2016).

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Ninth Circuit Grounds Aftermarket Claims, Refusing to Stretch Antitrust Theories and Reminding Plaintiffs That Allegations Must Be Supported by Evidence of Anti-Competitive Harm

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Last week, the Ninth Circuit affirmed a summary judgment disposing of numerous antitrust claims brought by an independent servicer against a manufacturer of systems and parts that also provides service. The court emphasized that “[t]his case serves as a reminder that anecdotal speculation and supposition are not a substitute for evidence, and that evidence decoupled from harm to competition—the bellweather of antitrust—is insufficient to defeat summary judgment.” Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., No. 14-15562 (9th Cir. Sept. 9, 2016).

Auxiliary Power Units (“APUs”) power an airplane’s air conditioning, cabin lights and instrumentation. Aerotec International, Inc. (“Aerotec’), a small servicer of APUs, including those manufactured by Honeywell International, Inc. (“Honeywell”), complained that Honeywell had stalled Aerotec’s sales efforts and prevented it from reaching cruising altitude through a variety of alleged anticompetitive conduct.

Honeywell has above a 70% share of the APU market, which includes just one other major manufacturer. Honeywell sells both APUs, APU parts, and APU service. Aerotec’s share of the repair market—which includes dozens of other firms—is about 1%. Some airlines also undertake their own APU servicing. Honeywell has a tiered pricing structure for its APU parts: Honeywell “affiliates” get the best pricing for and priority access to parts under long-term agreements that impose obligations on the affiliates. Airlines pay more than affiliates, and independent servicers—like Aerotec—pay even more on the spot market for Honeywell’s OEM parts. Those servicers, including Aerotec, can and do buy third-party parts approved by the FAA. Using such parts, Aerotec touted that its prices were 20% lower than its competitors on average.

Although Aerotec had some success as an APU servicer for a time, it claimed that its business was hurt when it had difficulty obtaining parts from Honeywell during what Honeywell deemed a parts shortage (which Aerotec alleged was pretextual). Aerotec also alleged that Honeywell maintained an overly burdensome ordering process, held Aerotec to stringent payment terms, withheld technical information, offered steeply discounted bundles of parts and repair services, and engaged in price discrimination against Aerotec and other independent servicers.

The Ninth Circuit had no difficulty in grounding Aerotec’s Sherman Act Section 1 and Section 2 claims and its Robinson-Patman Act claim. Aerotec advanced two Section 1 claims. First, it argued that Honeywell had unlawfully tied APU parts to service. This claim foundered because Aerotec presented no evidence of a tie, i.e., evidence that Honeywell either required customers to purchase Honeywell service if they wanted to buy APU parts or that Honeywell required customers not to purchaser service from others. The Ninth Circuit refused to stretch tying law to reach parts delays, pricing decisions, and removal of technical data. Those behaviors were directed not at a customer but at a competitor (Aerotec), distinguishing the situation from that in Eastman Kodak Co. v. Image Technical Servs. Inc., 504 U.S. 451 (1992). The court rejected Aerotec’s arguments that Honeywell “created an implied tie by making the purchase of Honeywell’s services an economic imperative.” Aerotec’s chain of logic and evidence – that airlines learned the “game” that to get parts, they should buy Honeywell service to avoid the complications or difficulties associated with using Aerotec—was “too attenuated to support liability” under Section 1. “[A]rguably manipulative tactics imposed on a third-party competitor are [not] sufficient by themselves to create a tie with respect to a separate buyer simply because they make it less desirable to purchase from the third party.”

Aerotec also argued that Honeywell violated Section 1 through exclusive dealing arrangements with customers. However, Aerotec did not present a global agreement by Honeywell with its customers. Other than submitting some evidence that purchasers of repair services contract for 3-7 years at a time, Aerotec failed to specify the amount or duration of foreclosure from any of Honeywell’s particular customer contracts. Aerotec’s “speculation and innuendo . . . cannot substitute for evidence.” The Ninth Circuit also declined to decide whether a substantial discount could amount to a de facto exclusive agreement. Even if it can, there was no evidence of any exclusive requirements on which the discounts were conditioned. The de facto theory did not “provide Aerotec an end run around the obligation to first show that express or implied contractual terms in fact substantially foreclosed dealing with a competitor for the same good or service.”

As to the Section 2 claim, Aerotec first argued that Honeywell had engaged in an unlawful refusal to deal with a competitor. This claim failed because even a monopolist has no general duty to deal, and Aerotec’s allegations did not fit within the “narrow exception” recognized in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). Aerotec “simply did not like the business terms offered by Honeywell, especially after things began to change in 2007. But this ‘business pattern’ can hardly be characterized as so onerous as to be tantamount to the conduct in Aspen Skiing.” Aerotec’s “vague requested remedy” that the court order Honeywell to provide parts, data and prices like it did before 2007 “reveal[ed] the problem with Aerotec’s refusal to deal claim: providing any meaningful guidance to Honeywell and ordering it to artificially create pre-2007 market conditions would require the courts to play precisely the kind of ‘central plan[ing]’ role that courts are ‘ill suited’ to play.”

Aerotec also argued that it had presented sufficient evidence of a Section 2 essential facilities claim, reasoning that APU parts are an essential facility without which repairs are impossible. The Ninth Circuit explained that it has treated essential facilities as a basis for a Section 2 claim even though the Supreme Court has never recognized the doctrine. Even so, the court said that this claim failed for an “obvious” reason—a facility is only “essential” where it is otherwise unavailable. The evidence showed that Aerotec had access to parts from sources other than Honeywell itself.

Aerotec’s bundled discount claim under Section 2 also failed because of a lack of credible evidence that Honeywell priced repair services below cost. Emphasizing that low prices benefit consumers regardless of how they are set, the Ninth Circuit refused to apply the discount attribution test of Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir. 2008), because that test does not apply where the parties offer the same bundle of good and services, and Aerotec offered both APU parts and services (just like Honeywell). On a bundle-to-bundle comparison, Aerotec could provide services more efficiently than Honeywell, which would enable it to avoid selling parts at cost. Aerotec’s argument that Honeywell was unlawfully charging it high wholesale prices for APU parts while it was charging low (but above-cost) prices for repair bundles was foreclosed by the Supreme Court’s decision in Pacific Bell Tel. Co. v. linkLine Communications, Inc., 555 U.S. 438 (2009), which held that “price-squeeze” claims are not actionable.

Finally, the Ninth Circuit affirmed the summary judgment for Honeywell on Aerotec’s Robinson-Patman Act price discrimination claim. While Honeywell gave its affiliates with long-term contracts better pricing, Honeywell received benefits under those long-term arrangements, including substantial obligations imposed on affiliates such as payment of license/royalty fees, maintenance of insurance, exclusive use of Honeywell parts, and compliance with policies, regulations, and procedures promulgated by Honeywell. These obligations made spot sales to Aerotec and affiliate sales not comparable for Robinson-Patman purposes. Cf. our recent blog posts on Robinson-Patman Act issues.

Aerotec stands as a further reminder that antitrust law is designed to protect competition, not competitors. If a plaintiff fails to marshal evidence of anticompetitive harm, and instead relies on generalizations and speculation and attempts to stretch existing antitrust categories beyond their limits, the plaintiff’s claims should and likely will fail.

Third Circuit Rules that Antitrust Standing Is Properly Challenged Under Rule 12(b)(6) for Failure to State a Claim, Not Under Rule 12(b)(1) for Lack of Subject Matter Jurisdiction

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On September 7, 2016, the Third Circuit ruled that a district court erred in granting a Fed. R. Civ. P. 12(b)(1) motion to dismiss federal antitrust claims for lack of subject matter jurisdiction, because the court conflated the analyses for Article III standing and antitrust standing. Hartig Drug Co. Inc. v. Senju Pharmaceutical Co. Ltd., No. 15-3289 (3d Cir. Sept. 7, 2016).

Hartig Drug Company Inc. (“Hartig”), an Iowa-based drug store chain, sued pharmaceutical manufacturers alleging that they suppressed competition for medicated eyedrops through a variety of means, which resulted in higher prices for the eyedrops. Hartig purchased the eyedrops from a distributor, AmerisourceBergen Drug Corporation (“Amerisource”), which purchased the eyedrops from the manufacturers. Hartig’s claim as an indirect purchaser from the defendant manufacturers was barred by Illinois Brick v. Illinois, 431 U.S. 720 (1977), so it alleged that Amerisource had assigned its claim to Hartwig, which enable Hartwig to sue as a direct purchaser.

The manufacturers filed a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, and also a Rule 12(b)(6) motion to dismiss for failure to state a claim. For the Rule 12(b)(1) motion, defendants submitted Amerisource’s Distribution Services Agreement (“DSA”) with one of the manufacturers—which was not mentioned in Hartwig’s complaint—to argue that an anti-assignment clause in the DSA prohibited Amerisource from assigning its claim without the defendant’s consent. The District Court accepted that argument and granted the Rule 12(b)(1) motion on the ground that Hartig was actually suing as an indirect purchaser and not as a direct purchaser because the assignment was invalid.

On appeal, several retailers filed an amicus brief arguing that defendant’s anti-assignment argument reached only the issue of antitrust standing, which is different from Article III standing, and the district court erred in ruling that it did not have subject matter jurisdiction. The Third Circuit agreed.

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Germany Plans to Introduce New Merger Notification Test

Merger Acquisition Antitrust

The German government has recently published a bill that would significantly amend the criteria for determining whether an M&A transaction is subject to German merger control.

Currently, the applicability of the German merger control rules depends primarily on the revenues of the firms participating in a transaction. A concentration needs to be notified to the German competition authority – the Bundeskartellamt – where all the following three turnover thresholds are met: (i) EUR 500 million worldwide, (ii) EUR 25 million in Germany, and (iii) EUR 5 million in Germany. The 500 million threshold (i) refers to the sales achieved by all of the parties combined in their last completed financial year. The other two thresholds (ii) and (iii) refer to the individual sales of two parties to the transaction (e.g., the acquirer, on the one hand, and the business being acquired, on the other). Where the notification thresholds are met, the parties are subject to a standstill obligation. They must not consummate the transaction until it has been cleared (or is deemed to have been cleared) by the Bundeskartellamt.

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Act of State Doctrine Bars Antitrust Claims Against Private Company’s Minority Owners where Majority Owner is a Foreign Sovereign

Sea Salt Antitrust

A court in the Central District of California recently applied the Act of State doctrine to dismiss a complaint against two private companies that are minority owners of a third company, also a defendant, which is majority-owned by the Mexican government. U.S. District Judge Dolly M. Gee held that the relief the plaintiffs sought would require the court to deem the official acts of a foreign sovereign invalid, and that the private entities had standing to invoke the doctrine.  Sea Breeze Salt, Inc. et al. v. Mitsubishi Corp. et al., CV 16-2345-DMG, ECF No. 45 (Aug. 18, 2016).

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Sun Sets on Solar Panel Manufacturer’s Predatory Pricing Claim as Sixth Circuit Affirms Dismissal

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Proving once again that antitrust law protects competition, not competitors, on August 18, 2016 the Sixth Circuit affirmed a decision from the Eastern District of Michigan dismissing a plaintiff’s Sherman Act § 1 predatory pricing complaint for failure to state a claim.  The case, Energy Conversion Devices Liquidated Trust et al. v. Trina Solar Ltd. et al., involved allegations by a US-based solar panel manufacturer that its Chinese competitors had conspired to lower their prices in the US to below cost in order to drive the plaintiff out of business.

Energy Conversion conceded that a predatory pricing claim under § 2 of the Sherman Act requires the plaintiff to plead and prove both that the defendant charged below-cost prices, and that the defendant had a reasonable prospect of recouping its investment.  But it maintained that for a claim brought under § 1, the second element—recoupment—was not required.

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Court’s Denial of Summary Judgment on Price Discrimination Claims Reminds Suppliers to Properly Structure Discount Programs

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In a recent decision, the Northern District of California denied Chrysler’s motion for summary judgment to defeat a Robinson-Patman Act price discrimination claim.  Mathew Enterprise, Inc. v. Chrysler Group LLC, 2016 U.S. Dist. LEXIS 108693 (N.D. Cal. Aug. 2, 2016) (opinion filed August 15, 2016 and available here).  The decision serves as a reminder of the relatively low bar for establishing competitive and antitrust injury for Robinson-Patman Act purposes, and counsels in favor of carefully structuring discount programs to avoid any potential litigation down the road.

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Seventh Circuit Rules that Offering Different Product Package Sizes Does Not Constitute Unlawful Price Discrimination

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On August 12, 2016, the Seventh Circuit ruled that a manufacturer’s decision to sell large package products to some retailers but not others does not constitute price discrimination under Section 13(e) of the Robinson-Patman Act.  Woodman’s Food Market, Inc. v. Clorox Co. and Clorox Sales Co. (7th Cir. Aug. 12, 2016) (opinion available here). The decision harmonizes Seventh Circuit law with that of other circuits and clarifies that manufacturers do not violate the promotional services or facilities requirements of the Act when they offer bulk products to some but not all purchasers.

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FTC and DOJ Antitrust Division Request Comments on Proposed Revisions to Antitrust Guidelines for Licensing IP

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After several turbulent years of litigation and policy wrangling, many have asked whether the federal antitrust agencies should rewrite their two-decade old Antitrust Guidelines for the Licensing of Intellectual Property (“Guidelines”).  Should they provide clearer guidance regarding thorny questions about licensing standard essential patents (SEPs), patent assertion entities (PAEs), reverse payment settlements, or other matters that have prompted new guidelines from other enforcers around the world?  On August 12, the Federal Trade Commission and US Department of Justice’s Antitrust Division responded with modest updates to the Guidelines, likely setting themselves up for considerable commentary in the weeks to come.

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English High Court Allows LCD Damages Action to Proceed

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On 29 July 2016, the High Court of England and Wales delivered its judgment dismissing the applications of two defendants to strike out a follow-on damages case in which the claimant, iiyama, asserts that it suffered losses as a result of the defendants’ alleged participation in the LCD cartel. Iiyama v Samsung [2016] EWHC 1980 (Ch).

The claim follows on from the European Commission’s decision of 8 December 2010, which found that six LCD panel producers had entered into a world-wide price fixing cartel and had implemented that cartel within the EU.  The Commission had been satisfied that the agreement related to direct and indirect sales of LCD panels to companies in the EU.  It also found that the participants in the cartel had sought to implement the cartel within the EU, even if price negotiations took place outside the EU.

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Fnac-Darty: A Landmark Merger Decision in France

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On 18 July 2016, the French Competition Authority (“FCA”) broke new ground in France by holding that retail distribution of electronic products through both physical stores and online channels is a single relevant market.

The background and the FCA’s Decision

The FCA’s decision concerns Fnac’s acquisition of Darty. The proposed transaction drew a great deal of public attention because it involves France’s two largest click and mortar retailers. It drew even more attention in March 2016, when the FCA announced a phase II examination of the potentially negative effects of the merger. However, in its 18 July 2016 decision, the FCA reversed course and granted conditional approval for the transaction after determining the relevant market includes both online and physical distribution channels.

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Second Circuit Rules That Judges Can Decertify a Class After a Jury Verdict

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The Second Circuit recently held that under Federal Rule of Civil Procedure 23, a district court judge can decertify a class after a jury verdict in favor of the class but before entering judgment, upholding a Southern District Court of New York decision granting defendants’ post-verdict motion to decertify the class.  Joseph Mazzei v. The Money Store, TMS Mortgage Inc., HomEq Servicing Corp., No. 15-2054 (2d Cir. July 15, 2016).  The Second Circuit’s decision confirms that after a court certifies a class, defendants should continue to develop evidence to seek to decertify the class even after a jury verdict in favor of the class.

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Court Awards $3M Sanction and Adverse Inference for Spoliation in Antitrust Case

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On July 6, 2016, Judge Leonard P. Stark, of the federal district court in Delaware, ordered a $3 million punitive monetary sanction, and an adverse inference jury instruction, against antitrust defendant Plantronics after finding that a top executive at the company had deleted thousands of potentially relevant emails.  This case is noteworthy both because of the severity of the sanction and the court’s decision to impute the conduct of an employee to the company even though numerous preservation practices were in place and the employee was instructed not to destroy information.

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ValueAct Settlement Marks Record Penalty in Heightened Agency Efforts Against HSR Act Violations

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Where is the line drawn between acquisitions of securities made “solely for the purpose of investment” on one hand, and influencing control, thereby requiring regulatory approval, on the other hand? That is the central cautionary question that was reinforced by the July 12, 2016, Department of Justice (“DOJ”) settlement with ValueAct Capital.  The well-known activist investment firm agreed to pay $11 million to settle a suit alleging that it violated the premerger reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”).  ValueAct purchased more than $2.5 billion of shares in two oil companies, Baker Hughes Inc. and Halliburton Co., after they announced they would merge.  The DOJ alleged that ValueAct used its ownership position to influence the proposed merger and other aspects of Baker Hughes and Halliburton, and thus could not rely on the exemption.

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Price Signalling Can Put Companies in Hot Water in the EU

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The long list of practices violating EU competition law just got longer: in Container Shipping, the European Commission confirmed that the unilateral publishing of pricing information, in public media, can violate Article 101 TFEU.[1]

In this case, the Commission expressed concern that the practice of fourteen container liner shipping companies (“Carriers”) to publish intentions to increase prices may harm competition. The Carriers regularly announced intended increases of freight prices on their websites, via the press, or in other ways. The announcements were made several times a year and included the level of increase and the date of implementation. The Carriers were not bound by the announced increases and some of them postponed or modified the price increases after announcement.

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European Commission Puts the Boot into Spanish Football Clubs

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On 4 July 2016, just as European football takes centre stage at the final stages of the UEFA European Championships in France, the European Commission (“Commission”) issued a decision ordering Spain to recoup tens of millions of euros of unlawful State aid granted to seven Spanish football clubs, including two of the best-known clubs in the world, Real Madrid and FC Barcelona.

The Commission’s probe was launched in December 2013, with three parallel investigations into certain public support measures granted to Real Madrid, FC Barcelona, Athletic Club Bilbao, Club Atlético Osasuna, and three Valencian football clubs, Valencia CF, Elche CF and Hercules CF.

“Protect the level playing field”

In announcing the rulings, Margrethe Vestager, Competition Commissioner, stated: “Using tax payers’ money to finance professional football clubs can create unfair competition. Professional football is a commercial activity with significant money involved and public money must comply with fair competition rules. The subsidies we investigated in these cases did not.” The Commission’s press release cites its application of State aid rules in these investigations as “protect[ing] the level playing field” for competing professional football clubs against State measures that could “prevent rivals from growing and being competitive.

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China’s Fair Competition Review System: China Takes Another Significant Step Eight Years After Enacting the Anti-Monopoly Law

Rshutterstock_99699011-2ecognizing concern that the Chinese government intervenes excessively into markets and private economic activities, the China State Council recently released opinions directing the implementation of a fair competition review system (“FCRS”), which is intended to moderate administrative authorities’ issuance of regulations and minimize the government’s interference in China’s economy. Although the CRS has been hailed as “a key step to establish the fundamental status of competition policies,”[1] its success will depend on how it is implemented.

On June 1, 2016, the Opinions of the State Council on Establishing a Fair Competition Review System During the Development of Market-Oriented Systems (“Opinions”) were promulgated and became effective.  The Opinions note that enforcement of current laws sometimes entails “local protectionism, regional blockade, industry barriers, business monopoly, granting preferential policies in violation of the law or illegally prejudicing the interests of market players, and other phenomena contrary to the efforts of building a unified national market and promoting fair competition.”  These so-called “administrative monopolies,” which often are at issue in cases investigated under the Anti-Monopoly Law (“AML”), are at cross purposes to the AML.  In an effort to reduce or eliminate obstacles to economic development, the Opinions call for limiting the government authorities’ administrative powers, establishing the FCRS, preventing new policies and measures that exclude competition, and gradually revising and ultimately abolishing existing provisions that impede fair competition.

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FTC Increases Maximum Civil Penalties for Violations of Competition Statutes

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On June 30, 2016, the Federal Trade Commission (“FTC”) announced increases to the maximum civil penalties issuable for violations of several key competition statutes.  The agency made these changes to comply with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which required the agency adjust penalty amounts for laws it enforces based on a methodology provided for by Congress.

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