On January 12, 2017, the Court of Justice of the European Union (“CJEU”) dismissed Roullier group’s appeal and thereby confirmed a fine of €59,850,000 imposed by the European Commission (“EC”) in the phosphates cartel case. This blog post summarizes the decision and discusses the CJEU’s reasoning, which provides valuable guidance to a firm in a cartel investigation that is evaluating a settlement proposal from the EC. In particular, the firm must weigh the fact that, pursuant to the CJEU’s decision, the EC may ultimately impose fines greater than those it proposed in a rejected settlement offer, even if it determines that the firm’s cartel participation was significantly less than it thought at the time of settlement discussions.
Last September, we discussed the U.S. Court of Appeals for the Second Circuit’s opinion in In re Vitamin C Antitrust Litigation vacating a $147 million judgment against Chinese vitamin C manufacturers based on the doctrine of international comity. That case stemmed from allegations that the defendants illegally fixed the price and output levels of vitamin C that they exported to the United States. In reversing the district court’s decision to deny the defendants’ motion to dismiss, the Second Circuit held that the district court should have deferred to the Chinese government’s explanation that Chinese law compelled the defendants to coordinate the price and output of vitamin C.
Joint ventures (“JVs”) can require navigation of a potential minefield of antitrust issues, which we’ll explore in a series of six blog posts beginning with this introductory post. Not all of the law in this area is entirely settled, and there remain ongoing debates about some aspects of the antitrust treatment of JVs. Indeed, arriving at a coherent and unified view of JV law is like putting together a jigsaw puzzle with missing and damaged pieces.
On January 13, 2017, the U.S. Department of Justice and the Federal Trade Commission issued their updated Antitrust Guidelines for the Licensing of Intellectual Property, first issued in 1995, which explains how the two agencies evaluate licensing and related activities involving patents, copyrights, trade secrets and know-how. Although the agencies have issued a variety of reports since 1995 regarding antitrust and IP issues, this is the first comprehensive update of the Guidelines. The final updated Guidelines do not differ significantly from the proposed Guidelines released in August 2016, which we analyzed in this blog post.
Also on January 13, 2017, the DOJ and FTC issued their revised Antitrust Guidelines for International Enforcement and Cooperation, first issued in 1995 as the Antitrust Enforcement Guidelines for International Operations. These Guidelines explain the agencies’ current approaches to international enforcement policy and their related investigative tools and cooperation with foreign enforcement agencies. The revised Guidelines differ from the 1995 Guidelines by adding a chapter on international cooperation, updating the discussion of the application of U.S. antitrust law to conduct involving foreign commerce (e.g., the Foreign Trade Antitrust Improvement Act, foreign sovereign immunity, foreign sovereign compulsion, etc.), and providing examples of issues that commonly arise.
In June 2016, China’s State Council issued its Opinions of the State Council on Establishing a Fair Competition Review System During the Development of Market-oriented Review System (“Opinions”). The fair competition review system (“FCRS”) that the Opinions contemplate is designed to protect against the potential abuse of administrative power by Chinese government agencies that could result in anti-competitive effects. In other words, the FCRS is supposed to constrain government activities from unduly influencing market competition, consistent with the prohibition that China’s Anti-Monopoly Law places on such conduct.
The development of a digital single market is a key objective for the European Union. As Jean-Claude Juncker, President of the European Commission (“EC”) said in September, “We need to be connected. Our economy needs it.” Although this economic policy objective was initiated when the EC published its communication on the Digital Single Market Strategy for Europe in 2015, the various proposals it contains need to be formally adopted and implemented in the EU. This process is now underway.
The EU’s commitments contained in the Telecoms Single Market Regulation of 2015 to end roaming charges for periodic travel in the EU required the EC to adopt rules by 15 December 2016. A transition period—starting from 30 April 2016 to 15 June 2017—has been established to make the abolition of roaming charges sustainable throughout the EU without an increase in domestic prices. On December 8, the EC sent an implementing draft on the end of the roaming charges to the representatives of Member States (via the Communications Committee (“COCOM”)). They voted on the text on December 12, and the EC will adopt these new rules regarding the retail market in the coming days. READ MORE
On November 17, 2016, Jon Sallet, DOJ’s Deputy Assistant Attorney General for litigation, presented a speech at the American Bar Association Antitrust Section’s Fall Forum in which he outlined his views regarding the DOJ’s approach to vertical mergers and other transactions that raise the potential for vertical restraints on competition. After recapping some of the history regarding the DOJ’s treatment of vertical restraints, Mr. Sallet commented on issues such as merger-related efficiencies, competitive effects, input foreclosure and raising rivals costs, innovation effects, the exchange of competitively sensitive information that could harm interbrand competition, and potential anticompetitive effects in transactions that do not involve a combination of vertically related assets. Finally, he noted that if the DOJ has concerns regarding anticompetitive effects, it might feel that conduct remedies are insufficient and may require structural remedies or even try to block the transaction. Any company considering a vertical merger or a transaction that may raise the potential for vertical restraints on competition will benefit from reviewing Mr. Sallet’s speech. The speech is available here.
In an October surprise, the DOJ and FTC (collectively, the “Agencies”) released guidance for HR professionals on the application of the antitrust laws to employee hiring and compensation. The Agencies’ October 20, 2016 release, Antitrust Guidance for Human Resource Professionals, announced that “naked” agreements among employers not to poach each other’s employees and to fix wages and other terms of employment are per se illegal. Critically, for the first time, the Agencies warn that such agreements could result in criminal prosecution against individual HR professionals, other company executives, as well as the company. This Guidance, coupled with repeated requests to approach the Agencies to report such agreements, signals a significant shift in enforcement focus for the Agencies, including a further move to individual prosecutions, particularly when taken together with last year’s DOJ Yates Memorandum calling for more emphasis on individual executive liability.
Although China and Japan have very different histories regarding their antitrust laws, antitrust enforcement officials from the two countries have recently taken steps to open a formal dialogue. This is a welcome development for Chinese and Japanese companies, as well as for foreign companies that do business in China and Japan, and it continues the trend of increased communication, cooperation and coordination among national enforcement agencies. There remains an open question, however, as to how convergence among Asian antitrust enforcement agencies will affect possible convergence with agencies in the United States, the European Union and the rest of the world.
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.
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.
Recognizing 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,” 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.
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.
Over the past decade, the Japan Fair Trade Commission (JFTC) has increased its criminal enforcement of Japan’s antitrust law, the “Act on Prohibition of Private Monopoly and Maintenance of Fair Trade,” commonly known as the Anti-Monopoly Act. This trend is likely to continue because last month Japan’s Diet amended the Code of Criminal Procedure to introduce a plea bargaining system that creates an incentive to report antitrust violations committed by others. The new plea bargaining system, which applies to crimes such as antitrust, fraud, bribery and tax evasion, will be implemented in Japan within 2 years.
For the past several years, plaintiffs and defendants in international price-fixing cases have battled over the extraterritorial application of the Sherman Act in light of the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), 15 U.S.C. § 6a, and the U.S. Supreme Court’s seminal decision in F. Hoffman-LaRoche Ltd. v. Empagran, S.A., 542 U.S. 155 (2004). Although the Supreme Court passed on an opportunity to clarify the scope of the FTAIA when it denied petitions for certiorari following decisions in Hsuing v. United States, 778 F.3d 738 (9th Cir. 2014), as amended (Jan. 30, 2015), and Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816 (7th Cir. 2014), as amended (Jan. 12, 2015), the Court’s decision in RJR Nabisco v. European Community—which addresses the extraterritorial application of the federal RICO statute—may provide some insight into how it views antitrust claims based on foreign injuries under the FTAIA.
On June 14, 2016, U.S. District Judge Jorge Alonso, of the Northern District of Illinois, denied a motion for preliminary injunction by the Federal Trade Commission (“FTC”) and the Attorney General for the State of Illinois, seeking to block the proposed merger between Advocate Health Care and the NorthShore University Health System (“NorthShore”) in the Chicago metropolitan area. According to Judge Alonso’s opinion released on June 20, the Plaintiffs failed to prove a relevant geographic market, the lack of which the Court deemed fatal to the Plaintiffs’ case.
This loss could be a blow for the FTC’s health care competition enforcement program. It is the agency’s second loss in district court this year in a hospital merger challenge. Additionally, as we noted in our May 13, 2016 blog post concerning the FTC’s earlier loss on the Hershey merger—now on appeal to the Third Circuit—both cases reflect push-back by courts against what to this point have been highly successful FTC market definition and consumer harm arguments in hospital merger cases.
On Monday, June 7, the Supreme Court requested the views of the Solicitor General in connection with a petition for certiorari filed by the U.S. subsidiary of GlaxoSmithKline plc (“GSK”) in SmithKline Beecham Corp. v. King Drug Co. of Florence, No. 15-1055. The Supreme Court’s request seems less directed to rethinking its seminal ruling in FTC v. Actavis on the lawfulness of “reverse-payment” settlements of Hatch-Waxman cases than to a concern that, in some specific ways, its decision may have created some unintended consequences.
Are patients receiving the best care in hospitals? The German competition authority – Bundeskartellamt – has now decided to apply a health check to the German hospitals market.
On May 31, 2016, the German competition authority announced that it was launching a so-called “sector inquiry” into the hospital services market to examine the degree of competition in that sector of the economy.
Businesses often wonder how competition authorities pick and choose the cases they decide to bring. Companies with operations in Europe now have some guidance as a result of a recent speech by European Competition Commissioner Margrethe Vestager, in which she outlined how the Commission prioritizes its enforcement efforts.
Commissioner Vestager explained that the Commission uses three main criteria in prioritizing which cases to pursue. Not every case needs to satisfy all three criteria, but the Commission tries to keep these three objectives in mind in determining whether to pursue an enforcement action.
On June 1, 2016, FTC Commissioner Maureen Ohlhausen delivered remarks in Hong Kong, pushing back on recent news reports implying that the United States currently suffers from a “monopoly problem” causing a reduction of competition in the marketplace. Recent articles and opinion pieces in The Economist and The New York Times suggest that the consolidation of market power, and lack of antitrust enforcement preventing such consolidation, are having a noticeable effect and harming consumers and innovation. Indeed, the precursor to these reports—an April 14, 2016 report from the Council of Economic Advisers (“CEA”), entitled “Benefits of Competition and Indicators of Market Power,” argues there has been a decline of competition in certain parts of the U.S. economy due the concentration of monopoly power in the hands of a select few players in certain industries (e.g., airlines, cable, networking). The CEA report suggests U.S. agencies should explore how certain factors—the use of Big Data, increased price transparency, and common stock ownership—affect competition. As a result of the CEA report, President Obama issued an Executive Order on April 15, 2016, directing antitrust enforcement agencies to use their authority to “promote competition.”