Douglas Lahnborg and Matthew Rose present a comparative discussion on the recently issued National Security and Investment White Paper, which proposes a significant expansion of the UK government’s powers to scrutinize foreign investment beyond those available in other leading economies. The white paper introduces powers to intervene in a broad range of transactions in any sector, regardless of deal value, the transaction parties’ market shares, or their revenues. If the proposals are brought into force in their current form, the UK regime would be one of the most stringent in the world, with wide-ranging implications for foreign and domestic companies and projects in sensitive sectors, including technology, energy, infrastructure, telecommunications, real estate and financial services. Read more here.
In response to a recent article by former director of the U.S. Patent and Trademark Office David Kappos, Orrick Antitrust attorneys John “Jay” Jurata and Emily Luken weigh in with their perspective on the Japan Patent Office’s “Guide to Licensing Negotiations Involving Standard Essential Patents.” While they agree that the Guide provides a balanced approach to the issues, they also provide insight into how the Guide acknowledges and expands upon potential abuses of standard essential patents. Read more here.
Deputy Assistant Attorney General Matthew Miner, head of the DOJ’s Fraud Section, recently discussed the DOJ’s efforts to address corruption discovered during mergers and acquisitions. During his remarks at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance In High Risk Markets, DAAG Miner explained that the DOJ would apply the principles in the FCPA Corporate Enforcement Policy (“FCPA Policy”) to successor companies that disclose and cooperate with the agency after discovering wrongdoing in connection with a merger or acquisition.
The FCPA Corporate Enforcement Policy. The Foreign Corrupt Practices Act prohibits corporate bribery of foreign officials and requires strong accounting practices. Last year, Deputy Attorney General Rod Rosenstein announced a revised FCPA Policy to help companies understand the costs and benefits of cooperation when deciding whether to voluntarily disclose misconduct. Absent aggravating circumstances or recidivism, and provided certain conditions are met, companies that voluntarily disclose, cooperate and remediate misconduct benefit from a presumption that they will receive a declination. (9-47-120 – FCPA Corporate Enforcement Policy.) Where a criminal resolution is warranted and (again) absent recidivism, the DOJ will recommend a reduction in the fine range. (Id.)
Application in the Mergers and Acquisition Context. With respect to M&A activity, especially in high-risk industries and markets, DAAG Miner explained that application of the FCPA Policy will give companies and their advisors more certainty when evaluating a foreign deal and determining how, and whether, to proceed with the transaction. (Deputy Assistant Attorney General Matthew S. Miner Remarks at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets.) Recognizing the benefits of having companies with strong compliance programs entering high-risk markets, the DOJ wants to encourage acquiring companies to “right the ship” by enforcing robust compliance. (Id.) Not only does application of the FCPA Policy in the M&A context encourage greater corporate compliance, it also frees up DOJ resources and enables the agency to focus on other matters. (Id.)
If potential misconduct is discovered during due diligence, the DOJ recommends the company seek guidance through its FCPA Opinion Procedures. (Id.) These procedures allow a party to assess the risk by obtaining an opinion about whether certain conduct conforms with the DOJ’s FCPA Policy. (Foreign Corrupt Practices Act Opinion Procedure.) Even for companies that discover misconduct after the acquisition, the DOJ wants to “encourage its leadership to take the steps outlined in the FCPA Policy, and when they do … reward them[.]” (Deputy Assistant Attorney General Matthew S. Miner Remarks at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets.)
Takeaways. The DOJ’s approach highlights the need for strong cross-disciplinary team staffing on mergers and acquisitions. For example, white-collar counsel can advise buyers on strategy once misconduct is flagged by corporate or antitrust counsel during the M&A process. Counsel for sellers that learns of misconduct during due diligence can discuss options with the client and coordinate as necessary to take advantage of the DOJ’s policies and guidance in mitigating any issues. Moreover, counsel for either party may uncover conduct from documents reviewed or conversations with the client that should be flagged to further assess whether misconduct has occurred. It is important to keep in mind that some of these documents may get produced to the DOJ or FTC during a merger review. Entities involved in deals in high-risk markets or industries should therefore involve deal, regulatory and enforcement experts where necessary.
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
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. 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. 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
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.
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
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.
On February 1, 2018, the Northern District of California court handling the sprawling In re Cathode Ray Tube (CRT) Antitrust Litigation (“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 (“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 (“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
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.
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:
- “Is big data a big deal? A competition law approach to big data” by Greg Sivinski, Alex Okuliar and Lars Kjolbye;
- “Pricing Algorithms: Conscious Parallelism or Conscious Commitment” by Alex Okuliar and Elena Kamenir;
- “The UK High Court of Justice issues an injunction prohibiting an undertaking from selling wireless telecommunications products in Britain due to its failure to enter into a worldwide patent license” by Matthew Rose, Emily Luken and Jay Jurata; and
- “Putting China’s Fair Competition Review System Into Action” by Shelley Zhang and David Goldstein.
Voting closes on February 9, 2018.
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”), 42% of the respondents declared that they use online platforms and marketplaces to sell their products or services. 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
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.
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
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
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.
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
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 famously “convoluted” language of the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a, is typically smoothed out and restated before application by courts. 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.