Here - MLex

Transcription

Here - MLex

Wa s h i n g t o n D C
APRIL 14-17, 2015
MLEX IN WASHINGTON:
Report from the 63rd ABA Antitrust Law
Spring Meeting
1 | A n t i t ru s t L aw S p r i n g M e e t i n g 2015
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Letter from the Editor-in-Chief
While global mergers and antitrust compliance were the talk of this year’s
American Bar Association Antitrust Spring Meeting, two events that
occurred outside the conference eventually dominated discussions.
The European Commission’s decision to file antitrust charges on the first
morning of the conference against Google was certainly timed for effect.
While a Google lawyer argued that that data was “more like sunshine…
something we can all lie in”, Commissioner Vestager responded to
inevitable accusations of protectionism. Indeed, European companies
are likely to bear the brunt of the dozen or so active investigations the
regulator is currently undertaking.
The U.S. 11th Circuit Court of Appeals the same day affirmed the FTC
decision that pipe fittings company McWane had harmed competition by
unfairly using its monopoly power. While monopolization cases come by
from time to time in Europe, for more junior lawyers the court’s decision
on McWane was the first affirmation of such an FTC case in the US in
their lifetime.
Shifting to mergers, US officials warned that they must remain vigilant
rather than shying away from over-enforcement, since some merger
ideas should “never get out of corporate headquarters”. Indeed, FTC
commissioner Brill argued for more analysis of where the FTC had cleared
mergers that it shouldn’t have – so-called Type 2 errors.
As single firm conduct charges and closer scrutiny of mergers add to the
regulatory risk mix, the conference also ventured into the bribery, fraud
and insider dealing cases that are springing up around the world. Keep an
eye out for MLex’s new White Collar Compliance service to be launched
later this year.
I hope that this selection of our proprietary coverage from the event will
be useful for you.
Robert McLeod, Editor-in-Chief, MLex
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We hope you enjoy our complimentary
special report, encompassing MLex’s
proprietary coverage of the 63rd
Spring Meeting of the American Bar
Association’s Section of Antitrust
Law in Washington DC.
Over the course of the three-day event, journalists from MLex bureaux in
Washington, San Francisco, São Paulo, China and Brussels attended panel
discussions and networking events, meeting with their broad base of leading
regulatory, competition and legal contacts.
We are pleased to present you with our unrivaled insight, analysis and commentary
on the key themes in antitrust from around the world.
To inquire about seeing the coverage in full, including all the background case
files that accompany our articles, or to inquire about access to MLex’s content in
general, please contact: [email protected].
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I. Antitrust
CONTENTS
I. Antitrust
US
Regulatory Approach
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Holder praises DOJ antitrust actions, expects ‘significant’ criminal cases in ‘next few weeks’
DOJ, FTC continue focus on monopolization, with ‘more to come’
Justice Department not deterred by fear of losing in court, top official says
‘Double-counting’ of cartel penalties rare, DOJ official says
Foreign companies get largest antitrust fines because of calculation method
Antitrust harm should lead to disgorgement, Baer says
McWane ruling shows qualitative economic evidence can be enough to make case
Excluding rivals through product-design changes warrants close scrutiny
Clarity on conditional pricing more likely by case law than DOJ guidance
FTC creates new litigation support unit for consumer-protection cases
DOJ ‘optimistic’ about future extraditions
‘Don’t overread’ DOJ letter to IEEE, top official says
Daubert motions ‘overused,’ US judge says
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Supreme Court’s Actavis precedent should apply to settlements over follow-on biologics
Large data stores aren’t an ‘unbeatable’ advantage, Google lawyer says
FCC lawyer says antitrust, consumer protection have role in protecting open Internet
Antitrust will help guide growth of ‘sharing economy’
FTC official criticizes laws handcuffing Uber, Tesla
McWane lawyer critical of antitrust ruling, as company pledges appeal
Supreme Court case may spur deregulation of professions
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CANADA
Regulatory Approach
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Canadian antitrust chief eyes closer cooperation with US
Poor international cooperation on cartels leading to remedy issues
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I. Antitrust continued
EUROPE
Regulatory Approach
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US companies aren’t unfairly targeted in EU probes, Vestager says
UK to boost criminal, civil cartel enforcement, says antitrust chairman
New UK group-claims law won’t lead to litigation ‘flood,’ agency chief says
Public price-signaling may be as damaging as private exchanges, UK official says
Officials must be mindful of drawn-out cartel probes, Italian antitrust official says
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Google-like companies don’t always break law by promoting own services, lawyer says
Distribution restrictions ‘high on agenda,’ says EU’s Italianer
Distribution arrangements need antitrust attention, Belgium’s Steenbergen says
Banks’ signaling of interest rates needs scrutiny in Norway, regulator says
Energy monopolies complicate national antitrust enforcement in EU, Polish regulator says
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CHINA
Regulatory Approach
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Conduct, not price, is central to antitrust probes, says NDRC official
NDRC needs ‘more active’ enforcement and further study of digital industries
SAIC to apply ‘rule-of-reason’ principle in antitrust enforcement in IP
China urged to observe international antitrust norms
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JAPAN
Regulatory Approach
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Japan to designate antitrust hearing officer this month
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I. Antitrust continued
BRAZIL
Regulatory Approach
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No cartel-fine discounts for compliance programs, says Brazilian antitrust chief Brazilian regulator warns of impasse without nominations for new councillors CADE open to ‘mix’ of professionals in top agency positions Brazil’s antitrust comfort process can’t circumvent antitrust investigations, watchdog’s president says 49
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· CADE will fight to reinstate cartel fine on Abbott, Eli Lilly, Bayer, others · Still premature to hold settlement talks in Petrobras probe, CADE’s top investigator says · Petrobras probe won’t dominate CADE’s year, regulator says 53
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MEXICO
Regulatory Approach
· Mexico’s competition woes not down to anticompetitive conduct 6 | A n t i t ru s t L aw S p r i n g M e e t i n g 2015
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II. Mergers
II. Mergers
US
Regulatory Approach
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US merger filings, in-depth antitrust reviews on the rise Timid merger enforcement could prompt price rises, warns Brill Regional offices will handle more merger cases, FTC’s Feinstein says
DOJ is performing systematic analysis of remedies imposed, top economist says
Hertz-Dollar Thrifty deal has affected how FTC considers divestitures
Courts unlikely to allow efficiencies defense if FTC rejects it, commissioner says FTC should issue more closing statements, says commissioner Mega-merger trend presenting increased antitrust risk, DOJ enforcer says Defendants are unharmed if denied access to agency’s ‘work product,’ DOJ top litigator says CEO often shouldn’t be initial defender of deal to regulators, US enforcer says CFIUS risk explained 57
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· Comcast, TWC merger faces probes in 25 US states · Denying public access to documents in St. Luke’s trial was ‘tough’ call 68
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EUROPE
Regulatory Approach
· Vague German, UK rules jeopardize minority shareholding investments, lawyer says
· Authorities could pitch merger remedies to ease reviews, Italian official says
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CHINA
Regulatory Approach
- Behavioral fixes account for 70 percent of Mofcom’s deal remedies, lawyer says
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II. Mergers continued
BRAZIL
Regulatory Approach
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Brazilian antitrust watchdog to offer further merger-review clarity with new guidelines
Cooperation with agencies abroad guides Brazilian competition policy
CADE could again consider changing associative contracts resolution, president says
Brazil may need to cut back on minority-shareholding notifications
Brazilian antitrust watchdog has no preference of merger-remedy type
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CADE probes several non-reportable transactions
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III. Digital & Data
IV. Corruption & Compliance
III. Digital & Data
US
Regulatory Approach
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Federal judge expresses skepticism of FTC’s authority over data breaches
Action under online-shopper law to ‘grow,’ say enforcers
Digital advertisers need to consider disclosures for ‘ordinary consumer’
FTC to issue more guidance on native advertising, Rich says
Growth in national data-localization rules a ‘pernicious’ trend, US trade official says
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Judgment against Siemens executive over compliance failure triggers broader concerns
Reckitt Benckiser moves to ‘prevention’ model of compliance
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Contributors
CONTRIBUTORS
Jeff Bliss
Can Celik
Lewis Crofts
Jeff is MLex’s senior reporter for US mergers and
acquisitions. He has worked for more than 25 years
as a reporter and editor at a range of publications
and services. Most recently, he spent 14 years
as a reporter at Bloomberg, covering a number
of beats in Washington DC, including antitrust,
Congress, the White House, the Department of
Homeland Security and intelligence agencies. Before
that Jeff was a senior editor at Computer Reseller
News, where he covered IBM and other hardware
companies, and an assistant editor at a daily
newspaper, the Staten Island Advance.
Can covers antitrust enforcement and civil litigation
for MLex. He graduated from Cornell University
in 2007 with a BA in economics and received his
JD from American University Washington College
of Law in 2010. He is currently a member in good
standing of the New York State Bar.
Lewis leads the agency’s coverage on competition
policy and enforcement in Europe, writing
extensively on issues of cartels, regulation and
state aid. He has also written for several years on
litigation before courts in Luxembourg, London,
Germany and the U.S. A graduate of Oxford
University, Lewis worked in academia at the Charles
University, Prague, before becoming a journalist.
Flavia Fortes
Eliot Gao
Chief Regulatory Consultant, China Antitrust
Global Head of Mergers
Flavia writes about merger control, antitrust
enforcement and litigation in the U.S. and Brazil.
Flavia has worked as an Antitrust Consultant
in the Federal Trade Commission’s Office of
International Affairs and as a Research Fellow for
the American Antitrust Institute. She has written
on the intersection of antitrust law and intellectual
property law in technology-driven and innovative
markets. Flavia holds a LL.M. in intellectual
property from the George Washington University
Law School and a Bachelor of Laws from the
Universidade Federal de Minas Gerais in Brazil. She
is admitted to the bar in New York and Brazil.
Eliot writes about merger control, antitrust
enforcement and litigation in China. Prior to
working for MLex, he worked at the Financial
Times and Dow Jones Newswires, where he
specialized in the economic and financial coverage.
He has an acute understanding of the country’s
regulatory system and government, writing
extensively on regulation and investment policy
issues. He received a Master’s in journalism from
Shantou University.
Dafydd oversees MLex’s global merger coverage.
A specialist in European Commission merger
investigations, he holds an LLM in European
Community Law from the London School of
Economics and Political Science. Before joining
MLex, he worked as Best Practice Manager at
Norton Rose LLP in London, legal researcher with
Cardiff University Law School, and in the Banking
& Finance division of Eversheds law firm.
Senior Reporter
Merger Analyst
Assistant Editor, North America
Chief Correspondent
Dafydd Nelson
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Contributors continued
F T C : W AT C H
Leah Nylen
Ana Rita Rego
Claude Marx
Leah writes about cartels, class actions and
litigation in the U.S. She previously covered
legislation and regulation for Congressional
Quarterly and Bloomberg, and received a Master’s
from Northwestern University’s Medill School of
Journalism
Ana Rita is spearheading MLex’s coverage of Brazil.
She spent five years at MLex writing about antitrust,
state aid and legislative change in the EU. She also
contributes on a regular basis to MLex’s court
reporting service. Ana Rita holds a Master’s degree
from the Institute d’Etudes Politiques de Paris
and studied journalism in London. She works in
English, Portuguese, French and Spanish.
Claude covers the Federal Trade Commission, the
Department of Justice and related congressional
panels, focusing on the intersection of government
and business, with a special emphasis on antitrust
and consumer protection issues. Having previously
written for the Associated Press and Congressional
Quarterly, he is also writing a biography of William
Howard Taft. Claude has a BA from Washington
University, and an MA from Georgetown.
Chief Correspondent, North America
Chief Correspondent, MLex Brazil
Reporter, FTC:Watch and MLex
F T C : W AT C H
Mike Swift
Richard Vanderford
Reporter
Associate Editor, FTC:Watch
Formerly chief Internet reporter for the San Jose
Mercury News and SiliconValley.com, Mike has
covered Google, Facebook and Yahoo closely as
he followed trends in search, the mobile web and
online social networks. A former John S. Knight
Fellow at Stanford University, Swift is a graduate of
Colby College. He is an award-winning journalist
with expertise ranging from the business of
professional sports to computer-assisted reporting.
Richard covers antitrust and financial services in
New York, as well as competition developments
in Canada. A graduate of New York University’s
journalism school, he covered litigation in
Manhattan before joining MLex.
Kirk covers the White House, Senate, labor,
lobbying and telecommunications at MLex
subsidiary FTC:Watch. He is an award winning
journalist, having spent over 20 years at the
National Journal, the Washingtonian, Governing
and The Fiscal Times. He has degrees from Antioch
School of Law, Columbia’s Graduate School of
Journalism and Williams College, and practiced in
the Justice Department’s Civil Division.
Senior Correspondent, Internet, Media and Telecom
Kirk Victor
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I. Antitrust | US | Regulatory Approach
Holder praises DOJ antitrust actions,
expects ‘significant’ criminal
enforcement news in ‘next few weeks’
The US Department of Justice won’t shrink from challenging anticompetitive conduct
and mergers in court, the top US prosecutor said Friday, suggesting that major criminal
antitrust enforcement action is expected in the coming weeks.
US Attorney General Eric Holder made his most substantive comments on antitrust
since taking office in 2009.
“Whether it involves price-fixing of computer components or bid-rigging in real-estate
foreclosure auctions, we have pursued all forms of criminal conduct — running the
gamut from local wrongdoing to transnational crime,” Holder said. “I expect that there
will be more significant news on the criminal side within the next few weeks.”
Holder praised the division’s criminal enforcement efforts, which under the Obama
administration have led to the prosecution of 385 individuals and 129 companies. Those
prosecutions resulted in more than $5 billion in criminal fines — with $1.3 billion of
that in the most recent fiscal year, he said.
“No matter how lengthy the investigation, no matter how challenging the environment,
and no matter how complex the practice or industry at hand, we will never shrink
from litigation nor shirk our sacred responsibility to uphold the laws of our nation
and protect the consumer,” said Holder, who is to step down once his replacement is
confirmed by Congress. “There is no unlawful conduct too complicated to pursue, and
no company or individual too large or too powerful to be held accountable.”
“No matter how lengthy the investigation, no matter how
challenging the environment, and no matter how complex
the practice or industry at hand, we will never shrink from
litigation nor shirk our sacred responsibility to uphold the
laws of our nation and protect the consumer”
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DOJ, FTC continue focus on
monopolization, with ‘more to come’
The US Department of Justice and the Federal Trade Commission have multiple open
investigations into abuse of dominance, senior officials said.
Sonia Pfaffenroth, chief of staff at the DOJ’s antitrust division, rejected the notion
that the agency hasn’t been focused on monopolization issues, which are prosecuted
under Section 2 of the Sherman Act, the US’s primary competition law. The DOJ last
brought a Section 2 case in 2011 against a Texas hospital that used exclusive contracts
with commercial health insurance providers to maintain its monopoly power.
“I wouldn’t consider us to have been dormant in recent times,” Pfaffenroth said. “Is
the division still focused on Section 2 enforcement? Absolutely we are. Do we have
investigations pending now that are exploring Section 2 theories? Yes, we do.”
Stephen Weissman, deputy director of the FTC’s Bureau of Competition, said that his
agency has been “appropriately active,” having brought seven cases since 2010 involving
allegations of monopolization and abuse of dominance.
“There’s going to be more to come,” Weissman said. “We certainly appreciate that
too much activity can deter procompetitive behavior. At the same time, we are equally
mindful too little activity in the area can chill the types of competitive process that we
are seeking to protect.”
“We are…mindful [that] too little
activity in the area can chill the types
of competitive process that we are
seeking to protect”
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Justice Department not deterred by
fear of losing in court, top official says
The US Justice Department will not shy away from litigation for fear of losing, a senior
official said.
“If we are right on the law, right on the facts and right on the economics, fear of
losing is not going to make us shy away from litigation,” said Mark W. Ryan, director of
litigation for the department’s antitrust division.
An analysis of the odds of courtroom success doesn’t drive decisions on whether to
bring a case, but does provide “incentive to make sure we do everything we can do to
put on the strongest possible case,” said Ryan, who is leaving the agency at the end of
the month to return to private practice.
The department has had a string of notable successes in antitrust cases, including a
February victory over American Express in a case challenging its so-called anti-steering
rules.
Ryan, who said that his opinions were his own and not necessarily those of the
department, added that the department does often base decisions on whether to bring
a case on whether it thinks the markets can provide a remedy.
The Justice Department “wants to err on the side of letting markets work things out,”
he said.
“[We] want to err on the side of letting markets
work things out”
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‘Double-counting’ of cartel penalties
rare, DOJ official says
US prosecutors aren’t obligated to consider fines imposed by other antitrust regulators
when calculating their own criminal penalties, the US Department of Justice’s top
criminal antitrust official said.
While the DOJ’s antitrust division will sometimes take other fines into account, Brent
Snyder, the deputy assistant attorney general for criminal antitrust enforcement, said
situations where double-counting arises are very rare.
“If another jurisdiction imposes fines, we’re not obligated to take that into account,”
said Snyder. “Our fines are calculated using direct US imports. It would be rare for us
to exclude price-fixed products directly imported into United States” from a company’s
fine.
Snyder said that in the agency’s air-cargo investigation, the DOJ coordinated with other
jurisdictions to take into account foreign fines for the same conduct. But Snyder, who
worked as a prosecutor on the air-cargo case and several other international price-fixing
cases before taking his current post, said that situations of true double-counting are
scarce.
“I’m aware of very few concrete instances of double-counting,” Snyder said. “It is the
great exception rather than the rule.”
Speaking at a different panel in the same conference, Kristen Limarzi, chief of the
antitrust division’s appellate section, also said that concerns about double-counting are
somewhat “overblown.”
“We haven’t encountered this very frequently,” Limarzi said, adding that there’s little
evidence that cartel conduct is being over-prosecuted.
“If another jurisdiction imposes fines, we’re not
obligated to take that into account”
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Foreign companies get largest
antitrust fines because of calculation
method, DOJ’s Baer says
The US’s largest criminal antitrust fines have been imposed on foreign companies
because of the way fines are calculated and the fact that more major multinational
companies are based abroad, the top US antitrust prosecutor said Friday.
Bill Baer, deputy attorney general of the antitrust division at the Department of
Justice, said the US calculates fines based on the volume of affected commerce, and
international cartels “inevitably” affect large economies, leading to larger fines.
“It turns out that of Fortune 500 companies, 75 percent of them now are non-US
based,” he said. “So the fact that the distribution would be the way it is at a given
moment in time is not shocking.”
The largest fine the antitrust division has ever obtained, $500 million in the LCD pricefixing case, came against AU Optronics, a Taiwanese maker of LCDs. The second
highest fine, $470 million, was against Japanese auto parts manufacturer Yazaki.
“It turns out that of Fortune 500 companies,
75 percent of them now are non-US based”
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Antitrust harm should lead to
disgorgement, Baer says
Antitrust violators who harm consumers or the government should pay for it by turning
over profits, US Assistant Attorney General William Baer said Friday, emphasizing the
government’s commitment to disgorgement as a remedy.
“If you do wrong, you shouldn’t be able to pocket the dollars from your wrongdoing,”
Baer said. “That goes back to consumers, and goes back to the government.”
Edith Ramirez, the chairwoman of the US Federal Trade Commission, also said that
disgorgement can be valuable when a fix such as an injunction would not be enough.
A federal judge in Pennsylvania said this week that the FTC can seek disgorgement in a
case it brought against Cephalon over alleged attempts to prevent generic competition,
a decision Ramirez highlighted.
Baer said that the Justice Department has focused on disgorgement in situations where
it believes wrongdoing has occurred, including bad mergers and joint ventures that have
raised prices.
“If you do wrong, you
shouldn’t be able to
pocket the dollars from
your wrongdoing”
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McWane ruling shows qualitative
economic evidence can be enough to
make case, Brill says
An appeals court ruling upholding the Federal Trade Commission’s finding that
McWane’s rebate program violated antitrust law shows that qualitative economic
evidence can be sufficient to establish a violation, Commissioner Julie Brill said.
The US Court of Appeals for the Eleventh Circuit rejected McWane’s contention that
the agency didn’t produce enough economic evidence — in particular, the agency didn’t
offer a study showing cross-elasticity of demand — to show a separate market for
domestically produced ductile piping. Instead, the court said, “Nope, don’t need it,
qualitative economic evidence is enough,” Brill said.
The appeals court said the economic study in the case — a SSNIP (small but significant
and non-transitory increase in price) test to look at the effect of a price increase, and an
expert who did testify— was enough and “we don’t actually need to go to econometrics,”
she said.
The court’s ruling “affirms on absolutely every single point the commission’s decision”
dealing with the exclusive dealing arrangements McWane had with its distributors, she
said.
The appeals court also wasn’t persuaded by McWane’s argument that its exclusive
dealing arrangements were voluntary and temporary, Brill said.
“Nope, don’t need it,
qualitative economic
evidence is enough”
Instead of doing a formalistic analysis of the arrangement, the appeals court looked at
what effects and found that it was to keep manufacturer Star off the market, she said.
The court said, “We’re going to look at the effect of it and we’re going to see that its
effect was to keep the competition out,” Brill said.
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Excluding rivals through productdesign changes warrants close
scrutiny, commissioner says
Product design changes that are explicitly created to make it harder for rivals to compete
warrant scrutiny by antitrust authorities, the junior Democratic member of the US
Federal Trade Commission said Thursday.
“If there is evidence that a product design is motivated by a desire to increase barriers
to entry or otherwise exclude rivals, that would certainly make me want to look closely
at that decision,” said FTC Commissioner Terrell McSweeny.
McSweeny’s comments came during a discussion on whether innovations can be
anticompetitive. In particular, several cases have arisen in the pharmaceutical industry
over a strategy known as “product-hopping,” where a branded drug manufacturer
introduces an updated version of a drug in an effort to transfer patients from a drug
whose patent is set to expire.
McSweeny and others on the panel said it can be difficult to determine whether design
changes are sufficiently innovative to justify the potentially anticompetitive effects.
“It’s really tricky to answer this question, which is what leads me to believe the rule of
reason analysis is a good tool for enforcers in this space because you can investigate and
apply a balancing test,” McSweeny said.
“The rule of reason analysis is a
good tool for enforcers in this space”
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Clarity on conditional pricing more
likely by case law than DOJ guidance
The Justice Department is unlikely to set out antitrust guidelines for companies
considering sales practices such as loyalty pricing or bundling, but may bring cases for
the courts to develop the law, a senior official said.
The conditional pricing area is of “great interest,” said Renata Hesse, a deputy assistant
attorney general for criminal and civil operations in the DOJ antitrust division. But
Hesse does not anticipate any “formal guidance or guidelines of any sort,” she said.
But the government might bring cases to test the law.
“It’s something we’re going to be looking at and seeing whether or not there are cases
out there that we can look at to bring a little more clarity to the law,” she said.
“It would actually help to have a little more work done in this area so the courts are
providing guidance rather than us,” she said.
“It’s something we’re going to be looking at…
to bring a little more clarity to the law”
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FTC creates new litigation support
unit for consumer-protection cases
Litigation is of “increasing importance” to the US Federal Trade Commission’s
consumer protection enforcement efforts, a senior agency official said, announcing the
creation of a new unit focused on litigation support.
The FTC’s Bureau of Consumer Protection, which brings privacy, cybersecurity and
fraud enforcement cases, recently devised a new unit — the division of litigation,
technology and analysis — said Jessica Rich, the director of the bureau.
The new unit reflects “the increasing importance of litigation to BCP and ... the use of
technology to help in litigation,” Rich said.
Rich cited the FTC’s case against Wyndham Hotel & Resorts over its alleged lax data
security practices, which is pending before the US Court of Appeals for the Third
Circuit, and the agency’s case against AT&T Mobility for allegedly misleading its
customers by charging them for supposedly unlimited data plans while reducing their
data speeds.
The division of litigation, technology and
analysis reflects “the increasing importance of
litigation to BCP and ... the use of technology
to help in litigation”
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DOJ ‘optimistic’ about future
extraditions
The US Department of Justice is confident it can continue to seek extradition of
antitrust offenders to face trial in US courts, the antitrust division’s top criminal official
said.
“We’re optimistic we will be able to successfully seek extradition in the future and will
be continuing our efforts to seek extradition,” said Brent Snyder, the deputy assistant
attorney general for criminal antitrust enforcement.
Last year, the DOJ’s antitrust division successfully extradited two individuals to the US
for antitrust violations. One was Romano Pisciotti, an Italian national who was accused
of price-fixing marine hoses. The other was John Bennett, a Canadian national charged
with fraud for allegedly paying kickbacks to a project manager at a federal cleanup site
in New Jersey to gain a peek at competitors’ bids in an effort to win federal contracts.
Pisciotti ultimately pleaded guilty and served more than a year in a US prison. Bennett
has pleaded not guilty and is set for trial in November.
“[We] will be continuing our
efforts to seek extradition”
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‘Don’t overread’ DOJ letter to IEEE,
top official says
The author of a US Department of Justice letter on patent policy changes by a leading
standards organization cautioned critics about reading too much into the document,
emphasizing that the antitrust division doesn’t endorse the change.
In February, the Institute of Electrical and Electronics Engineers, or IEEE, a global
standards organization, approved controversial changes to its intellectual property
rights policy that garnered criticism from some patent owners.
The update placed limits on the ability of patent holders to obtain injunctions on
essential patents, required patent holders to make their intellectual property available
to component makers, as opposed to only licensing to end users, and said that patent
royalties or damages should be calculated based on the “smallest saleable unit.”
The US Department of Justice reviewed the updates and determined they didn’t raise
competition concerns.
But Renata Hesse, the deputy assistant attorney general for antitrust for criminal and
civil operations, said: “We were asked a question, and we answered the question.”
“We went to great pains to have the letter reflect that it was not an endorsement of the
policy.”
“We went to great
pains to have the letter
reflect that it was not
an endorsement of
the policy”
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Daubert motions ‘overused,’
US judge says
Parties are overusing motions intended to challenge expert witnesses’ expertise, a
federal judge said.
US District Judge Susan Illston said she finds “that we overuse the Daubert process.”
“We have more Daubert motions than you can shake a stick at,” Illston said. “Many of
them are not really quarrels with the expert’s underlying expertise, or with the expert’s
underlying knowledge of the subject matter that’s being provided.”
Rather, she said, “it’s a challenge to the answers that the expert is providing because the
other side doesn’t like them.”
That becomes “very time-consuming and tedious,” Illston said.
The process can become
“very time-consuming and tedious”
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I. Antitrust | US | Sector/Case-specific
Supreme Court’s Actavis precedent
should apply to settlements over
follow-on biologics, FTC’s Meier says
“As long as it’s
possible for
competitors to get
together and divide
up monopoly profits
at the expense of
consumers, the
fundamental teachings
of Actavis remain
relevant”
The Supreme Court’s ruling in the Federal Trade Commission’s case against Actavis
on pay-for-delay settlements should apply to similar settlements between biologic and
follow-on biologic manufacturers, a senior FTC official said.
Markus Meier, assistant director of the healthcare division in the agency’s Bureau of
Competition, said an agreement between a biologic manufacturer and a follow-on
biologic manufacturer that sets a specific entry date for the follow-on’s entry should be
evaluated under the framework the high court set out in its June 2013 ruling.
“Yes, Actavis should apply,” Meier said.
“Did you really expect me to say anything else?” he quipped.
Unlike traditional small molecule pharmaceuticals, biologics are products — such as
vaccines and antitoxins — that are manufactured or extracted from biological sources.
Follow-on biologics, also known as biosimilars, are generic versions that are highly
similar to a branded biologic product. The FTC held a workshop in February 2014
exploring competition issues related to biologic medicines and follow-on biologics.
“As long as it’s possible for competitors to get together and divide up monopoly profits
at the expense of consumers, the fundamental teachings of Actavis remain relevant,”
Meier said.
RETURN TO CONTENTS
Large data stores aren’t an
‘unbeatable’ advantage, Google
lawyer says
“Data is more
like sunshine.
It is something we
can all lie in”
A company holding large amounts of data doesn’t stand in the way of rivals entering a
market, a Google lawyer said. Data might benefit companies but it isn’t an “unbeatable
competitive advantage,” Sara Walsh said, speaking in a personal capacity.
As large companies have emerged in online services, regulators have come under
pressure to assess whether the data amassed by search engines, social networks or online
retailers can give them an unfair degree of power.
“Data is nothing new,” Walsh said. “It is an input like any other.”
“More data doesn’t necessarily mean an unbeatable competitive advantage. Having
more cash may be an advantage, but not an unbeatable competitive advantage.”
She said that web-based services in the past collected large amounts of data, but they
were still overtaken by rivals offering better services.
Walsh said that data is “non-rivalrous,” meaning it isn’t “exclusive to one platform.”
“Data is more like sunshine. It is something we can all lie in.”
Data is often used to hone advertising services so ads can be better targeted to users
who will be interested in their content.
Walsh said that targeted advertising isn’t the only way to compete.
“The goal is to match advertisers with users, and data is not the only way to do that,”
she said.
RETURN TO CONTENTS
FCC lawyer says antitrust, consumer
protection have role in protecting
open Internet
The top lawyer at the Federal Communications Commission said there is a role for both
antitrust law and for the FCC’s new net neutrality regulations in protecting the openness
of the Internet, rejecting arguments that an antitrust enforcer alone would be better
situated for that enforcement.
“It’s a false choice” to choose between antitrust law or pro-competition consumer
protection rules like the FCC’s open Internet order, said Jonathan Sallet, the general
counsel of the FCC. “In fact, this is an area where they have both existed the past, they
have been used effectively and I believe they will continue to be used in that way.”
“There’s more to be
done, and I think the
antitrust agencies and
the commission ought
to work together to get
things done”
The FCC enacted rules in March declaring broadband Internet services a common
carrier service protected by Title II of the Communications Act. Sallet said he agreed
with recent congressional testimony by a Democratic member of the US Federal Trade
commission, Terrell McSweeny, that the FTC and the FCC should work together to
preserve an open Internet, and that Congress can help that cooperation by repealing
a section of the FTC’s enabling legislation that blocks the agency from regulating
common carrier services.
Sallet said that while antitrust law tends to look at conduct that happened in the past,
the new net neutrality rules are intended to protect against future conduct by Internet
service providers who might try to block or slow competing online applications or
applications that require heavy bandwidth.
Sallet pointed to a record $105 million joint enforcement action by the FCC and the
FTC against AT&T Mobility in 2014 over mobile “cramming” charges as a blueprint for
how the FTC and the FCC can work together to protect an open Internet.
“The two agencies are looking to have better ways to work together, recognizing
FTC’s greater experience on consumer protection,” Sallet said. “We want to be able to
harmonize and work together.”
Even with the passage of the FCC’s open Internet rules, “there’s more to be done, and
I think the antitrust agencies and the commission ought to work together to get things
done,” Sallet added.
RETURN TO CONTENTS
Antitrust will help guide growth of
‘sharing economy’
Competition law is increasingly likely to play a guiding role as a regulatory regime
develops for “sharing-economy” businesses such as Uber and Airbnb, according to
leading antitrust enforcers from the US, Europe and UK.
FTC Chairwoman Edith Ramirez said that while there might be some legitimate claims
for local health and safety regulation of those new competition model upstarts, “it
might also have the impact of creating barriers for new, disruptive business models.”
William J. Baer, the US Department of Justice’s antitrust chief, agreed that enforcers
are watching for anticompetitive efforts by industry incumbents to squelch technology
start-ups.
“We are instinctively
in support of
innovation and
disruption as a
competitive
advantage”
“As a general matter, the incumbents don’t like their revenue shrinking or their margin
shrinking, and some companies will go to great lengths to protect that income stream,”
Baer said. “Some of what we can do is law enforcement-based; some of it is advocacybased, and we need to be prepared to do that.”
The antitrust chiefs for both the European Union and the United Kingdom agreed that
there is likely to be a role for antitrust law in protecting the innovation and competition
these startups have brought to the economy.
Lord David Currie, chairman of the UK’s Competition and Markets Authority, agreed
that he “absolutely” saw a role for the authority to play in protecting technology upstarts
from any anticompetitive behavior by industry incumbents.
“We are instinctively in support of innovation and disruption as a competitive
advantage” to spur growth, Currie said.
Margrethe Vestager, commissioner for Competition for the European Commission,
said: “We have heard complaints by some of those companies who say member states
are not enabling us to provide services,” she said. “We are, both in short run and also in
the long run, going to be looking into it on the commission.”
RETURN TO CONTENTS
FTC official criticizes laws
handcuffing Uber, Tesla
Local regulations that inhibit upstarts such as Uber and Tesla remain problematic, a
senior Federal Trade Commission staffer said Wednesday, suggesting that the agency
will continue advocating reform in the heavily regulated taxi and auto sales industries.
Many of the strict municipal rules governing taxis are “decades old and are mismatched
to the business model,” while state laws that block Tesla from selling cars directly to
buyers “essentially discourage innovation,” said Marina Lao, director in the commission’s
office of policy planning.
“Is there a particular reason that a taxi has to be black or dark blue?” Lao said. “Instead
of making it more difficult for everyone, we can perhaps make it a little bit easier for
everyone.”
The FTC has previously urged states to closely consider laws governing the taxi and car
sales industries, both of which have been dogged by complaints that their old-school
business models protect incumbents at the expense of innovation.
Lao said that she doesn’t take a position on whether car sales through independent
dealerships — a regime mandated in about 30 states — is actually better than the direct
manufacturer-controlled sales model that electric car maker Tesla has advocated. But
the choice of a sales market should usually be a company’s, she said.
“They might be wrong. If they are wrong, the market will punish them,” she said.
The FTC could help both industries by continuing to advocate and weigh in on state
legislative proposals, Lao said. Lao added that she was speaking on her own behalf and
not on behalf of the commission.
“They might be wrong. If they are wrong,
the market will punish them”
RETURN TO CONTENTS
McWane lawyer critical of antitrust
ruling, as company pledges appeal
A lawyer for Alabama pipe-fitting maker McWane has criticized an appeals court ruling,
which backed Federal Trade Commission findings that the company maintained a
monopoly in the domestic fittings market through an unlawful exclusive dealing policy.
“The Eleventh Circuit essentially deferred to the commission,” Joseph Ostoyich said.
“It is very easy to confuse intent evidence and effects. I think that’s a mistake to focus
on intent in what is an effects-based analysis.”
The comments coincided with news from the company that it will appeal to the Supreme
Court.
“We are very disappointed that the court deferred to the FTC’s unsupported and
erroneous findings, and allowed the FTC to ignore established antitrust law and basic
economic principles,” G. Ruffner Page, president of McWane, said in a statement. “We
will appeal.”
“We are very disappointed that the court
deferred to the FTC’s unsupported and
erroneous findings”
RETURN TO CONTENTS
Supreme Court case may spur
deregulation of professions
States may want to discontinue licensing certain professions and restructure some boards
as a way of complying with the Supreme Court’s recent decision over professional
licensure, a top adviser to the West Virginia attorney general said Wednesday.
Misha Tseytlin, general counsel to West Virginia Attorney General Patrick Morrisey, said
states may want to have more professions regulate themselves without any involvement
from the state to avoid potential litigation. He also said some boards would have to be
restructured to reduce the role of individuals or organizations that would benefit from
restricting competition.
Tseytlin, who was an author of an amicus brief on behalf of state governments with
the high court, said that he would advise state agencies of these options as a way of
complying with a decision that he described as one that won’t help consumers and
ignores the intents of the drafters of the Sherman Antitrust Act.
He added that states could decide that getting rid of certain regulations would decrease
the risk that they would be subject to additional litigation.
In February, the high court ruled 6-3 that a state dental board controlled by dentists
could be sued by the US Federal Trade Commission under antitrust laws for driving
providers of teeth whitening services out of business.
States could decide that getting rid of certain
regulations would decrease the risk that they
would be subject to additional litigation
RETURN TO CONTENTS
I. Antitrust | Canada | Regulatory Approach
Canadian antitrust chief eyes closer
cooperation with US
John Pecman, Canada’s chief competition enforcer, advocated closer cooperation
between his country and the US, saying that ideally the two would conduct joint merger
reviews and joint investigations.
The two neighboring countries, whose competition authorities already work together
closely, could collaborate further, said Pecman, Canada’s commissioner of competition.
“My ideal state would be conducting joint reviews, as opposed to parallel,” he said.
“Then we could move to that next state of joint investigations.”
Pecman said that he is hopeful in the coming years that the level of closeness could
extend to Europe. Canada recently negotiated a free trade agreement with the European
Union.
Staff at Canada’s Competition Bureau already enjoy a “pick-up-the-phone” relationship
with their front-line counterparts in the US, and the two countries extensively share
certain types of data, like econometric data and draft reviews, Pecman said.
Legal roadblocks in the US currently prevent the sharing of parties’ confidential
information, Pecman said. But close cooperation in some cases has still occurred. In
the seminal US antitrust case against Microsoft, for example, the company agreed
that remedies imposed in the US would also apply in the closely integrated Canadian
markets, a framework that could be a model in the future, Pecman said.
“My ideal state would be conducting joint
reviews, as opposed to parallel”
RETURN TO CONTENTS
I. Antitrust | Canada | Regulatory Approach
Poor international cooperation on
cartels leading to remedy issues,
Canada competition chief says
Weakness in cooperation between national competition agencies taking action against
international cartels can lead to problems, like double counting, when each country tries
to fashion remedies, Canada’s top competition enforcer said.
Though countries tend to coordinate well when starting cartel investigations, they
do a poorer job mopping them up after settlements, said John Pecman, Canada’s
Commissioner of Competition.
“The community does an excellent job on the front end of coordinating investigations,
with dawn raids, searches and whatnot,” Pecman said. “It’s the back end, at the remedy
and settlement stage, where...some of the agencies settle with parties without a lot of
communication with their international partners.”
“We can do a better job in that area for sure,” he said.
One agency settling a cartel case without coordinating with its counterparts can lead to
double counting when another agency, left out, tries to fashion its own remedy, he said.
“We can do a better job in that area for sure,”
RETURN TO CONTENTS
I. Antitrust | Europe | Regulatory Approach
US companies aren’t unfairly targeted
in EU probes, Vestager says
EU competition commissioner Margrethe Vestager said it was normal that US
companies become involved on both sides of disputes in technology industries, but
antitrust enforcement more often falls on European companies.
In her first speech before a US audience, she said her agency is “indifferent” to the
nationality of companies under scrutiny.
On Wednesday, Vestager sent formal antitrust charges to Google over an alleged abuse
of market power following complaints by European websites and publishers, as well as
US companies including Microsoft and Yelp.
The increasingly hardline approach to Google adopted by governments around Europe
has given rise to accusations in some quarters that the continent is picking on US
businesses.
“It is clear that US companies are strong players in the IT sector, so it is normal that
they are often involved in our cases in this sector. And that can be on both sides of the
argument,” Vestager said.
“So, one out of four individual companies that complained in the Google search case is
a US company. Companies from the US also play a major role in complaining business
associations,” she said, according to scripted remarks.
“At the same time, since we enforce EU competition rules in the EU Single Market, the
chances are that the companies that fall under our scrutiny are European.”
“One out of four individual companies that complained
in the Google search case is a US company”
RETURN TO CONTENTS
UK to boost criminal, civil cartel
enforcement, says antitrust chairman
The UK’s competition authority will focus on bringing more and stronger cartel cases to
improve its track record, said the regulator’s chairman Lord David Currie.
“We are determined to enforce more competition cases, consumer protection cases and
most importantly cartel enforcement, both civil and criminal,” Currie said.
Currie is confident the regulator’s pending cases will improve its track record. “Our
record [in cartels] has not been as strong as we would like. There are a number of cases
coming forward we think will change that,” he said.
Bid-rigging cartels will be in the spotlight for officials, Currie said. “Bid-rigging is
probably far greater than we would like. I want to get successes in that area.”
A recent change in the law governing criminal cartel enforcement will make it easier to
secure convictions, Currie said. “This will enable us to bring people in breach of the law
to justice more effectively.”
“Bid-rigging is probably far greater
than we would like”
RETURN TO CONTENTS
New UK group-claims law won’t lead
to litigation ‘flood,’ agency chief says
New UK litigation that opens the door to consumers and companies grouping together
to sue antitrust offenders won’t lead to an “absolute flood” of litigation, Lord David
Currie, chairman of the British competition agency said.
The UK government has adopted legislation which could see English courts hosting
large group claims against cartel members. Specific rules are still needed before such a
claim can be brought, but London is already seeing an uptick in damage claims.
“We think this regime will increase the number of cases. We think that is desirable,”
Currie of the Competition and Markets Authority said.
“I don’t think it is going to lead to an absolute flood,” he said.
Currie said the new legislation included safeguards that mean UK claims won’t feature
some of the elements that characterize US-style class actions.
He said a judge would decide on the level of damages, and the losing party in the
litigation is obliged to pay the other side’s legal fees.
“We think this regime will increase
the number of cases. We think that
is desirable”
RETURN TO CONTENTS
Public price-signaling may be as
damaging as private exchanges,
UK official says
Disclosing pricing information in public to rivals may in theory be as damaging as doing
it in private, a UK antitrust official said.
“Conceptually speaking, the damage of sharing future pricing intentions … seems to be
the same whether exchanges are in private and public,” said Juliette Enser, director of
cartel enforcement at the UK’s Competition and Markets Authority, stressing that this
was her own opinion.
In a previous review of the cement market, the UK’s regulator looked at whether
companies announcing pricing information could pose a threat to competition.
Enser said that the market investigation carried out by the regulator was general and
didn’t amount to an enforcement action against companies. “We haven’t taken an
enforcement case yet,” she said.
Enser said that in an enforcement case, officials would have to look at the “reason for the
public announcement” and “consider the ...context coming out of the announcement.”
She suggested there may be legitimate reasons for companies to disclose seemingly
sensitive information publicly.
“Our market investigation … doesn’t say announcements would ensure enforcement
actions,” Enser said.
“We haven’t taken an enforcement case yet”
RETURN TO CONTENTS
Officials must be mindful of drawnout cartel probes, Italian antitrust
official says
Italian antitrust officials have to be “very careful” to ensure that antitrust investigations
don’t last too long and harm companies’ rights, Italian antitrust official Salvatore
Rebecchini has said.
The Italian official said his authority had to respect strict deadlines or risk seeing
decisions quashed.
“In opening an investigation … we are obliged to indicate the length of the investigation.
This is a very important point to ensure fairness,” Rebecchini said.
Merger reviews have strict deadlines, and conduct investigation should only take about
a year, he said.
While officials may postpone deadlines for cartel investigations, that requires a formal
decision from the authority’s decision-making board that such a move is thoroughly
justified.
“The authority’s board takes a formal decision, and it must be motivated because it can
be challenged in court if postponement is harmful. We have to be very careful,” the
official said.
Defendants can ask the regulator to postpone the deadline to complete a conduct
investigation, but the stakes are higher if the authority requests the extension.
“A lengthy investigation per se is not fair in my opinion,” he said.
“A lengthy investigation per se is not fair in
my opinion”
RETURN TO CONTENTS
I. Antitrust | Europe | Sector/Case-specific
Google-like companies don’t always
break law by promoting own services,
lawyer says
Platforms such as Google don’t necessarily break antitrust law if they promote their
own products, said Maurits Dolmans, a lawyer who represents Google, but who stressed
he wasn’t speaking for the company.
Dolmans spoke about applying antitrust law to platforms such as Google, which are
known as two-sided platforms because they operate free services that are funded by
paid ones. Google’s search services are funded by a lucrative ad service.
“It’s very difficult to
prove dominance on
two-sided markets.
Users will switch.
If quality lowers,
users switch”
“European case law says that if a company owns an essential facility they cannot
discriminate by favoring their own product. If they don’t have an essential facility, the
rule doesn’t apply,” Dolman said.
He suggested that advertising a company’s own products can be a rational and justifiable
choice for platforms and therefore shouldn’t automatically be seen as an abuse.
“Favoring by placing ads to advertise own products, is that an abuse? It’s a rational
behavior that non-dominant companies also engage in,” he said.
In order to find an abuse, strict precedents set by the European Court of Justice would
have to be met, Dolmans said.
“Those kinds of practices can’t be seen as an abuse unless specific conditions of case
law imposed by the court are met,” he said. “Design choices are not an abuse if there is
an objective justification or rationale.”
Dolmans spoke about the difficulties of proving that businesses such as Google hold
market power.
“It’s very difficult to prove dominance on two-sided markets. Users will switch. If
quality lowers, users switch,” Dolmans said.
RETURN TO CONTENTS
Distribution restrictions ‘high on
agenda,’ says EU’s Italianer
Potentially anticompetitive restrictions on how goods and services are distributed will
be “high on the agenda” of European antitrust enforcers in the coming year, said
Alexander Italianer, the head of the European Commission’s competition department.
Under EU law, it can be illegal to restrict the way products are sold — for example,
by limiting the distribution of goods through online retailers. Agreements between
suppliers and retailers that contain “vertical restraints” can be anticompetitive because
they limit choice and protect prices.
Italianer said solving the questions raised by such restraints will be a focus of antitrust
enforcers in Europe.
“Vertical restraints in general will be featuring high on the agenda,” he said.
Italianer pointed to a sector-wide probe to be launched next month, in which the
European Commission will analyze potential problems with consumers buying goods
and services online.
Regulators around the globe will also be working on the issue within a network of
competition agencies that meets next month in Sydney, he said.
“There is a lot of concern on online content,” Italianer said, also mentioning online
booking platforms that are under scrutiny in about a dozen European countries.
“We see a lot of restrictions in distribution among member states,” he said.
“There is a lot of concern on online content”
RETURN TO CONTENTS
Distribution arrangements need
antitrust scrutiny, Belgium’s
Steenbergen says
Restrictive agreements between producers and suppliers pose a challenge to antitrust
authorities in Europe and require close study, the head of Belgium’s competition
authority has said.
Regulators in some EU states may have underestimated the potential impact of such
“vertical restrictions,” Jacques Steenbergen said, adding that they warranted scrutiny.
“A number of us — the Germans, the French, ourselves and the British — had to face
the fact that we underestimated the impact of vertical restrictions,” said Steenbergen.
“We thought they were a thing of the past [and] that with the completion of the [EU’s]
internal market we could focus on other things,” he said.
“But a number of complaints [and] also reports on differences in price levels in memberstate markets have forced us to look back again on vertical restrictions.”
Such agreements often feature in online markets where owners of branded goods seek
to manage the distribution of their products over sales channels. They also feature
among suppliers and retailers in, for example, sale of consumer goods.
“A number of the economists, who were very skeptical about the relevance of these
cases, have come to the conclusion that we can no longer afford to ignore [these cases].”
Steenbergen said there were a number of “traditional” investigations into supplierretailer arrangements, and there were also “major” cases in France and Germany in the
online sector.
“We can no longer afford to ignore [these cases]”
RETURN TO CONTENTS
Banks’ signaling of interest rates
needs scrutiny in Norway, regulator
says
The way banks signal interest rates and other financial information among themselves
warrants further attention in Norway, the head of the national competition authority
said.
“What we have been looking at, and what we need to investigate more is: is there a form
of signaling practice in the financial industry which is detrimental to competition?” said
Christine Meyer, director general of the Norwegian Competition Authority.
“We just started but there are signs that [there’s] a signaling practice,” Meyer said.
Under some competition laws, if a company signals its behavior to the market and helps
other companies to adapt their behavior, it can be seen as anticompetitive.
“In investor presentations, [banks] should be allowed to talk about interest rates and so
forth,” Meyer said. “But when they signal about the future in the media, then we see
there is behavior where the interest rates are much higher and much more equal then
they should be.”
“The margins are higher than they should be,” Meyer said. “We are still grappling with
this and how we should go about it.”
“Is there a form of signaling practice in the
financial industry which is detrimental to
competition?”
RETURN TO CONTENTS
Energy monopolies complicate
national antitrust enforcement in EU,
Polish regulator says
A lack of competition among companies supplying energy to Europe poses problems
for national regulators and their aim to create better-functioning domestic markets, said
Adam Jasser, the head of Poland’s antitrust authority.
“Dealing with some of
the incumbents would
certainly be easier if
Europe as a whole
sorted out its issues
with some of the
suppliers”
Many East European countries depend heavily on natural-gas supplies from Russian
energy giant Gazprom, meaning they struggle to negotiate fair prices and provide
greater choice for gas users.
The European Commission has opened an antitrust probe into state-controlled
Gazprom, and the regulator has adopted liberalization measures meant to loosen
Russia’s grip on Europe.
At the same time, regulators are trying to ensure that national incumbents inside Europe
don’t dominate national markets.
“In the energy sector, this is complicated by the fact that Europe is grappling with a
supplier that doesn’t necessarily play by market rules,” Jasser said.
“So, the question [arises] of how to enforce competition when you have an outside
force that doesn’t play by rules.”
Jasser said it was “worth keeping in mind that this is an imperfect market. Not just
because of the incumbent’s market power. There are other monopolists at play here.”
“Dealing with some of the incumbents would certainly be easier if Europe as a whole
sorted out its issues with some of the suppliers,” Jasser told MLex. “As we know, the
commission is looking at that.”
“There is so much distortion in this market and it is such an imperfect market that
competition tools alone are not going to create the greatest benefits for consumers.”
RETURN TO CONTENTS
I. Antitrust | China | Regulatory Approach
Conduct, not price, is central to
antitrust probes, says NDRC official
China’s antitrust regulator focuses on behavior that could lead to excessive pricing,
rather than the price itself, an official at the National Development and Reform
Commission has said.
“It’s not possible to determine a reasonable price. Enforcement agencies shouldn’t set a
price for a commodity,” said Liu Jian, a deputy director at the NDRC’s Price Supervision
and Anti-Monopoly Bureau.
“The focal point of enforcement should be the fairness of conduct, not how high the
price is of final products,” he said.
The official said the Antimonopoly Law is not anti-high profit law, and enforcement
agencies do not have the right to set exact prices for licensing royalties.
But the agency can investigate whether conduct is unfair and unreasonable, and leads
to high pricing directly or indirectly, rather than the result of a fair market negotiation.
“We do not care about
price itself, we care
about those behaviors
that arise from
competition concerns
and lead to unfair
pricing”
Regarding the regulator’s antitrust remedies for such a violation, he said a remedy
shouldn’t impose a lower price, but instead change the conduct that led to a higher price.
“We do not care about price itself, we care about those behaviors that arise from
competition concerns and lead to unfair pricing,” Jian said.
He also said a focal point of the NDRC’s enforcement is the licensing of standard
essential patents, or SEPs.
SEP licensing should be open and fair, and licensing conditions should be reasonable.
Refusing to license SEPs would be prohibited, Jian added.
He said the regulator would take a prudent approach in carrying out enforcement in the
intellectual property rights area.
RETURN TO CONTENTS
NDRC needs ‘more active’
enforcement and further study of
digital industries
A senior antitrust official at China’s National Development and Reform Commission
said the regulator will prioritize “more active” enforcement, improve its procedures and
do additional study of emerging sectors.
“First, most importantly, we have to enforce the competition law as actively as possible,”
said Zhu Zhongliang, director of the Competition Policy and International Cooperation
Division at the NDRC’s Price Supervision and Anti-Monopoly Bureau.
He said the agency needs to carry out more study into the e-commerce and Internet
sectors because it is difficult to define a relevant market, determine violations and apply
the theory of harm in the rapidly evolving industry.
He also said the agency intends to improve its working procedures - such as its settlement
commitment program, exemption rules and calculation of fines — in order to make its
enforcement more effective and transparent.
“We will make a study on how to suspend investigations, how to exempt some
anticompetitive activities,” he said.
The NDRC is also researching the use of its leniency program so as to make it more
effective in enforcement, the official said.
“We will make a study on how to suspend
investigations, how to exempt some
anticompetitive activities”
RETURN TO CONTENTS
SAIC to apply ‘rule-of-reason’
principle in antitrust enforcement
in IP
China’s non-price related antitrust regulator would stick to a “rule-of-reason” approach
in carrying out antitrust enforcement in the intellectual property sphere, an official has
said.
“When conducting enforcement regarding intellectual property, we will be extremely
cautious,” said Song Yue, an official at the Antimonopoly and Anti-Unfair Competition
Bureau of the State Administration for Industry and Commerce.
The regulator would conduct comprehensive analysis, including considering evidence
provided by target companies and third parties in its enforcement, she said.
On April 13, SAIC announced that it officially passed the long-waited “Regulation
on the Prohibition of Abuse of Intellectual Property Rights to Eliminate or Restrict
Competition,” which will take effect on Aug. 1.
The main purpose of the regulation is to draw a clear line so that companies can
understand the agency’s concerns and implement their intellectual property rights safely.
In response to questions on whether such regulation may jeopardize innovation, Song
said the rule is a reflection of China’s transitional market features.
“Personally, I would
want more and more
antitrust enforcement
[activity] in the
future”
She also vowed to ramp up enforcement and deterrence against antitrust violators
because competition policy hasn’t received enough attention in China.
“There is still a lot of room for antitrust authorities to enforce the law,” Song said.
“Personally, I would want more and more antitrust enforcement [activity] in the future.”
She also said the regulator’s enforcement is obscured by the tight staffing levels at the
agencies, and so far a majority of its enforcement cases are triggered by complaints
lodged by companies.
RETURN TO CONTENTS
China urged to observe international
antitrust norms
US antitrust enforcers on Friday urged Chinese authorities to ensure procedural
protections in their antitrust probes and focus on anticompetitive effects rather than
how conduct affects particular rivals.
Bill Baer, the assistant attorney general for antitrust, noted that the DOJ and its sister
agency, the US Federal Trade Commission, have had more than 100 years to develop
their competition policies and procedures. But those developments occurred in a
different, entirely domestic economic situation, not in today’s globally interconnected
economy, he said.
“We can’t wait to let other developing antitrust regimes ... get to international norms
over a leisurely period of time,” Baer said. “It affects investment. It affects business.”
Those concerns led the Obama administration, and President Barack Obama himself,
to seek commitments from China regarding transparency and due process last year,
Baer said.
FTC Chairwoman Edith Ramirez, speaking at the same panel, said that while jurisdictions
do sometimes reach different conclusions by applying their local laws to the local market
conditions, China and other developing antitrust enforcers should adopt the same “core
values” as other jurisdictions — procedural fairness and an emphasis on economic
evidence that anticompetitive conduct is affecting consumers.
“It’s really crucial that the focus be on how should we as competition authorities advance
long-term consumer welfare,” Ramirez said. “I’ve expressed concerns, particularly when
it comes to the application of antitrust laws to matters that involve intellectual property,
that they are ensuring that long-term consumer welfare ... as opposed to other policy
objectives. This really goes to the heart of the legitimacy of our entire competition
policy enterprise.”
“This really goes to the heart of the legitimacy
of our entire competition policy enterprise”
RETURN TO CONTENTS
I. Antitrust | Japan | Regulatory Approach
Japan to designate antitrust hearing
officer this month
Japan’s antitrust authority is expected to designate an independent official to oversee
investigations and ensure their fairness, the former chairman of Japan’s regulator said.
The new official is expected to oversee investigations and report to decision-makers
about the interaction between investigators and defendants. Final rulings on cases will
remain a prerogative of the decision-making commission.
“This month the hearing officer will be designated,” Kazuhiko Takeshima .
The official will belong to Japan’s Fair Trade Commission but will retain some
independence, Takeshima said.
In 2013, the Japanese government set up a group within the Cabinet Office to study
rights of defense and procedural fairness in investigations. The group was tasked with
making recommendations for legislative changes, if needed.
The creation of the working group followed criticism by the Japan Business Federation,
known as Keidanren, and the American Chamber of Commerce in Japan of the JFTC’s
investigative procedures. The groups said the procedures were lacking in due process
and failed to meet the standards for transparency and fairness that exist in US and
European antitrust probes.
The 15-member committee released its recommendations in December and suggested
the JFTC create public guidelines regarding its standard investigative procedures.
The official will belong to Japan’s Fair Trade
Commission but will retain some independence
RETURN TO CONTENTS
I. Antitrust | Brazil | Regulatory Approach
No cartel-fine discounts for
compliance programs, says Brazilian
antitrust chief
Brazil’s antitrust authority doesn’t intend, for now, to grant companies discounts on
cartel fines for having compliance programs, the regulator’s president told MLex.
Companies may still benefit from reductions in fines indirectly if their compliance
programs spot improper behavior and facilitate their cooperation in investigations, he
said.
The regulator plans to issue guidance on how companies can ensure staff don’t breach
antitrust laws.
“If you have a very
effective compliance
program and you get
involved in a cartel,
the company can sign
a leniency agreement”
The plan is to launch a first draft of that document by July, said Vinicius Marques de
Carvalho. “What we don’t intend to do, at least for now, is set a discount level for the
existence of a compliance program.”
Carvalho acknowledged that programs cost companies money, but said they can still be
advantageous.
“If you have a very effective compliance program and you get involved in a cartel, the
company can sign a leniency agreement,” Carvalho said.
Cartel whistleblowers typically get full immunity from fines in Brazil.
If another cartelist is first in line, a company that identifies a cartel can still cooperate
with officials and secure reductions of up to 50 percent, Carvalho said.
“If you have a good program, you’ll surely be able to cooperate a lot with the
investigations. Collaboration … is a factor when we evaluate the amount of a fine a
company receives,” Carvalho said.
If companies show good will and help in a probe they may also face more lenient fines,
the regulator said.
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Brazilian regulator warns of impasse
without nominations for new
councillors
Brazil’s antitrust regulator has warned the government that it may be unable to make
decisions in August if President Dilma Rousseff doesn’t nominate new councillors by
then.
The Administrative Council for Economic Defense, or CADE, is awaiting the
nomination by Brazilian President Dilma Rousseff of several top-level decision-makers
for its Tribunal. The regulator’s work could be paralyzed starting in August if Rousseff
fails to appoint enough new members to allow the Tribunal to conduct its business.
“CADE has done all it can. The Brazilian government is aware that this may happen.
We have warned of the possibility,” CADE President Vinicius Marques de Carvalho
told MLex in an exclusive interview.
“We hope that by the middle of the year the names of new councillors will be forwarded
[to the Senate for approval]. I’m sure it will happen,” he said.
“CADE has done all it can”
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CADE open to ‘mix’ of professionals in
top agency positions
The president of Brazil’s antitrust authority said he is open to seeing more private
practitioners appointed to top positions in the agency.
Vinicius Marques de Carvalho suggested that a “mix” of experience among high
officials could be positive for the institution.
The antitrust regulator, the Administrative Council for Economic Defense, is awaiting
the nomination by Brazilian President Dilma Rousseff of several top-level decisionmakers for its Tribunal.
The regulator’s work could be paralyzed starting in August if Rousseff fails to appoint
enough new members to allow the Tribunal to conduct its business.
“Let’s see if we can manage this situation related to bringing people from the private
sector to be [Tribunal] Commissioners or bring in people that had experiences in the
private sector,” Carvalho said. “It’s important to have a mix among private sector,
governmental enforcers and people with an academic profile,” he said.
Most of the regulator’s top officials come from governmental bodies, and a revolving
door between private practice and public service can be controversial.
The regulator also faces a shortage of staff. But Carvalho said that given Brazil’s
economic situation, it may not be the best time to request backup forces.
“I can say we have now … 0.4 case-handlers for a single merger. The European
Commission’s DG Competition has almost three case-handlers for each merger. It’s a
huge difference,” Carvalho said.
“It’s important to have a mix among private
sector, governmental enforcers and people with
an academic profile”
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Brazil’s antitrust comfort process
can’t circumvent antitrust
investigations, watchdog’s president
says
Companies seeking reassurance from Brazil’s antitrust authority that corporate plans
don’t breach competition law can’t use that “advance consultation” process to avert
enforcement in complex cases, the agency’s head told MLex.
Advance requests for guidance, known as consultations, can give companies some
validation for decisions, but don’t replace full reviews if the matter is complex, Vinicius
Marques de Carvalho said.
“Consultations can’t substitute the analysis of a merger or a conduct,” Carvalho said.
“Companies can’t try to use the tool to circumvent the [investigatory] Superintendence
and obtain a waiver from the [decision-making] Tribunal for their strategy.”
“I think it’s legitimate
for companies to try to
get some comfort about
their commercial
strategies”
Companies can ask the Tribunal of the Administrative Council for Economic Defense,
or CADE, to state whether business plans comply with competition laws. While the
regulator is keen to give companies guidance, there are limits to what it can review,
Carvalho said.
Carvalho said if the Tribunal realizes a request to clarify the law is too complex and
needs a more in-depth review, it won’t take it on.
“I think it’s legitimate for companies to try to get some comfort about their commercial
strategies,” he said. He said companies may not be aware that certain legitimate strategies
could have anticompetitive effects, and it’s appropriate for them to seek validation.
“Often, an anticompetitive effect derives from a competitive strategy by companies,”
he said.
The consultation option was recently revived after CADE published new guidelines on
how to approach the authority with requests.
“Let’s see if [the tool] works out. I hope it will,” he said.
RETURN TO CONTENTS
I. Antitrust | Brazil | Sector/Case-specific
CADE will fight to reinstate cartel fine
on Abbott, Eli Lilly, Bayer, others
“In my opinion,
we have voluntarily
adopted a stricter
standard to get more
robust evidence”
Brazil’s antitrust authority will initiate a new court challenge to to reinstate fines against
several drug companies for allegedly colluding to block generic alternatives from the
market, an agency official has said.
In 2005, the Administrative Council for Economic Defense, or CADE, fined drug
companies, including Abbott Laboratórios do Brasil, Eli Lilly do Brasil, Merck Sharp &
Dohme and Bayer, for allegedly seeking to block distributors that also handled generic
alternatives.
In 2011, a federal court quashed the regulator’s decision. CADE failed to convince an
appeals court in March to reinstate the decision.
The case turned on whether the companies agreed to collude during an industry meeting
in 1999.
The March ruling came as a blow to the regulator, which usually sees its decisions stand
the test of the courts.
In an exclusive interview with MLex, CADE’s top investigator, Eduardo Frade, said
the regulator has taken steps in recent years to ensure its decisions are robust and are
upheld by courts.
“In my opinion, we have voluntarily adopted a stricter standard to get more robust
evidence,” Frade said.
“Indirectly, some of the concerns raised in this case raised by the court have already
been incorporated as self-criticism in general,” he said.
Frade said the specific case is still open because the agency will appeal.
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Still premature to hold settlement
talks in Petrobras probe, CADE’s top
investigator says
It’s too early to engage in settlement talks with construction companies involved in a
probe into collusion at Petroleo Brasileiro, but Brazil’s antitrust authority will keep an
open mind, the agency’s top investigator told MLex.
In March, the Administrative Council for Economic Defense, or CADE, signed a
whistleblower agreement with construction company Setal Engenharia e Construções
and its affiliate SOG Óleo e Gás over an alleged cartel targeting Petrobras.
CADE is reviewing the evidence provided by the whistleblowers, but hasn’t yet opened
a formal investigation. The regulator is one of many authorities investigating wrongdoing at Petrobras.
“We already have a lot of evidence. We have a robust leniency, in our view, (and) access
to a series of evidence apprehended at company premises, in addition to our own
investigations,” Frade told MLex.
Despite the wealth of evidence in its hands, CADE hasn’t ruled out requests by other
companies to collaborate with the probe, he said.
“It’s not an evaluation which is possible to make now, because we will only reveal what
we have or don’t have at a more advanced stage of the investigation,” Frade told MLex.
But a successful settlement would depend on a company being able to collaborate
“significantly” in the probe, Frade said.
“We will only reveal what we have or don’t have
at a more advanced stage of the investigation”
RETURN TO CONTENTS
Petrobras probe won’t dominate
CADE’s year, regulator says
A high-profile cartel investigation into bid-rigging at state-controlled oil giant Petroleo
Brasileiro won’t dominate the Brazilian antitrust authority’s agenda for the year,
President Vinicius Marques de Carvalho told MLex.
Like many Brazilian authorities, the Administrative Council for Economic Defense,
or CADE, is investigating allegations that construction companies colluded and paid
bribes to Petrobras officials to secure contracts.
While the case has taken on monumental proportions in the country, Carvalho said it
won’t dominate CADE’s agenda.
“It won’t, in no way,” Carvalho told MLex.
“When a large conduct or merger case arrives … sometimes the team will have to
prioritize one thing over another. That’s normal,” Carvalho said. “That can happen to
any agency in the world.”
“Sometimes the team will have to prioritize one
thing over another. That’s normal”
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I. Antitrust | Mexico | Regulatory Approach
Mexico’s competition woes not down
to anticompetitive conduct
Competition issues in Mexico are not a result of anticompetitive conduct, but rather
due to historical bottlenecks in sectors that were closed to competition, the country’s
antitrust chief has said.
The Federal Economic Competition Commission, known as Cofece, is being proactive
in sectors that have recently opened up by assessing new regulations and alerting the
government of structural issues, agency President Alejandra Palacios Prieto said.
Cofece is also focused on its advocacy role through informal market investigations, she
said. “Certain sectors are important because of the impact on the economy as a whole,
such as finance, transport, health and agriculture. We decided to take a look at those
sectors in particular to understand those sectors as a whole,” Prieto said.
The agency performed an investigation of the financial sector, making 36
recommendations, and it plans to publish the results of an investigation into the
agricultural industry in August, she said.
Also on the agenda is more cooperation, especially with other Latin American
authorities. “We received a lot of support from the US Federal Trade Commission and
US Department of Justice in terms of capacity building, and they would like to do the
same to their Latin American partners,” Prieto said. The agency will be receiving interns
from fellow antitrust agencies this year, she said.
“Certain sectors are important because
of the impact on the economy as a whole,
such as finance, transport, health and agriculture”
RETURN TO CONTENTS
II. Mergers | US | Regulatory Approach
US merger filings, in-depth antitrust
reviews on the rise
Merger transactions, particularly aggressive ones with complex antitrust issues, are on
the upswing, senior officials with the US Department of Justice said, cautioning that the
antitrust division will challenge any that “push the envelope too far.”
Pre-merger notification filings are up 10 percent this year, said David Gelfand, the
division’s deputy assistant attorney general for litigation. The number of mergers that
receive an in-depth second request is also up more than 10 percent, he said.
“We’re seeing a lot of transactions with difficult, complex antitrust issues,” he said.
In response to a question about the DOJ’s recent merger challenges, Gelfand said he
believes that companies are attempting more potentially problematic transactions.
“There are some transactions that, lets face it, shouldn’t have gotten to the point they
got to. People are trying some aggressive transactions,” he said. “Maybe there are
instances where companies are trying to push the envelope too far, and our job is to
protect consumers.”
Gelfand said he was referring to several recent cases that were essentially mergers to
monopoly, such as the DOJ’s challenge of Twin America, a tour bus joint venture in
New York City between Coach USA and City Sights, and the agency’s block of the
proposed tie-up of the two largest national cinema advertising companies, National
CineMedia and ScreenVision.
“Maybe there are instances where companies
are trying to push the envelope too far, and our
job is to protect consumers”
RETURN TO CONTENTS
Timid merger enforcement could
prompt price rises, warns Brill
The US Federal Trade Commission and other antitrust agencies need to be careful
not to be too timid in challenging mergers because of fears about over-enforcement,
the senior Democratic member of the agency said Thursday, pointing to research that
showed significant price increases in some cases where the agencies didn’t challenge
potentially anticompetitive mergers.
“We spend so much time in Washington thinking about Type 1 errors,” where an agency
challenges a merger or conduct that is ultimately found to comply with antitrust laws,
Commissioner Julie Brill said. “Type 1 errors are serious. I think we need to start having
a conversation of Type 2 errors — when we pass on an issue, consumers pay the price.”
Brill pointed to research by economist John Kwoka, which looked at mergers that would
have been close to the line for enforcers. Sixty percent of the mergers led to price
increases, on average of about 5 percent, according to Kwoka’s analysis.
Brill said that the FTC needs to make sure it is “taking appropriately aggressive action
in mergers.”
“When you’re on the fence [thinking about] type 1 errors [is] important...But there are
also problems when you don’t go after [a merger] because the market can suffer. Prices
will go up,” she said.
“I think we need to start having a conversation
of Type 2 errors — when we pass on an issue,
consumers pay the price”
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Regional offices will handle more
merger cases, FTC’s Feinstein says
The Federal Trade Commission’s regional offices will handle more mergers in the
future, the head of the agency’s Bureau of Competition said. The office may also need
to reassign staff to balance out the workload.
Deborah Feinstein said “we will see, probably, in the coming days more mergers moving
to the regions, and you also will be totally flummoxed about why you’re getting a call
from Merger II on an oil merger.”
The Bureau of Competition has four merger shops, numbered one through four, that
investigate transactions in different industries. Mergers I, for example, is primarily
responsible for reviewing transactions in healthcare industries, and Mergers II usually
handles a variety of industries, including coal mines, chemicals, and computer hardware
and software.
The coming redistribution is “simply because the workload is such that we’re doing the
best we can,” Feinstein said.
When the agency moves a matter from one group to another, it keeps the managers of
the group that has had a longer history with it involved in the case day-to-day so they
don’t lose the knowledge the group has, Feinstein said.
Feinstein said there will also be more cross-staffing of matters.
“I don’t believe in silos,” she said. “I don’t believe that just because the industries that
Mergers I handles are busy that those people should all be working a million hours a
day when a different merger shop may be quiet, so we have a lot of different people
working on different cases.”
“I don’t believe in silos”
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DOJ is performing systematic
analysis of remedies imposed,
top economist says
The antitrust division of the US Department of Justice is doing a systematic analysis of
remedies imposed on transactions that have settled, the division’s top economist said.
“We are not doing statistics in [every] market right now, [but] the division is doing a
systematic look back at remedies,” said Nancy Rose, deputy assistant attorney general.
The division is looking at how successful divestiture remedies have been, especially in
the airline industry. Rose said that carriers that acquired divested assets in the American
Airlines and US Airways settlement made great use of them by building up their
schedules and capacities.
For example, he said, in some capacity-restricted airports, statistics show year-over-year
capacity growth of as much as 10 percent. Lower cost carriers have been able to make
more effective use of slots despite restrictions on the number of flights per day.
“We are very excited by the impact we’ve seen,” Rose said.
The division is looking at how successful
divestiture remedies have been, especially
in the airline industry
RETURN TO CONTENTS
Hertz-Dollar Thrifty deal has affected
how FTC considers divestitures
The failure of the buyer of the divested assets in the Hertz and Dollar Thrifty merger
has had an impact on how the US Federal Trade Commission thinks about remedies in
merger cases, a commissioner said.
In May 2013, the FTC approved Hertz’s $2.3 billion acquisition of Dollar Thrifty
Automotive Group on condition that the combined entity sell Advantage Rent a Car to
Franchise Services of North America, which folded that business into its Simply Wheelz
subsidiary. Just a few months later, Simply Wheelz filed for Chapter 11 bankruptcy
protection.
“I think our experience in the Hertz merger is informing the way that I and others in
the agency are looking at potential remedies and how effective they may or may not be,”
Commissioner Julie Brill said. “I think the failure there had to do with the particular
entity.”
While merger decisions are highly fact-specific, Brill said, important considerations for
buyers of divested assets include whether and how long they have been in the market
and their financing.
“We have to be really careful to make sure that whatever we’re doing will alleviate the
substantial lessening of competition,” she said.
“We have to be really careful to
make sure that whatever we’re doing
will alleviate the substantial lessening
of competition”
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Courts unlikely to allow efficiencies
defense if FTC rejects it,
commissioner says
If the US Federal Trade Commission rejects an efficiencies defense of a merger being
challenged as anticompetitive, skeptical courts are unlikely to reverse that, the senior
Democratic member of the agency said, citing the agency’s recent appellate win in a
hospital case.
Courts tend to require “extraordinary efficiencies” before they will accept that as a
defense to a merger, Julie Brill said, pointing to a recent decision by a federal appeals
court to order the unwinding of the merger of hospital groups St. Luke’s Health System
and Saltzer Medical Group.
The Horizontal Merger Guidelines used by the commission to assess an efficencies
defense are easier on merging parties than courts have been, Brill said.
“I actually think the guidelines are more generous at least than the courts have
traditionally been” in considering efficiency arguments, Brill said.
“I do think the courts are more skeptical. There have been courts that have looked at
efficiency arguments and said, ‘We’re going to need to see extraordinary efficiencies in
order to overcome what we’re seeing as an anticompetitive merger in this context,’” she
said.
The February decision Brill referenced, a ruling by the US Court of Appeals for the
Ninth Circuit, upheld an order requiring St. Luke’s to unwind its buy of Saltzer. The
FTC opposed the merger because it said the deal would hurt the market for adult
primary care services.
Efforts to overturn Ninth Circuit’s ruling are ongoing.
“I do think the courts
are more skeptical”
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FTC should issue more closing
statements, says commissioner
The Federal Trade Commission should issue more statements explaining its reasoning
for closing investigations, the agency's junior Republican commissioner said.
“I would like to see us do them more often,” Commissioner Joshua Wright said in
comments on the sidelines of a conference in Washington Thursday.
Wright noted that in the recent merger of online real estate sites Zillow and Trulia, he
released a statement on the approval alongside Commissioners Maureen Ohlhausen
and Terrell McSweeny. In the statement, the commissioners noted that FTC’s review
showed that the sites face significant competition from other web portals that have
the same or similar data, such as Realtor.com and Redfin, leading the agency to
conclude the transaction didn’t raise competition concerns.
While there are sometimes confidentiality considerations, Wright said he was strongly
in favor of issuing more information about the FTC’s decision-making.
“I would definitely like to do more,” he said.
“I would like to see us do them more often”
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Mega-merger trend presenting
increased antitrust risk, DOJ enforcer
says
Some merger ideas should “never get out of corporate headquarters,” according to the
head of the US Department of Justice’s antitrust division.
The recent burst of mega-deals has resulted in “companies investing in strategic
acquisitions,” of which “a higher percentage have the potential to have antitrust,
competition concerns associated with them,” he said.
Baer referenced National Cinemedia’s failed attempt to buy rival Screenvision, although
it’s not one of the recent multi-billion dollar transactions. The companies are the only
two national providers of pre-show advertising in movie theaters in the US.
National Cinemedia and Screenvision pulled the plug on their deal after the DOJ filed
suit to block it last November.
Edith Ramirez, chairwoman of the US Federal Trade Commission, said that some big
deals, such as in the pharmaceutical industry, have been “resolved by having targeted
divestitures.”
However, she cautioned that “while a lot of these mega-deals are the ones that end up
getting a lot of the attention,” regulators should “not lose sight of the fact that we have
a lot of smaller deals that do create [problems] and its important for us to take action.”
Ramirez emphasized that every deal has to be assessed on its own merits.
Some merger ideas should
“never get out of corporate headquarters”
RETURN TO CONTENTS
Defendants are unharmed if denied
access to agency’s ‘work product,’
DOJ top litigator says
Defendants in merger litigation are not at a disadvantage if they lack access to
information collected by the agency during the deal’s investigation, the top litigator of
the Department of Justice’s antitrust division said.
“I don’t think there’s a good basis for defendants in these cases to get wholesale
disclosure of our interview notes and facts heard from third parties. That’s core work
product, and we are going to fight to protect it every time,” said David Gelfand, the
DOJ’s deputy assistant attorney general for litigation.
“Everybody has a lot of time to prepare,” Gelfand said. “You go into discovery in a case
and you can learn through discovery. I don’t think it disadvantages defendants.”
In February, the department won a battle in federal court in the National CinemediaScreenvision litigation, in which the companies were seeking disclosure of all persons
who communicated factual information about the merger to DOJ and whether they
expressed concern. The federal judge denied the request, finding that defendants have
not met a burden of showing a ‘substantial need.’
NCM and Screenvision ultimately abandoned their deal.
“We are going to fight to protect it every time”
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CEO often shouldn’t be initial
defender of deal to regulators,
US enforcer says
CEOs of merging companies often should resist defending their deals in initial
discussions with antitrust authorities, a US enforcer said.
The top officials of companies sometimes don’t have the detailed knowledge antitrust
authorities need to deciding whether a deal is anticompetitive, said William H. Stallings,
chief of the Transportation, Energy and Agriculture Section of the Department of
Justice’s antitrust division.
If a CEO says, “this is such a great deal” and it is “complementary,” but company
documents later contradict that view, “there’s a credibility hit” from which it’s difficult
to recover, he said.
External and company counsel should deal upfront with potential problems, said Mike
Moiseyev, head of the Mergers I unit of the Federal Trade Commission’s Bureau of
Competition.
“If it looks like there are going to be issues, starting the process early is important,” he
said.
“There’s a credibility hit”
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CFIUS risk explained
A US government official today set out the wide-reaching nature of the Committee on
Foreign Investment in the United States, a secretive body that vets takeovers by foreign
companies of businesses with US operations.
Recently, companies doing deals in areas as benign as the food industry have had to
get deals approved by CFIUS. They include privately held holding company Shuanghui
International’s $7.1 billion merger with meat processor Smithfield Foods.
Shawn Cooley, director of foreign Investment for the US Department of Homeland
Security, said that “one of the things that we do first and foremost is try to identify
whether or not the department does or could use the product and services of the
acquired company in the normal course.”
Cooley manages the Department of Homeland Security’s participation on CFIUS.
Critical infrastructure
includes “information
technologies, communications, chemical,
nuclear, emergency
services, government
facilities, chemical
facilities, critical
manufacturing
and dams”
Products and services that could trigger a review “usually take the form of government
contracts.” He said it is also necessary to consider “whether or not the target company
is involved with the critical infrastructure sectors for which [the department] has
responsibility.”
“That would include information technologies, communications, chemical, nuclear,
emergency services, government facilities, chemical facilities, critical manufacturing and
dams,” he said.
Cooley, speaking in a personal capacity, identified further risk factors, including the
“proximity [of assets] to sensitive government facilities” as well as possible “supply
disruptions.”
“Would the new foreign owner disrupt an otherwise steady supply of products and
services to the US government?”
Cooley also encouraged companies to set up a “courtesy meeting” with CFIUS on a
transaction that may raise US national security issues.
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II. Mergers | US | Sector/Case-specific
Comcast, TWC merger faces probes
in 25 US states
Twenty-five states across the US are investigating the proposed Comcast-Time Warner
Cable merger, propelled by consumer concerns about the combination of the nation’s
top two cable companies, a Maryland state official said Thursday.
“There are constituents who are saying, ‘We are concerned about content. We are
concerned about service issues,’” said Schonette Jones Walker, a former assistant
attorney general in antitrust for the attorney general’s office.
Jones Walker recently took a position in the state comptroller’s office and said she is not
working on the Comcast-Time Warner Cable probe.
The US Department of Justice, after deposing executives at the cable companies and
gathering thousands of documents from Comcast and Time Warner Cable, is now
deciding whether it should legally challenge the $45.2 billion merger or approve it with
conditions. The Federal Communications Commission is conducting its own review of
the deal and is closely coordinating with the DOJ.
“There are constituents who are saying,
‘We are concerned about content.
We are concerned about service issues’”
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II. Mergers | US | Sector/Case-specific
Denying public access to documents
in St. Luke’s trial was ‘tough’ call
A senior Idaho official said it was a “tough decision” to move to bar the press from
seeing court documents in the government’s antitrust challenge to St. Luke’s Health
System’s acquisition of a physician group.
Brett DeLange, Idaho deputy attorney general, said that it was a difficult move because
the state’s attorney general, Lawrence Wasden, is “for openness.”
On the other hand, DeLange said that when his office served subpoenas on industry
players, it promised to keep their information confidential in order to get candid
testimony.
“Part of the ability to be candid is that they think ‘my competitors are not going to see
what I am telling you,’” DeLange said.
“The press here wanted every last item made public, and we objected,” he added. “We
wanted to keep some things confidential so that we would get candid stuff and not
canned stuff.”
“Whether we walked the line right in how we defined it — maybe people could decide
differently where that line was drawn,” DeLange conceded. “Interestingly enough, as
the judge took it upon himself to look at all the assertions, I bet he didn’t agree with
about 60 percent of them,” and those documents were ultimately released.
The battle by the media to get access to the documents came during and after the trial
in 2013 in which the court found that St. Luke’s acquisition of Saltzer Medical Group
in Nampa, Idaho, would harm competition — a decision upheld by a three-judge panel
of the US Court of Appeals for the Ninth Circuit.
St. Luke’s recently asked the full panel of judges on the court to rehear the case.
“We wanted to keep some things confidential
so that we would get candid stuff and not
canned stuff ”
RETURN TO CONTENTS
II. Mergers | Europe | Regulatory Approach
Vague German, UK rules jeopardize
minority shareholding investments,
lawyer says
Vague rules on whether acquisitions of minority shareholdings trigger the need for
regulatory approval could deter companies from making investments, a lawyer for one
of one of the world’s largest media companies said today.
Cerry Darbon, senior regulator counsel for Liberty Global, said that merger rules in
Germany and the UK both involve concepts that are “quite difficult to define with any
degree of certainty.”
“There is a need
for a change in the
rules to cover an
existing gap”
German merger law requires companies to file purchases of shares that give rise to a
“competitively significant influence,” she said.
Darbon, speaking in a personal capacity, said that “in Germany it’s a breach of law to
have missed a notification,” which could be difficult to determine given the “very vague
test.”
“In my view that does have real-world effects, and is likely to deter investments that
would otherwise happen,” she said.
Darbon’s comments come as the European Commission is weighing how best to
regulate purchases of minority shareholdings.
Speaking at the same event, Carles Esteva Mosso, acting deputy general for mergers at
the EU’s competition directorate, said “there is a need for a change in the rules to cover
an existing gap.”
The EU watchdog cannot at present review minority share purchases that don’t confer
control.
The regulator recently sought views on an amendment to its rules, but the responses
“prompted us to decide not to come forward immediately with a reform,” Mosso said.
The commission will do some further reflection “before we decide what will be the next
steps,” he said.
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II. Mergers | Europe | Regulatory Approach
Authorities could pitch merger
remedies to ease reviews, Italian
official says
Antitrust officials should be able to suggest remedies in complex merger cases if
companies fail to come up with an offer to see a deal through, an Italian antitrust
official said.
Salvatore Rebecchini, a decision-maker at the Italian competition authority, said officials
should be able to make suggestions to ensure a deal is reviewed quickly.
“Obviously, it’s best if parties come up with a backup strategy,” Rebecchini said.
But if companies fail to make a proposal because they didn’t understand the regulator’s
concerns, officials should be able to propose an alternative, the decision-maker said.
“Why not try to suggest, to foster good remedies on the party so we can clear the deal
and everybody can go home,” Rebecchini said. “I don’t feel like we are compelling the
party.”
“Obviously, it’s best if parties come up with a
backup strategy”
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II. Mergers | China | Regulatory Approach
Behavioral fixes account for 70
percent of Mofcom’s deal remedies,
lawyer says
China’s top merger regulator, the Ministry of Commerce, still prefers the use of
behavioral remedies to resolve anticompetitive transactions, and that approach accounts
for 70 percent of the regulator’s total remedies, a leading Chinese antitrust lawyer said.
“Mofcom is becoming more and more aggressive and active, and to a certain extent
more creative,” said Susan Ning, a senior partner and the head of the antitrust group at
King & Wood Mallesons.
She said the regulator has shown a preference for behavioral remedies over structural
remedies, but that causes heavy burdens for both the companies involved and the
regulator itself.
She said that Mofcom is developing its own pattern for behavioral remedies, especially
the use of hold-separate remedies, which have become “a formal form of remedy,” she
said.
Hold-separate remedies require companies to maintain the independence of certain
operations and erect a firewall to maintain competitive operations. The adoption of
such remedies is partly a result of the special concerns in the Chinese market that
competitors or end-users may have.
“Mofcom is becoming more and more aggressive
and active, and to a certain extent more
creative”
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II. Mergers | Brazil | Regulatory Approach
Brazilian antitrust watchdog to offer
further merger-review clarity with
new guidelines
The president of Brazil’s competition authority expects to have four new guidelines
published by the end of his term next May, including guidance on gun-jumping,
compliance, horizontal mergers and merger remedies.
Vinicius Marques de Carvalho told MLex that he expects to release, within the next
two weeks, guidelines on transactions that close before receiving antitrust approval, a
practice known as gun-jumping.
The head of the Administrative Council of Economic Defense, or CADE, also plans to
have in the second half of the year a draft on guidelines for compliance.
“We want to release a first draft soon so lawyers can discuss their provisions and maybe
hold seminars on the topic,” he said.
The agency is also planning by the end of the year to issue new guidelines for reviewing
horizontal transactions, and by May next year, when Carvalho’s term expires, to have
guidelines on merger remedies.
“We want to release a first draft soon so
lawyers can discuss their provisions and
maybe hold seminars on the topic”
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Cooperation with agencies abroad
guides Brazilian competition policy
The president of the Brazilian antitrust authority said today that cooperation with other
national authorities has helped shape the country’s competition policy.
The agency cooperated with other countries on 13 cases last year and has already
engaged this year on seven cases, he said.
The new competition regime, established about three years ago, helped Brazil establish
a better relationship with other countries in terms of coordinating on merger analysis,
Vinicius Marques de Carvalho said.
“Maybe it’s the most important way to move forward in terms of competition policy,”
Carvalho said.
The president specifically mentioned a dialogue with China and the importance of
competition advocacy with developing countries that have similar challenges.
This year, the regulator received waivers from Novartis and GlaxoSmithKline allowing
for an information exchange with the European Commission in the review of the
companies’ over-the-counter medicine joint venture.
“Maybe it’s the most important way to move
forward in terms of competition policy”
RETURN TO CONTENTS
CADE could again consider changing
associative contracts resolution,
president says
The Brazilian competition authority is open to reviewing a rule that requires arm’slength “associative contracts” between companies to be notified for approval under
merger law, the agency’s chief said.
Some concerns have been raised by practitioners about the breadth of the resolution,
but the president of the Administrative Council for Economic Defense, or CADE, said
if the number of notifications rises too much the agency could tweak it.
“We will have to see how the notifications will develop along the year, to see the number
of cases we will receive and if the concerns are really meaningful,” President Vinicius
Marques de Carvalho said. He said that if the number rises from 400 notifications
to 800, the agency would have to consider reviewing the language for requiring the
notification of these types of contracts, but if the increase were only to 450 cases, then
it would not.
The agency could also refine the rule through its interpretation in cases, he said.
“We could create exceptions through jurisprudences,” Carvalho told MLex.
“We don’t have any attachment to the resolution. We changed the resolution on
investment funds because we realized that we were receiving more filings than necessary,
so if needed, we would change this one too,” he said.
“We could create
exceptions through
jurisprudences”
RETURN TO CONTENTS
Brazil may need to cut back on
minority-shareholding notifications
Brazil may need to review rules governing which minority acquisitions need regulatory
approval, to cut back on the number of filings, a leading practitioner has said.
“The analysis is very objective, but it means everything has to be filed,” said Cristianne
Zarzur, who worked as external counsel for Vivendi on the Telefonica transaction in
Brazil, but wasn’t speaking for the company on this occasion. Zarzur is president of the
Brazilian law institute IBRAC.
The new competition law in the country is only two years old, so the presumption is
that minority acquisitions between competitors may be a problem, she said. The agency
may need to perform a more sophisticated analysis so in the future fewer notifications
are required.
The rules governing minority acquisitions are provided in a separate regulation on
notification of mergers and acquisitions that was amended last October.
In the Telefonica transaction, in which it acquired the Brazilian Internet provider GVT
from French conglomerate Vivendi, the regulator required Vivendi to gradually sell the
11.3 percent stake in Telefonica Brasil that it acquired as part of the GVT agreement.
Minority acquisitions in Brazil trigger a filing if a 5 percent stake is acquired of a
competitor or vertically related company, or more than a 20 percent stake is acquired of
companies that are neither competitors nor vertically related.
“It means everything has to be filed”
RETURN TO CONTENTS
Brazilian antitrust watchdog has no
preference of merger-remedy type
Brazilian antitrust officials reviewing problematic mergers don’t necessarily favor
solutions that involve divestments over behavioral remedies, the country’s competition
chief has said.
“CADE doesn’t have a preference for remedies, but rather it seeks to formulate remedies
that are proportional to the concerns identified in the transaction,” Vinicius Marques
de Carvalho told MLex.
Marques said that behavioral remedies can resolve issues when structural restrictions fail
to take into account the economic context of the country and the world. For example,
divestitures can’t work without a buyer for the assets.
He said the majority of remedies imposed by the Administrative Council for Economic
Defense, or CADE, have been structural, with divestitures required.
CADE has used behavioral remedies in recent cases, including Videolar’s acquisition
of Petrobras petrochemical unit Innova. The agency approved the deal solely on
commitments from the parties, including requirements to invest in research and
development, to license technology and pass on efficiency gains to consumers.
The agency said that although the deal will combine two of three national producers of
polystyrene, the restrictions will be enough to address competition concerns.
“Behavioral remedies can resolve
issues when structural restrictions
fail to take into account the
economic context”
RETURN TO CONTENTS
II. Mergers | Brazil | Sector/Case-specific
CADE probes several non-reportable
transactions
Brazil’s competition authority is investigating the potential for anticompetitive effects
of several transactions that didn’t meet the threshold for agency notification.
“We have a lot of activity, which is still confidential. We have been sending lots of
questionnaires [to parties],” the agency’s top investigator, Eduardo Frade, told MLex.
The Administrative Council for Economic Defense, or CADE, may require notifications
about transactions that didn’t meet the financial threshold established by the law up
until one year after the deal has closed.
The procedure would have to occur through an investigation of the transaction, known
as APAC, which can be started by CADE’s Superintendent or any of its councillors,
according to a draft of the relevant regulation, which hasn’t been formally released by
the agency.
The draft provides that the agency would be able to enter into an agreement with the
companies that guarantees the reversibility of the transaction in case the agency decides
it should be notified of the deal because of competition concerns.
CADE President Vinicius Marques de Carvalho told MLex that the agency plans by the
end of May to release regulation on investigating non-reportable transactions.
“This regulation will be another step towards more transparency and the guarantee of
standard due process [to the parties],” said Carvalho.
“This regulation will be another step
towards more transparency and the
guarantee of standard due process”
RETURN TO CONTENTS
III. Digital & Data | US | Regulatory Approach
Federal judge expresses skepticism
of FTC’s authority over data breaches
US District Judge Rosemary M. Collyer of the US District Court for the District of
Columbia said that she was “very pessimistic” that the US Federal Trade Commission
could keep up with the flood of data breach attacks that is occurring and said the agency
was “really stretching” its unfairness authority to claim jurisdiction over such breaches.
Her comments came at the conclusion of a mock hearing in which the FTC was seeking
to find a company in contempt stemming from its failure to protect sensitive consumer
data, which had been hacked repeatedly.
Though Collyer said she would “punt” the mock trial to the appeals court to let that
court decide the issue, she went on to opine that there was a “serious question” involving
the FTC’s jurisdiction.
The FTC has long claimed that under Section 5 of the FTC Act, it has authority to
pursue “unfair” acts that it defines as including a failure by companies to safeguard
sensitive consumer information.
“I think it’s really stretching it,” Collyer said of its use of unfairness authority in this
context. She noted that the FTC had filled this space “for a long time,” but added that it
was “very hard” to protect privacy against hackers in Russia and China.
Despite her personal skepticism, Collyer said she knew that administrative law worked
in favor of federal agencies so that she predicted that the FTC would ultimately prevail
in challenges to its authority.
“I think it’s really stretching it”
RETURN TO CONTENTS
Action under online-shopper law to
‘grow,’ say enforcers
Companies that sell products or services on the Internet need to be aware of the new
Restore Online Shopper’s Confidence Act, whose emergence as an enforcement tool
has been one of the 2014 enforcement highlights.
“I’ve been talking to a lot of businesses in the last year, telling them to watch out for
ROSCA. This is an important thing to be aware of,” said Lesley Fair, senior attorney
with the US Federal Trade Commission’s Bureau of Consumer Protection.
The FTC has now brought four enforcement actions using ROSCA, which became law
in 2011. The law was applied, for example, by the FTC and the attorneys general of
Illinois and Ohio in a joint $22 million settlement in November with FreeScore360.com
and other websites that allegedly lured consumers with promises of “free” credit reports,
which actually cost $29.95 a month. ROSCA prohibits so-called “negative options,” in
which consumers that make an initial online purchase cannot be automatically charged
for other online goods or services without their express consent.
In the past, the FTC might have alleged an “unfair” or “deceptive” business practice
under Section 5 of the FTC Act, but ROSCA gives the agency an enforcement tool with
prohibitions of specific behavior.
The FreeScore360.com settlement was one of a number of joint federal-state consumer
protection settlements that Richard Lawson, director of the Consumer Protection
Division of the Florida Office of the Attorney General, said marked a growing trend
of federal-state enforcement work.
“I can only imagine this is going to grow, that we’re going to do more of this,” said
Lawson. He said having both federal and state enforcers sitting across a negotiation
table from a defendant “has a very persuasive effect” in settlement talks. He and Fair
stressed they were speaking in their personal capacities and not on behalf of their
agencies.
“I’ve been talking to a lot of businesses in the last year,
telling them to watch out for ROSCA”
RETURN TO CONTENTS
Digital advertisers need to consider
disclosures for ‘ordinary consumer’
Digital advertisers who rely on social media and mobile devices to drive their advertising
must continue to incorporate ad disclosures that consider consumers less familiar with
online and mobile technology, an official with the US Federal Trade Commission said.
Regulators will not allow online or mobile ad disclosures that are exclusively geared
to the expectations of younger, more technically savvy people, said Richard Cleland,
assistant director of the FTC’s Division of Advertising Practices. Rather, consumer
disclosures in digital ads must be based on the FTC’s long-standing standard that
disclosures are clear from the “perspective of a consumer acting reasonably” in the
marketplace, the FTC said in a policy statement it made in 1983.
“The reasonable consumer is the ordinary consumers who are out there, and there are a
lot of people who aren’t technically savvy and they use the same things we use,” Cleland
said. “They don’t always get all this.”
That means digital advertisers are going to have to design their advertising with older,
less technology savvy consumers in mind “until this millennial generation becomes the
ordinary consumer in the marketplace,” Cleland said.
“There are a lot of
people who aren’t
technically savvy”
RETURN TO CONTENTS
FTC to issue more guidance on native
advertising, Rich says
The US Federal Trade Commission will issue additional guidance on native advertising
later this year, a senior agency official said Friday.
“In the coming year, we are going to be giving some guidance and possibly a report on
native advertising,” said Jessica Rich, the director of the FTC’s Bureau of Consumer
Protection. “We are seeing different forms of native advertising. We are seeing more
and more difficulties in distinguishing content from advertising.”
Native advertising refers to the situation where content sponsored by a particular
company or entity may appear to be editorially neutral news or entertainment content.
“We just think the explosion of opportunities for native advertising, both on mobile
devices and the Internet, etcetera, and the expansion of that makes it timely for us
to provide guidance in this area,” Rich said. “We did a workshop last year on native
advertising that provided us with a lot of information to work from.”
“We are seeing more and more difficulties in
distinguishing content from advertising”
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Growth in national data-localization
rules a ‘pernicious’ trend, US trade
official says
An official with the US Trade Representative on Wednesday called a growing trend of
nations requiring data about their citizens to be physically stored within that country a
“pernicious” development, and singled out China as a country whose new laws have US
officials particularly concerned.
“We see data localization as extremely pernicious and something that is very much on
our radar screen,” said Christine J. Bliss, assistant USTR for Services and Investment.
Bliss said the USTR is tracking the trend, and has found there are now at least 24
countries that maintain some kind of requirement that data be stored or processed on
servers within that country, “and they are growing.”
Bliss and other members of a panel on data localization agreed that one country of
concern is Russia, which has a law due to take effect Sept. 1 that will require that all
personal data gathered or processed about Russian nationals be stored on servers that
are physically located within that country.
Other countries, ranging from Indonesia to Nigeria are — for economic development,
national security, privacy or other reasons — also slapping restrictions on where data
can be stored and processed, or limiting how it can be transferred across international
boundaries.
At least 24 countries maintain
some kind of requirement that
data be stored or processed on
servers within that country
RETURN TO CONTENTS
Judgment against Siemens executive
over compliance failure triggers
broader concerns
The judgment against a former top Siemens executive, found liable for compliance
failings at the firm, has raised concerns at German companies about the risks for
management related to cartel cases. Heinz-Joachim Neubuerger, the former chief
financial officer at Siemens, reportedly committed suicide.
Neubuerger left the company in 2006 after a corruption scandal that involved bribes
paid in Iraq, Venezuela, Bangladesh, Russia and other countries.
In 2008, the German engineering company pleaded guilty in the US to violating the
Foreign Corrupt Practices Act, and agreed to pay a total of $1.6 billion in penalties to
US and German authorities.
Siemens subsequently brought a damages suit against Neubuerger and in 2013 won a
15 million euro judgment against him. The judgment said that executives have a duty to
establish and effectively monitor a proper internal compliance program, said Hans-Jörg
Niemeyer, a partner with Hengeler Mueller.
The judgment could have greater implications, such as for price-fixing or bid-rigging
violations, he said.
“This judgment in Germany has made top management extremely nervous, also in
cartel cases,” Niemeyer said.
The judgment could have greater
implications, such as for price-fixing
or bid-rigging violations
RETURN TO CONTENTS
Reckitt Benckiser moves to
‘prevention’ model of compliance
Smart technology has allowed UK-based consumer goods company Reckitt Benckiser
to move from a “cure”-focused compliance program to one that prevents problems, the
company’s general counsel said Wednesday, describing a company compliance program
that has drawn plaudits.
Apps that give business staff more control in contracting — a time-consuming task for
legal departments — have let the company automate much of its contracting, Claire
Debney said.
“We’re definitely moving to prevention, where I’m spending the last 30 years doing
cure,” Debney said.
The company’s program, known as i-legal, is aimed at integrating compliance more
thoroughly in the business and has drawn notice from business press that have
commented on its innovative qualities.
The program includes an app that provides business users with templates for contracts
and a few red-flag questions — such as “is the other side related to you? Is it a
public official” — that if not triggered let business staff complete a contract without
involvement from the legal department, Debney said.
The company uses the program in its Slough, England, headquarters and intends to
deploy the program globally over the next two years, she said.
i-legal is aimed at integrating
compliance more thoroughly in
the business
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