Corporate Counseling Committee Antitrust Update for In ... · PDF fileCorporate Counseling Committee . Antitrust Update for . ... co -promotion, ... bundling and tying conduct in markets

Corporate Counseling Committee Antitrust Update for In-House Counsel

December 12, 2013

Moderator: Christi Braun, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo U.S. Criminal Enforcement Update: Lisa Tenorio-Kutzkey, Orrick, Herrington & Sutcliffe U.S. Mergers Update: Antony (Tony) Kim, Orrick, Herrington & Sutcliffe U.S. Civil Litigation Update: David Smutny and Scott Westrich, Orrick, Herrington & Sutcliffe EU Update: Douglas Lahnborg, Enzo Marasà and Elizabeth Turner, Orrick, Herrington & Sutcliffe

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U.S. Criminal Enforcement Update: Lisa Tenorio-Kutzkey

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Major Developments

• September Fire Sale • Focus on Individuals • Industries Under Fire

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September Fire Sale

• Importance of September − Close of Division’s fiscal year − All stats for the year are calculated

• Importance of September 2013 − Marked the end of DAAG Scott Hammond’s tenure − Pressure to finalize pending plea agreements − Extraordinary discounts made available

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September 26, 2013

• Nine Japan-based automobile parts manufacturers agreed to plead guilty to fixing prices on parts sold to U.S. car manufacturers and installed in U.S. cars − Hitachi Automotive Systems Ltd.: $195 million − JTEKT Corp.: $103.27 million − Mitsuba Corp.: $135 million − Mitsubishi Electric Corp. (MELCO): $190 million − Mitsubishi Heavy Industries Ltd.: $14.5 million − NSK Ltd.: $68.2 million − T.RAD Co. Ltd.: $13.75 million − Valeo Japan Co. Ltd.: $13.6 million − Yamashita Rubber Co. LTD: $11 million

• North of $740 million in criminal fines in a single day

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Focus on Individuals

• Division policy to continue to focus on individuals

• Belief that individual jail sentences create the largest deterrent

• Room within the U.S. Sentencing Guidelines to increase prison time

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Industries Under Fire

• Wire Harnesses → Sensors → Control Panels→ Seat Belts/Air Bags → Navigation → Air Conditioning → Assorted Auto Parts → Ball Bearings → Steering → Coils → Washers → Lights → additional non-public investigations

• Air Cargo → Passenger Services → Freight Forwarder → Shipping

• DRAM → SRAM → LCD → CRT → Optical Disk Drive • LIBOR, Muni Bonds & Auction Foreclosure • What’s next?

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U.S. Mergers Update: Antony (Tony) Kim

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Mergers Agenda

• Mergers in Court − U.S. v. US Airways/American Airlines

• Consent Decrees − Pinnacle/Ameristar (FTC) − Honeywell/Intermec (FTC)

• Closed Investigations • Counseling Developments

− HSR Changes re: Pharma Patent Rights

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Mergers in Court: U.S. v. US Airways

2011: Nov. 29: American Airlines files for bankruptcy 2012: Jan. 25: US Airways discloses it is exploring merger 2013: Feb. 14: US Airways and American announce

merger Mar. 27: Bankruptcy court approves merger August: Customer class action; DOJ sues to block Nov. 12: DOJ settlement announced Nov. 27: Bankruptcy court approves DOJ settlement Dec. 9: Merger consummated (stock symbol:

“AAL”) 11


Nov. 12, 2013: Settlement with Government ... 1. “Game changer” divestiture of slots and gates, plus certain other

facilities, to low cost carriers (LCCs) at seven key airports − Boston-Logan; Chicago-O’Hare; Dallas-Love Field; Los Angeles-LAX, Miami

International; NY-LaGuardia; and Reagan National-DCA − Other facilities: e.g., ticket counters, baggage handling, offices, loading

bridges

2. Agreement with DOT to retain small aircraft commuter slots at Reagan National (DCA) solely for service to small, non-hub and medium-sized airports

3. Agreement with state AGs to keep hubs in plaintiff-states for three years; continued daily service at one or more hubs for five years

− Charlotte; NY-JFK; Los Angeles; Miami; Chicago-O’Hare; Philadelphia; Phoenix

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Divestitures by the numbers (and LCCs):

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Airports Slots Gates Includes other facilities as necessary

Reagan (DCA)

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• At DCA: divestiture of all air-carrier slots not reserved for use by smaller, commuter planes

• JetBlue (DCA) and Southwest (LaG) acquire slots currently leased from American

• Remaining 88 slots (DCA) and 24 slots (LaG) plus any JetBlue or Southwest decline will be divested in “bundles”

NY-LaGuardia

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Boston-Logan Chicago-O’Hare Dallas-Love Field Los Angeles-LAX Miami Int’l

2 each

• To be sold on commercially reasonable terms

• Preference to be given to airlines that do not currently operate a large share of slots or gates


• Attorney General Holder: − “By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports,

this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country.”

• Asst. Attorney General Baer: − “This settlement will disrupt the cozy relationships among the incumbent legal

carriers, increase access to key congested airports and provide consumers with more choices and more competitive airfares on flights all across the country.” JetBlue’s entry at Reagan National led to Boston fares dropping 30

percent and consumer savings of $50 million per year In 2010, Southwest’s acquisition of 36 divested slots at Newark Liberty

(from United-Continental merger) led to 10 percent fare drops on nonstop routes, 36 percent increased traffic

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• Nov. 27, 2013: Bankruptcy court approves settlement − Bankruptcy Court previously approved merger in March 2013,

months before Government filed to block merger − Bankruptcy Court also presiding over customer class action filed in

August 2013 − U.S. Bankruptcy Judge Sean Lane “mystified” that plaintiff-

customers waited for “months” to seek to enjoin merger; court denied customers’ request to stay merger for more discovery

− U.S. District Judge Loretta Preska rejected appeal by customers from Bankruptcy Court, stating that she fully supported Judge Lane’s decision to allow merger to proceed

− 2nd Circuit and U.S. Supreme Court similarly rejected attempts to halt merger

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Consent Decrees: Pinnacle/Ameristar (FTC Admin Compl. May 2013)

• Alleged Market: − Casino services (slot, video poker, table gaming, i.e., “gambling,” and associated

amenities driving gaming revenues, such as hotel, restaurant, entertainment) in two geographic markets: St. Louis, MO and Lake Charles, LA

• Alleged Harm in Lake Charles: − Unilateral effects theory: Parties “. . . soon will be each other’s closest

competitor in the Lake Charles area market” after $2.8 billion merger

• FTC Divestiture Remedy (Final Approval, Nov. 20, 2013): − FTC approves Ameristar Casino’s divestiture of casino and hotel project (Mojito

Pointe) under construction in Lake Charles to GNLC Holdings, parent company of Landry’s Inc., which owns Golden Nugget casinos and 450 restaurants nationwide

− (Separate divestiture process for St. Louis assets ongoing) 16

Consent Decrees: Honeywell/Intermec (FTC Settlement, Sept. 13, 2013)

• Alleged Market: − Two-dimensional (2D) bar code scanners, which are used at retail stores to

translate images (e.g., UPC barcode) into digital format that can be interpreted and analyzed by a computer

• Alleged Harm: − Coordinated effects theory: $600 million merger viewed as 3-to-2, where

Honeywell/Intermec and Motorola would control >80 percent of U.S. market for 2D scanners; increased coordination, high IP entry barriers

• FTC Licensing Remedy (Final Order, Nov. 27, 2013): − Per remedy first proposed in September 2013, Honeywell to license Datalogic

IPTECH s.r.l. for next 12 years − Honeywell barred from asserting patent infringement claims against Datalogic for

2D scan products, and from transferring patents in license to anyone who does not commit to abide by FTC order

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Closed Investigations:

• Microsoft/Nokia (Nov. 29, 2013) − DOJ clears Microsoft’s $7 billion acquisition of Nokia’s mobile

devices & services business and licenses to Nokia patents

• Tenet Healthcare/Emanuel Medical Center (Nov. 18, 2013) − FTC clears Tenet’s $131 million acquisition of Emanuel; Tenet’s

third hospital acquisition in Northern San Joaquin Valley, which would end Emanuel’s 96-year run as an independent non-profit hospital

− Parties awaiting California AG sign-off, which is required under state law when for-profit company acquires nonprofit hospital

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• FTC announced on Nov. 6, 2013, final amendments to Hart Scott Rodino Act (HSR) that change the premerger notification rules applicable to pharmaceutical, biologics, and medicine manufacturing industries

• Background: HSR Act requires parties to file premerger notification filings for mergers or acquisitions of assets and/or voting securities that exceed certain thresholds, and to observe waiting periods before closing transactions

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Counseling Developments: HSR Changes re: Pharma Patent Rights


• Old Rule: Premerger Notification Office (PNO) historically analyzed exclusive patent licenses based on whether rights to “make, use and sell” patent were being transferred − Historically, only transfer of the full set of these rights was HSR

reportable as an asset transfer − Historically, if licensor retained the right to make the licensed

product (even if exclusively for the licensor), the PNO viewed the deal as essentially a distribution agreement, not a reportable asset acquisition

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• New Rule: Transfer of exclusive patent rights are potentially HSR reportable, even if licensor retains certain rights... − Focus is whether deal transfers “all commercially significant rights”

to a patent (i.e., the exclusive right to use the patent) for “any therapeutic area (or specific indication within a therapeutic area)”

− “All commercially significant rights” to a patent are transferred even if licensor retains “limited manufacturing rights” and/or “co-rights” “limited manufacturing rights”: licensor retains right to manufacture product

exclusively for the licensee; examples also make clear that could be reportable where deal allows licensor to retain right to manufacture same licensed product for use by third party in different therapeutic area

“co-rights”: co-development, co-promotion, co-marketing, co-commercialization (assisting licensee to sell licensed product)

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U.S. Civil Litigation Update: David Smutny

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Major Developments in Civil Antitrust Litigation

• New Cases and Substantive Decisions • Developments in IP–Antitrust Law

• Developments in Antitrust Class Actions

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New Antitrust Cases • Valassis Communications v. News Corp., Case No. 2:13-cv-

14654 (E.D. Mich. Nov. 12, 2013). − $560 million claim including 16 counts of federal and state antitrust violations,

unfair competition and tortious interference.

− Complaint alleges monopoly maintenance, predatory pricing, exclusive dealing, bundling and tying conduct in markets for in-store advertising and promotions (ISPs), and free-standing advertising inserts (FSIs).

− Follows jury verdict and subsequent settlement in 2009.

• Aluminum Warehousing Class Action Cases − E.g., Central Aluminum Co. v. Goldman Sachs Group, Inc., et al., Case No. 2:13-

cv-14811 (E.D. Mich. Nov. 21, 2013) (class action alleging antitrust conspiracy to control the supply of aluminum in order to profit from stock fluctuations).

− Based on July 2013 announcement of DOJ investigation against Goldman Sachs and JP Morgan Chase for allegedly entering into agreements artificially inflating the cost of storing aluminum.

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New Substantive Decisions • Metro. Regional Info. Sys. v. Am. Home Realty Network, Inc.,

2013 U.S. Dist. LEXIS 157134 (D. Md. Nov. 1, 2013). − Mixed ruling—granting counterclaim defendant’s motion to dismiss as to certain

counterclaims, and denying motion to dismiss as to others.

• Sidbe v. Health, 2013 U.S. Dist. LEXIS 160512 (N.D. Cal. Nov. 7, 2013).

− Granting defendant’s motion to dismiss for: (1) failure to allege plausible relevant markets, (2) failing to state a tying claim, and (3) failing to state a claim for monopolization or attempted monopolization.

• Animal Sci. Prods. v. Hebei Welcome Pharm Co. Ltd., 2013 U.S. Dist LEXIS 169083 (EDNY Nov. 25, 2013). − March 14, 2013 jury verdict finding defendants liable for Sherman Act §1 price-

fixing violations in the market for Vitamin C.

− District Court denied defendants’ renewed motion for post-verdict JMOL, denying defendants’ motion to reduce damages award, and granted plaintiffs’ motion for a 10-year permanent injunction.

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IP–Antitrust Developments

• Cascades Computer Innovation LLC v. RPX Corp., et al., Case No. 12-cv-1143 (YGR) (N.D. Cal. Dec. 3, 2013). − Denying motion to dismiss Sherman Act, §§ 1-2 group boycott and monopsony

antitrust claims brought by patent troll against a “patent aggregator” and manufacturers of Android OS-based smart-phone and tablet products.

• FTC extends comment period for its 6(b) Study on patent acquisition entity issues to Dec. 16, 2013.

• Competition Commission of India (CCI) opens an investigation

into Ericsson’s royalty demands for Standard Essential Patents (SEPs). − Investigation follows patent infringement lawsuit filed by Ericsson against India-

based Micromax.

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IP-Antitrust Developments (Cont.)

• RJ Machine Co, Inc. v. Canada Pipeline Accessories Co., LTD., Case No. A-13-CA-579-SS (W.D. Tex. Nov. 22, 2013). − Antitrust claims alleged that Canada Pipeline Accessories Co., Ltd. (“CPA”)

monopolized the market for off-patent product by threatening plaintiff with trademark litigation. CPA’s patent over the product expired in 2011, and CPA obtained

trademarks for the names consumers associated with the product, as well as the “trade dress” design, which was the only form and dimensions that could replace the products.

− District Court dismissed plaintiff’s antitrust claims, stating CPA’s threats and legal actions “do not transform this trademark dispute into an antitrust case, no matter how clever the argument may be.”

− Court “acknowledge(d) the potential anti-competitive effect of [CPA’s] alleged activity[,]” but found that the conduct did not qualify as “sham” litigation.

− Court denied CPA’s motion to dismiss plaintiff’s declaratory judgment claim that CPA’s trademarks and trade dress are invalid.

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Antitrust Class Action Developments

• Class Certification Rulings Mixed

• In re NCAA Student-Athlete Name & Likeness Licensing Litig., 2013 U.S. Dist. LEXIS 160739 (N.D. Cal. Nov. 8, 2013). − Claim: Antitrust claims brought on behalf of current and former college athletes

against the NCAA alleging Sherman Act § 1 agreement to fix at zero the price of student-athletes image licensing rights.

− Holding: District Court denied certification of plaintiffs’ damages class, but granted certification of an injunction class consisting of:

All current and former student-athletes residing in the United States who compete on, or competed on, an NCAA Division I … college or university men’s basketball team or on an NCAA Football Bowl Subdivision ... men’s football team and whose images, likenesses and/or names may be, or have been, included in game footage or in videogames licenses or sold by Defendants, their co-conspirators, or their licensees after the conclusion of the athlete’s participation in intercollegiate athletics.

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Class Actions (Cont.)

• Glaberson v. Comcast Corp., 2013 WL 5988966 (E.D. Pa. Nov. 12, 2013). − On remand, district court found that Supreme Court decision in Comcast does

not preclude certification of a narrowed class with a revised antitrust impact analysis.

• In re Nexium (Esomeprazole) Antitrust Litig., 2013 U.S. Dist. LEXIS 162276 (D. Mass. Nov. 14, 2013). − Certifying damages class in detailed post-Comcast analysis.

• Supreme Court of Canada rejects American Express-style class certification test that would have required judges to delve into the merits of a claim at the class certification stage. − Pro-Sys Consultants Ltd., et al. v. Microsoft Corp., et al., Case No. 34282 (Oct.

31, 21013). − Infineon Technologies, A.G., et al. v. Option Consommateurs, et al., Case No.

34617 (Oct. 31, 2013).

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U.S. Civil Litigation Update – Pay-for-Delay:

Scott Westrich

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Pay-for-Delay Background

• A “pay-for-delay” settlement is a settlement of patent litigation in which the brand-name drug firm pays its potential generic competitor to abandon a patent challenge and delay entering the market.

• The concern of the FTC and others is that “pay-for-delay” settlements allow the branded drug manufacturer to share its monopoly profits with the prospective entrant and defeat the purpose of the Hatch-Waxman Act by delaying the introduction of lower-cost generic competition.

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FTC v. Actavis, 133 S. Ct. 2223 (2013)

• Concerned settlement agreements between Solvay and Actavis and other generic manufacturers regarding Solvay’s AndroGel.

• Consistent with most other courts, the 11th Circuit had dismissed the case under the “scope of the patent” rule – I.e., absent sham litigation or fraud in obtaining the patent, a

reverse payment settlement is immune from antitrust attack so long as the potential anticompetitive effects fall within the scope of the patent.

• Split of authority in the circuits with 3rd Circuit’s K-Dur decision (settlements presumptively unlawful)

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FTC v. Actavis

• In an opinion by Justice Breyer, the Court held that antitrust liability is not governed by patent law (scope of the patent) – Reverse payments should be analyzed under the rule of reason

• “a court, by examining the size of the payment, may well be able to assess its likely anticompetitive effects along with its potential justifications without litigating the validity of the patent”

– Rejects FTC position that reverse payment settlement agreements are presumptively unlawful and should be assessed via a “quick look” approach

• The Court noted that the likelihood of anticompetitive effects depends on the size of the payment, anticipated future litigation costs, whether the payment includes other services, and the justification proffered.

• Strong dissent from Chief Justice Roberts 33

FTC v. Actavis

• The Supreme Court’s decision leaves open many questions regarding how courts should apply the rule of reason in assessing the legality of pay-for-delay agreements. – What is the role of patent validity or the strength of the branded

manufacturer’s patent? – What factors other than payment size are relevant to assessing

anticompetitive effects? – What is the role of market definition? – How will the services provided by the generic be valued? – What justifications would be accepted? – What is the plaintiff’s burden and when does the burden shift to

the defendant? 34

Continued FTC Priority

• Pay-for-delay has been an important priority for the FTC for more than 10 years – Began with administrative litigation against Schering-Plough in

2000

• Current FTC leadership has reiterated the continued importance of pay-for-delay issues to the FTC – Nov. 13 interview with Bureau of Competition Director Deborah

Feinstein – Prior comments after the Actavis decision by Chairwoman

Ramirez and Commissioner Wright

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Continued FTC Priority

• The FTC has said it will focus on: – Its two ongoing cases: Actavis and Cephalon – Continuing pending investigations – Examining both new settlements and earlier settlements in light

of Actavis • According to the FTC, in fiscal year 2012 there were “40 potentially

anticompetitive patent settlements between brand-name and generic drug companies” and more than 100 since 2009.

– Filing amicus briefs in private litigation to help shape the law in this area following Actavis

• E.g., In In re Effexor XR Antitrust Litigation (D.N.J.) and In re Wellbutrin XL Antitrust Litigation (E.D. Pa.), the FTC submitted briefs addressing whether a branded manufacturer’s agreement not to launch an authorized generic could be unlawful under Actavis.

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Pay-for-Delay Case Developments

• Actavis (N.D. Ga.): – Remand still pending

• Cephalon (E.D. Pa.):

– Cephalon moved to dismiss action as moot because there are now multiple generic versions of its Provigil narcolepsy drug on the market

– On Nov. 18, the FTC filed an opposition to Cephalon’s motion: • In light of generic entry since the case was originally filed, “the FTC’s focus

is now on equitable relief designed to prevent recurrence of, and obtain redress for, Cephalon’s violation of law, including monetary equitable remedies.” (Emphasis added.)

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• Cephalon (continued) • Possible remedies that remain viable notwithstanding current generic

competition include: (1) a prohibition on entering into business transactions simultaneously with patent settlements; (2) disgorgement or restitution; and (3) measures designed to restore competitive market conditions that would have prevailed but for the violation.

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• In re Nexium (Esomeprazole) Antitrust Litigation, Case No. 12-md-02409-WGY (D. Mass.) – MDL incorporating claims by direct purchasers and end payors

(indirect purchasers) of AstraZeneca’s heartburn drug Nexium that AstraZeneca violated the antitrust laws in agreeing with generic manufacturers to delay the entry of a generic version of Nexium.

– On Nov. 14, the court certified a class of end payors in those states allowing indirect purchaser actions. See 2013 WL 6019287.

• Class certified under Rule 23(b)(3)

• Plaintiffs’ expert’s “averages” damages model based on a class-wide overcharge analysis met Comcast requirements. The fact that a portion of the putative class received coupons or otherwise may have not paid overcharges was “insufficient to overcome the showing of common antitrust impact to the putative class.”

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• In re Nexium (Esomeprazole) Antitrust Litigation, Case No. 12-md-02409-WGY (D. Mass.) (continued) – On Nov. 27, the court ruled that claims filed in Aug. 2012 based

on a AstraZeneca-Ranbaxy settlement agreement executed in April 2008 were not barred by a four-year statute of limitations.

• The court relied on plaintiffs’ showing that, without the settlement agreement, Ranbaxy would not have launched a generic Nexium product until August 2008 (due to regulatory and manufacturing reasons).

• The court had previously ruled that overcharge claims were not barred by the statute of limitations because each overcharge was a continuing violation. 2013 WL 4832176 (Sept. 11, 2013).

– Trial is scheduled for March 2014.

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• Cipro Cases I and II (San Diego Superior Ct.) – On Nov. 15, the court approved Bayer’s $74 million settlement

with California indirect purchasers. • Settlement was reached shortly before the Actavis decision

– This case followed remand of indirect purchaser claims after decisions in the Federal and 2nd Circuits holding that the 1997 Cipro agreements at issue did not violate the federal antitrust laws because they were within the scope of the patent. The indirect purchaser actions date back to 2000.

– In 2011, the California Court of Appeals dismissed the indirect purchaser Cartwright Act claims under the scope of the patent rule. The California Supreme Court granted review.

– The California Supreme Court stayed the case pending a decision in Actavis (among other things). The case will continue to move forward against generic manufacturers.

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Pay-for-Delay: New Cases

• Miami-Luken, Inc. v. Boehringer Ingelheim Pharma, Nov. 8, 2013, E.D. Pa. – Putative class action of direct purchasers of Boehringer’s

Aggrenox stroke prevention medication alleging that they paid inflated prices due to an agreement by Barr to delay entry in return for a $120 million co-promotion deal.

– The FTC has been investigating similar issues since 2009. The FTC is currently appealing to the D.C. Circuit a district court decision allowing Boehringer to withhold production on work product grounds of documents the FTC asserts are critical to its investigation. See FTC v. Boehringer Ingelheim Pharmaceuticals, Inc., Case No. 09-564 (JMF) (D.D.C. Sept. 27, 2012).

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Pay-for-Delay: New Cases

• Lidoderm pay-for-delay suits against Endo and Actavis – Nov. 8 complaint in E.D. Pa. – Nov. 12 complaint in N.D. Cal. – Complaints allege:

• Actavis agreed to delay entry in return for $96 to $240 million of free, branded Lidoderm from Endo to sell.

• Endo’s annual sales of its pain relief patch Lidoderm were approximately $1.3 billion.

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EU Update: Douglas Lahnborg, Enzo Marasà

and Elizabeth Turner

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EU Update: Legislative Developments

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EU Antitrust Damage Claims

• Damages available for victims of violation of Articles 101 and 102 TFEU

• Current regime for claiming for damages in the EU: − National courts − National rules − Forum shopping

• Development of EU-wide legislative framework − 2005 Green Paper − 2008 White Paper − 2013 Proposal for a Directive

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EU Antitrust Damage Claims • Proposed Directive addresses the following primary issues

– Disclosure of evidence General disclosure

Immunity submissions

– Presumption of loss

– Pass-on defence

– Joint and several liability Confirmation

Protection of immunity applicant

– Limitation

– Effect of national decisions

• Internal consultation within EU institutions ongoing

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EU Antitrust Damage Claims (cont’d) • European Council adopted “common position” Dec. 2

− Final decision of national competition authority binding only on courts of that Member State and relevant (non-binding) evidence before courts of other Member States

− Limitation period reduced from five to three years − Contribution claims against immunity applicant to be permitted

• European Parliament − Committees in charge of reviewing the Council’s text to meet January to

reach Parliament “common position” − Main concerns relate to absolute protection of whistleblower’s statements

and limitation of joint and several liability for immunity applicants − Vote scheduled for spring session

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EU Merger Control Regime (Overview) • Prior review of “concentrations” between undertakings that

meet certain turnover thresholds. − “Concentration” arises any time a “change of control” in one or more undertakings

occurs as a result of a transaction.

− The transaction is subject to mandatory prior notification solely with the Commission (within the EU) and it cannot be completed before clearance.

− Pre-notification contacts required to assess scope of information required by the Commission in a view to ensure completeness upon formal filing.

− Commission has 25 working days from notification (Phase I) to decide whether to open an in-depth investigation (Phase II) or unconditionally clear the transaction in Phase I.

− In Phase II, the Commission has 45 working days to decide whether to prohibit the transaction, clear it unconditionally, or impose remedies (e.g., divestitures or behavioral commitments).

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EU Merger Control Regime (Streamlining the Procedure)

• On Dec. 5, the Commission adopted a package simplifying certain procedures under the EU Merger Regulation (EUMR) in a view to cut red tape and costs for businesses.

• Extending the scope of the “simplified procedure” to a larger number of unproblematic mergers. The Commission raised the market share thresholds under which mergers qualify for a short review: − from 15 percent to 20 percent for horizontal overlaps; − from 25 percent to 30 percent vertically related markets; − companies’ combined market shares up to 50 percent, provided

that the increase in the level of concentration of the relevant markets (the so-called HHI delta) is less than 150.

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• A “super-simplified procedure” is introduced for joint ventures active entirely outside the European Economic Area (EEA). − Minimum information required to describe the transaction: parties’

businesses in general terms, and turnover figures to assess the jurisdiction of the Commission under the EUMR.

• For normal non-simplified cases, the market share thresholds that identify “affected markets” (for which more information is required) have been raised from 15 percent to 20 percent for horizontal overlaps and from 25 percent to 30 percent for vertically related markets.

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• Companies can request waivers from the Commission to give certain information. − Revised text of the notification forms clearly identify categories of

information that are more likely to qualify for waiver requests.

• Pre-notification procedure no longer recommended where merging companies do not have horizontal overlaps or vertical links.

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EU Merger Control Regime (Minority Shareholdings)

• In June 2013, the Commission also launched a consultation on a more radical reform of the EUMR which, inter alia, included a proposal to extend its scope to cover acquisitions of non-controlling shareholdings between companies.

• The EUMR currently entitles the Commission to review, prior to completion, transactions that confer “control” by one undertaking over another. − “Control” is defined as the power to exercise “decisive influence” over an

undertaking. − Upon acquisition of control, two previously independent undertakings

become one single entity.

53

EU Merger Control Regime (Minority Shareholdings)

• The Commission now proposes extending its jurisdiction over acquisitions of shareholdings that fall short of conferring “control” over the target, but which may still give the minority shareholder “enough influence”: − Ability to influence the target resulting in it competing less aggressively, for

example, through influencing pricing decisions, or other competitive behavior of the target.

• The Commission says that some problematic structural links may not be detected and sanctioned under Articles 101 and 102 TFEU—which prohibit, respectively, anticompetitive agreements between undertakings and the abuse of a dominant position. − Ryanair/Aer Lingus case used as main example of problematic structural links that

could not be caught by Article 101 or Article 102.

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EU Merger Control Regime (Minority Shareholdings – Consultation)

• Many respondents to the consultation maintain that Articles 101 and 102 are better tools to address structural links. − 101/102 are based on an ex-post assessment system, which allows

observation of the actual effect of a structural link on competition over time.

− EUMR is based on an ex-ante review, which entails a static one-off prior assessment of the transaction—this may not be suitable for assessing non-controlling links between independent companies.

• Many suggest the Commission would better issue guidelines to stretch the application of existing provisions over structural links rather than launching a drastic and burdensome legislative reform.

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EU Merger Control Regime (Minority Shareholdings – Procedure for Approval)

• The Commission asked stakeholders which procedure for the approval of acquisition of structural links would be preferable between: i. A mandatory prior-notification regime in line with that already

applicable under the current EUMR; ii. A self-assessment regime, under which it would be entirely up

to undertakings whether to inform the Commission of the transaction; or

iii. A transparency system, under which certain prima-facie problematic transactions would have to be notified for information purposes, with the Commission to decide whether to open a formal proceeding.

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EU Merger Control Regime (Minority Shareholdings – Remarks)

• Almost all the respondents are in favour of a self-assessment system coupled with voluntary notification and no suspension obligation in case of voluntarily notified transactions:

− It allows undertakings to obtain certainty on whether the transaction is unproblematic without requiring burdensome mandatory filings;

− It is more in line with the current self-assessment system under Article 101 and 102

• Commission may still favor a transparency system

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EU Update – Cartel Investigations

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Libor/Euribor – Eight Banks Fined €1.7 Billion ($2.3 Billion)

• Commission fined eight international banks a total of €1.71 bln ($2.3 bln) for participating in illegal cartels in markets for financial derivatives

• Commission issued two separate decisions adopting the cartel settlement procedure • Euro interest rate derivatives • Yen interest rate derivatives

• Simplified settlement procedure

• Companies must acknowledge their responsibility for the infringement • Companies must not challenge Commission decision • Commission issues streamlined decision and grants 10 percent reduction in the

fine in addition to reductions applicable under leniency programme

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• Barclays, Deutsche Bank, Société Générale and RBS found to have operated EIRD cartel from September 2005 to May 2008.

• Cartel intended to distort normal course of pricing components for derivatives through discussing—through the traders—their bank’s submissions for the calculation of the Euribor as well as the trading and pricing strategies.

• Barclays received highest fine—€690 million—but received full immunity for revealing existence of cartel.

• RBS received 50 percent reduction, Deutsche Bank 30 percent reduction and Société Générale only 5 percent under leniency programme in addition to 10 percent for early settlement.

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• UBS, RBS, Deustche Bank, JP Morgan, Citigroup and RP Martin found to have participated in at least one of several infringements lasting between 1 and 10 months from 2007 to 2010 in relation to the fixing of interest rates derivatives linked to the Japanese Yen (JPY Libor).

• Collusion included discussions between traders on certain JPY Libor submissions and exchanges of sensitive information as to trading positions or future submissions.

• RP Martin allegedly facilitated one of the infringements by influencing the JPY Libor submissions of certain banks that were not involved in the coordination.

• UBS received a record fine of € 2.5 bn but received full immunity for blowing the whistle under the Commission’s leniency programme.

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Ongoing Commission Investigations

• Ongoing investigations into Libor/Euribor for companies that chose not to participate in the settlement procedure.

• Commission also has ongoing investigation in relation to products linked to the Swiss Franc in the field of interest rates derivatives.

• Investigation on alleged collusive behaviour of 13 banks in the market for Credit Default Swaps traded “over-the-counter” is also at advanced stage—Statement of Objections sent to the parties last July.

• Commission also probing alleged manipulation of benchmarks for the oil and bio-fuels industry involving the reporting of prices to agency Platts by companies such as Statoil, BP and Shell.

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Lisa Tenorio-Kutzkey

• Partner, San Francisco

Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, CA 94105-2669 Phone: (415) 773-4135 Email: [email protected]

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mailto:[email protected]

Antony Kim

• Partner, Washington, D.C.

Orrick, Herrington & Sutcliffe LLP Columbia Center 1152 15th Street, N.W. Washington, D.C. 20005-1706 Phone: (202) 339-8493 Email: [email protected]

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David Smutny

• Partner, Washington, D.C.

Orrick, Herrington & Sutcliffe LLP Columbia Center 1152 15th Street, N.W. Washington, D.C. 20005-1706 Phone: (202) 339-8562 Email: [email protected]

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Scott Westrich

• Senior Counsel, San Francisco

Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, CA 94105-2669 Phone: (415) 773-4235 Email: [email protected]

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Douglas Lahnborg

• Partner, London & Brussels

Orrick, Herrington & Sutcliffe LLP 107 Cheapside London EC2V 6DN DX: 557 London/City United Kingdom Rue d’ldalie 9-13 1050 Brussels Belgium Phone: +44 20 7862 4696

+32 2894 6443 Email: [email protected]

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Enzo Marasà

• Attorney, Brussels

Orrick, Herrington & Sutcliffe LLP Rue d’ldalie 9-13 1050 Brussels Belgium Phone: +32 2 894 6441 Email: [email protected]

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Elizabeth Turner

• Senior Associate, London

Orrick, Herrington & Sutcliffe LLP 107 Cheapside London EC2V 6DN DX: 557 London/City United Kingdom Phone: +44 20 7862 4661 Email: [email protected]

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Corporate Counseling Committee

• Please become a member of our committee! – Visit our committee home page to join: http://apps.americanbar.org/dch/committee.cfm?com=AT304000 – While you are there you can also sign up for our list serv and join

our LinkedIn community.

• We are also looking for in-house attorneys to host and moderate a new series of committee programs aimed at current counseling issues. − Please contact Jim Wade at [email protected] for more

information on how to get involved.

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http://apps.americanbar.org/dch/committee.cfm?com=AT304000


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