Potential Antitrust Issues Lurking in Blockchain Technology

Blockchain technology has burst onto the scene and into the public consciousness over the last few years. While the securities and privacy law questions surrounding blockchain technology have received much attention, perhaps less obvious are the potential antitrust issues raised by the technology.

Although these issues are nascent, they are not wholly theoretical. For example, on March 16 the FTC announced that it is creating a Blockchain Working Group to look at, inter alia, competition policy. “Cryptocurrency and blockchain technologies could disrupt existing industries. In disruptive scenarios, incumbent companies may sometimes seek to hobble potential competitors through regulatory burdens. The FTC’s competition advocacy work could help ensure that competition, not regulation, determines what products will be available in the marketplace” (FTC Blog Post). And in January of this year, the Japan Fair Trade Commission also indicated that it may look into the competition policy issues involving blockchain-based cryptocurrencies.

This blog post briefly discusses some of the potential antitrust issues associated with blockchain technology. READ MORE

European Crackdown on Violations of Merger Control Procedural Rules Continues

Last year on this Blog we wrote about the uptick in enforcement action by European competition authorities against violations of merger control procedure (see here).

Yesterday, the UK Competition and Markets Authority (“CMA”) indicated that this trend is set to continue, issuing a fine of £100,000 for a breach of an Interim Order imposed on Electro Rent in its acquisition of Microlease. This is the first time the CMA has fined a company for such a procedural breach.

On the face of it, the fine seems harsh given that the relevant action – serving notice of termination of a lease without the CMA’s prior consent – was discussed with the appointed Monitoring Trustee prior to coming into effect.[1] Indeed, the European Court of Justice (“ECJ”) recently confirmed that parties may take certain actions without violating the standstill obligation imposed under the EU Merger Regulation – including terminating agreements – where such actions do not contribute to the implementation of a transaction.[2] In doing so, the ECJ’s ruling confirmed the commonly held view that merging parties are permitted to take certain steps allowing them to prepare for implementation of a transaction without violating merger control procedural rules.

Given the developing case law on standstill obligations, companies involved in M&A will need to revisit pre-completion protocols, noting that the EU approach seems to be diverging from the CMA’s somewhat more rigid approach to merger control. READ MORE

Out of Sync? : DOJ’s Policy Reversal Towards SEPs Lacks Legal Support

Jay Jurata and Emily Luken co-authored an article for Global Competition Review about the troubling policy shift by the DOJ’s Antitrust Division regarding the application of competition law to the assertion of standard-essential patents.

Please click here to read the full article.

Check Your Rates – Comply with FTC Variable Rate Marketing Guidelines

Rising Interest Rates Likely to Lead to Increased Scrutiny of Variable Rate Loan Marketing

On March 21, 2018 the Federal Reserve lifted its federal funds rate by a quarter percentage point to a range of 1.5% to 1.75%, the highest level since 2008. The Fed also significantly boosted its economic forecast and hinted that it may be more aggressive in its plan to continue to raise rates, signaling that the market should prepare for higher interest rates. For consumers with variable rate loan products, the rise in interest rates will result in the first substantial increase in loan payments in more than 10 years.

If history is our guide, the increase in interest rates will lead to an increase in consumer complaints of deceptive marketing for variable rate loan products. The Federal Trade Commission (“FTC”) takes such complaints seriously and has a history of investigations and enforcement actions based on deceptive marketing of financial products. For newer lenders who entered the lending marketplace after 2008, this may be the first time their variable rate marketing is scrutinized by the FTC. It’s a good time for all lenders to perform a “check-up” of variable rate marketing campaigns for compliance with the FTC’s rules and regulations and avoid allegations of deceptive or misleading ad copy.

To read the full article, click here.

CMA Launches Consultation Concerning Changes to its Jurisdiction over M&A in the Tech Sector

The UK government considers that transactions in the following sectors can raise national security concerns:

1. quantum technology;
2. computing hardware; and
3. the development or production of items for military or military and civilian use.

In order to allow the UK’s Secretary of State to intervene in transactions in these sectors, the UK government has proposed amendments to the Enterprise Act 2002 that would expand the Competition & Markets Authority’s (“CMA”) jurisdiction to review transactions in these sectors from a competition perspective. READ MORE

Stock Compensation May Trigger HSR Filing

The requirements of the Hart-Scott-Rodino (“HSR”) Act and Rules are well known to companies that engage in significant M&A transactions. But less well known is their applicability to acquisitions of stock by individuals as part of compensation practices. Especially where relatively young and successful companies are involved, HSR obligations may unexpectedly arise where equity compensation is given to founders, board members, executives, and other employees (whom we will group together and call “Insiders”). Companies and individuals potentially caught in the HSR process for this reason should ensure they are aware of the trigger rules, as a failure to file can result in significant fines.
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Chinese Company’s Use of Foreign Sovereign Immunity Defense Linked to FTAIA Standard for “Direct” Impact on U.S. Commerce

On February 1, 2018, the Northern District of California court handling the sprawling In re Cathode Ray Tube (CRT) Antitrust Litigation[1] (“CRT”) declined to enter a default judgment against related Chinese defendants, finding the companies had made a sufficient showing of immunity under the Foreign Sovereign Immunities Act[2] (“FSIA”) for the issue to be addressed on the merits more fully.  The decision by Judge Tigar turned on the court’s interpretation of the “commercial activity” exception to the FSIA’s general preclusion of jurisdiction against foreign sovereigns and their agencies and instrumentalities, an exception that requires conduct having a “direct effect” in the United States.  That statutory construction in turn was drawn from the alternative test for Sherman Act claims under the Foreign Trade Antitrust Improvements Act[3] (“FTAIA”) that requires foreign conduct have a “direct, substantial, and reasonably foreseeable” effect on U.S. commerce.  In looking to the FTAIA to interpret the FSIA, the court made a pair of assumptions that are not thought to be correct in all circuits:  That the similar (but different) FTAIA and FSIA “direct effect” provisions have the same meaning, and that the correct meaning is one in which a “direct” effect must follow ‘immediately” from the defendant’s predicate act.  The court’s decision may have implications for the construction of both the FTAIA and the FSIA, certainly in antitrust cases and, while this remains to be seen, perhaps more broadly. READ MORE

Antitrust Issues with Joint Ventures – PLI CLE presented by Howard Ullman

Orrick Antitrust Of Counsel Howard Ullman will present a Practising Law Institute (PLI) One-Hour Briefing on the topic of Antitrust Issues with Joint Ventures.  This One-Hour Briefing will analyze the potential antitrust ramifications of joint ventures and other collaborations between competitors and how to balance the pro-competitive efficiencies against the anti-competitive effects of a proposed JV.  Registration for the webcast can be found here, and to read Howard’s series on Orrick’s Antitrust Watch Blog analyzing the antitrust effects on joint ventures, click here.

2018 Antitrust Writing Awards Nominees

 

Four articles authored (or co-authored) by Orrick attorneys have been nominated for a 2018 Antitrust Writing Award from Concurrences, published by The Institute of Competition Law.  Concurrences picks its Antitrust Writing Award winners in part by popular vote.  You can view the articles and cast your vote(s) here:

 

 

Voting closes on February 9, 2018.

Enhancing Fairness in Platform-to-Business Relations in the EU Through a Change of Legal Landscape

Online platforms have become a crucial infrastructure for businesses. They enable small businesses to have easy access to millions of potential customers and create an unprecedented choice of products and services for them. According to a recent Eurobarometer survey on the use of online marketplaces and search engines by small and medium-sized enterprises (“SMEs”),[1] 42% of the respondents declared that they use online platforms and marketplaces to sell their products or services.[2] This survey also indicates that 82% of the respondents rely on search engines to promote and sell their products or services. In short, online platforms play a key role in the growth of the economy and help the digital transformation of small businesses. READ MORE

Intellectual Ventures Wins Summary Judgment to Defeat Capital One’s Antitrust Counterclaims

Patent License agreement on a table Intellectual Ventures Wins Summary Judgment to Defeat Capital One’s Antitrust Counterclaims

Antitrust partner David Goldstein recently wrote an article for the Antitrust, UCL and Privacy section of the State Bar of California regarding Intellectual Venture’s recent summary judgment win to defeat Capital One’s antitrust counterclaims asserted in response to IV’s patent infringement claims. The decision addresses recurring issues involving patent assertion entities, including the definition of the relevant market, the Noerr-Pennington doctrine, and collateral estoppel. The article can be accessed here.

Don’t Hold Back: FTC Offers New Guidance on HSR Filing Obligations

As discussed previously on this blog, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires parties to certain proposed transactions to submit detailed premerger notification filings and wait for clearance before consummating the deal. To facilitate the antitrust review, merging companies that meet the HSR thresholds are required to submit a wealth of information about their businesses and the proposed transaction, including annual reports, market analyses, and agreements and other documents bearing on the deal. Despite these broad requirements, the FTC found that some merging companies were withholding side agreements relevant to the antitrust review process on the theory that they were ancillary to the main agreement and/or protected by a common interest privilege or joint defense agreement. READ MORE

Antitrust Analysis of Joint Ventures: How Big Is Too Big?

In the first post in this series, we introduced the concept of joint ventures (“JVs”), outlined why antitrust law applies to their formation and operation, identified the major antitrust issues raised by JVs, and discussed why you should care about these issues.  In the second installment, we unpacked some of the major antitrust issues surrounding the threshold question of whether a JV is a legitimate collaboration.  The third post in the series discussed ancillary restraints–what they are and how they are analyzed. READ MORE

Putting China’s Fair Competition Review System Into Action

National emblem of the People's Republic of China Law360 Article on Putting China’s Fair Competition Review System Into Action by Shelley Zhang and David Goldstein

In June 2016, China promulgated a Fair Competition Review System (FCRS), which is intended to ensure that competition agencies foster competitive markets in China.  Recently, China’s competition agencies jointly issued the Implementing Rule of the Fair Competition Review System, which provides guidance regarding the FCRS,  including review mechanisms and procedures, review criteria, policy guidance, and supervision and accountability.  Orrick partners Shelley Zhang and David Goldstein have published an article, “Putting China’s Fair Competition Review System Into Action,” in Law360 today providing an overview of the implementing rules.  Click here to access the article.

 

 

First Person Extradited From Europe to the United States for Criminal Antitrust Charges—Continued

Can Germany extradite an EU national to the United States for criminal prosecution when Germany’s own nationals are protected from extradition? This question has been put to the European Court of Justice, and the court’s advisor, Advocate General Yves Bot, has said “yes”. READ MORE

Gun-Jumping Continues To Be Serious Infringement in EU

Like many other merger control regimes, the EU merger control regulation (Regulation No. 139/2004, hereinafter “EUMR”) imposes certain obligations on parties to mergers and acquisitions that come under the jurisdiction of the European Commission. In particular, a transaction must be notified to the Commission prior to its implementation, and the parties must not implement the transaction until it has been cleared by the Commission. Failure to comply with the notification or the “standstill” obligations may result in a fine of up to 10% of the worldwide group turnover for each party. READ MORE

The Convoluted Language of the FTAIA Again Supports Dismissal of Antitrust Claims Having Extraterritorial Focus

The famously “convoluted”[1] language of the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a, is typically smoothed out and restated before application by courts.[2]  The actual statutory language must be honored, however, and occasionally fidelity to that language has led to the dismissal of claims on grounds that they seek an impermissibly extraterritorial application of the antitrust laws.  A few illuminating examples appear in the recent Southern District of New York decision in Biocad, JSC v. F. Hoffmna-La Roche, Ltd.[3]

READ MORE

Is Big Data a Big Deal? A Competition Law Approach to Big Data

Big Data Wordcloud Concept with the word big data in large block letters in red color surrounded by a cloud of related words in blue European Competition Journal article proposing a framework to determine the competitive significance of big data

Orrick Antitrust & Competition partner Alex Okuliar has co-authored an article in the European Competition Journal with Greg Sivinski, Assistant General Counsel in the Competition Law Group at Microsoft, and Lars Kjolbye, a partner at Latham & Watkins in Brussels, in which they propose a framework to determine the competitive significance of data.  The framework first considers whether the parties own or control the relevant data. The second consideration is whether the relevant data is commercially available as a product or as an input for products of downstream competitors. The third consideration is whether the relevant data is proprietary to the owner’s or controller’s products or services and a competitively critical input. The last consideration is whether reasonably available substitutes for the relevant data exist or whether the data is unique.

The article can be accessed here.

 

Big Data: German Antitrust Decision Regarding Facebook Expected in 2017

As more internet users entrust their personal data to operators of websites, operators’ use of this “Big Data” has become a growing concern. As a result, government agencies around the world are grappling with whether and how to regulate “Big Data” in the context of social networking websites.  This includes some competition authorities that are trying to expand their purview by using competition laws to regulate “Big Data” in the context of social media.  The possibility that competition authorities around the world may try to become super regulators of “Big Data” should be of concern to all operators of social networking websites.

A case in point is the German competition authority (FCO), which in March 2016 initiated proceedings against one of the most popular social networking sites – Facebook – purportedly based on a concern that it may have infringed data protection rules. Since the case is the first of its kind in Europe, the outcome – which is expected before the end of the year – is awaited with great interest.

READ MORE

UK High Court of Justice Issues an Injunction Prohibiting Huawei from Selling Wireless Telecommunications Products in Britain Due to its Failure to Enter Into a Worldwide Patent License

Orrick antitrust practice team attorneys Matthew G. Rose, Jay Jurata and Emily Luken recently published an article in the e-Competitions Bulletin August 2017 discussing the implications of the UK High Court of Justice ruling that enjoins Huawei from selling wireless telecommunications products in Britain due to Huawei’s failure to enter into a patent license for Unwired Planet’s worldwide portfolio of standard-essential patents (SEPs), even though Huawei was willing to enter into a license for Unwired Planet’s United Kingdom (UK) SEPs.

The article examines the potential competitive harms that would result from a regime in which licensees are required to take worldwide SEP licenses.