Today, companies looking to merge with others across jurisdictions would do well to consider antitrust issues at the beginning of the transaction process; regulatory antitrust challenges to M&A are increasing globally. On Corporate Counsel, McDermott partners Jon B. Dubrow and Joel R. Grosberg discuss six risks to deals from antitrust regulators, such as vertical merger enforcement changes at the US DOJ, and ways to manage them.
Alert: The Supreme Court clarified the principles of international comity this week in a ruling pertaining to the long-running vitamin C antitrust class action litigation. International comity is the recognition a nation shows to the legislative, executive or judicial acts of another nation. Principles of comity state that US courts should defer to the laws of other nations when actions are taken pursuant to those laws. In this week’s ruling, Justice Ginsberg wrote that federal courts should accord respectful consideration to foreign government submissions when analyzing comity issues, but are not bound by them. This ruling vacates the Second Circuit’s decision in the case overturning the jury verdict for the class, and is a win for the class of US purchasers of vitamin C. (more…)
The Chinese government announced on March 13, 2018, that it will consolidate the duties of three competition agencies into a new government agency to handle all antitrust matters. While it is too early to tell how this reorganization will impact China’s review of transactions and conduct cases, we believe that this change could lead to greater consistency and potentially more experienced attorneys reviewing competition matters.
On 15 March 2016, the Japan Fair Trade Commission (JFTC) and the European Commission (Commission) announced their intention to upgrade the current antitrust co-operation agreement between Japan and the European Union. The upgrade will have a number of practical and legal implications for companies involved in international antitrust investigations or considering making leniency applications.
The review is understood to focus primarily on the facilitation of exchanges of information and evidence between the JFTC and the Commission. If the negotiations prove successful, it would be the second time that each of the agencies has entered into a “second generation” co-operation agreement. The JFTC entered into a second generation co-operation agreement with the Australian Competition and Consumer Commission in April 2015 and a second generation agreement between the European Union and the Swiss Confederation was signed in May 2013.
Federal Trade Commission (FTC) Chairwoman Edith Ramirez and Assistant Attorney General William Baer testified before the House Committee on the Judiciary’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law on May 15, 2015. The oversight hearing provided an opportunity for the heads of the U.S. antitrust enforcement agencies to survey their agencies’ priorities and recent achievements. The two agency heads also faced congressional questions on a variety of topics ranging from proposed reforms to the FTC’s merger review process to the alleged unfair targeting of foreign firms by Chinese antitrust authorities.
In her prepared testimony, Chairwoman Ramirez reviewed her agency’s recent activity, emphasizing especially recent U.S. Supreme Court and appellate court victories. She reiterated the agency’s strategic focus on core areas of concern, including health care, where the agency continues to review health care provider and pharmaceutical industry mergers carefully. Ramirez also stressed the agency’s continued attention to combating efforts to stifle generic drug competition. Other key focus areas include consumer products and services, technology and energy markets.
For the U.S. Department of Justice’s (DOJ’s) Antitrust Division, Assistant Attorney General Baer’s prepared remarks focused on the division’s criminal cartel enforcement activity, including the expansive London Interbank Offered Rates and auto parts investigations. Baer also highlighted the Division’s civil enforcement activity, noting for example that three major mergers had recently been abandoned in the face of concerns raised by the division.
Chairwoman Ramirez faced questioning from the subcommittee about its merger review process. Asked about a recent rule change, Ramirez downplayed the significance of the change and stated that it was meant merely to clarify the agency’s position in situations where a court has refused to issue a preliminary injunction. She stated that the new rule was not a departure from past practice and that the Commission always assessed each case to determine whether to continue with an administrative hearing in the wake of the denial of an injunction.
Ramirez also faced questioning about the proposed SMARTER Act. The proposed legislation, which passed out of committee in the House last fall, would require the DOJ and FTC to satisfy the same standards to obtain preliminary injunctions against mergers. Currently, for the DOJ to obtain an injunction, it must show that the transaction would cause irreparable harm if allowed to go forward. The FTC faces a different test, and must only show that the injunction is in the public interest. Under the proposed legislation, both agencies would be held to the irreparable harm standard. In addition, the legislation would prevent the FTC from using its administrative court for mergers where an injunction has been denied. Chairwoman Ramirez contended that the proposed Act “undermines one of the central strengths of the Federal Trade Commission and one of the reasons the FTC was created in the first instance, which was to have an expert body of bipartisan commissioners rule on and develop antitrust doctrine.” She pointed also to the agency’s record of appellate success to stress her view that the [...]
On July 24, 2014, the district court in Animal Sci. Prod., Inc. et al. v. China Nat’l Metals & Minerals Imp. and Exp. Corp. et al., Case No. 2:05-cv-04376 (D.N.J.), dismissed direct purchaser plaintiff’s Amended Complaint without prejudice in favor of magnesite producers accused of engaging in a price fixing scheme for magnesite and magnesite products sold in the United States. The court found that the direct purchaser plaintiff, Resco, did not plausibly plead facts to establish antitrust standing as a direct purchaser. The analysis was complicated by the fact that Resco inherited its claim from an assignor, Possehl (US), and the Amended Complaint contained no facts supporting the allegation that Possehl made direct purchases from the defendants. The court recommended amending the complaint to identify specific transactions and the governing agreements for those purchases.
The dismissal is another setback for the plaintiffs, who filed suit in 2005 against 17 foreign companies, 16 of which are located in China. None of the Chinese defendants responded to the complaint and in 2007, and plaintiffs filed a motion for a default judgment. Seven of the companies responded in 2008 with a motion to compel arbitration. However, before any of the motions were resolved, the case was administratively closed while the Third Circuit determined the appropriate standard for analyzing whether the district court had jurisdiction to hear the case under the Foreign Trade Antitrust Improvements Act. The case was reopened in April 2012 and the district court asked for briefing on antitrust standing issues, which resulted in the dismissal of the Amended Complaint.
On April 14, 2014, China’s Ministry of Commerce (MOFCOM) filed an amicus brief asking the Second Circuit to overturn a ruling by the Eastern District of New York against Chinese vitamin manufacturers. See Brief for Amicus Curiae Ministry of Commerce of the People’s Republic of China in Support of Defendants-Appellants, In re Vitamin C Antitrust Litigation, No. 13-4781 (2d Cir. filed Apr. 14, 2014). The lower court rejected the defendants’ argument that the challenged conduct was required by Chinese law and refused to dismiss the case. The case was later tried by a jury and ultimately resulted in a $157 million judgment against the defendants.
As MOFCOM recounted in its brief, the Chinese agency has been involved in the litigation since 2006, when it filed its first amicus brief in support of defendants’ motion to dismiss. MOFCOM explained that beginning in 1997, it required the defendants to participate in a Vitamin C Subcommittee in order to obtain export licenses, which “could be revised or revoked if a licensee failed to comply with mandatory export price and quantity constraints.” Brief at 5. The lower court characterized MOFCOM’s involvement in the case as “a post-hoc attempt to shield defendants’ conduct from antitrust scrutiny.” Id. at 2. In its April 14 filing, MOFCOM fired back, calling the court’s statement “profoundly disrespectful, and wholly unfounded.” Id.
MOFCOM’s central legal argument is that under United States v. Pink, 315 U.S. 203, 220 (1942), American courts must accept a foreign government’s official interpretation of its own law as conclusive. The district court, however, “ignored these fundamental precepts” and “instead invented its own mode of analysis that yielded a strikingly incorrect conclusion of Chinese law.” Brief at 14. The case has raised thorny international relations issues, and the appeal will no doubt be closely watched by the Chinese government. In MOFCOM’s words, “[t]he district court’s approach and result have deeply troubled the Chinese government, which has sent a diplomatic note concerning this case to the U.S. State Department.” Id. at 13. A reversal by the Second Circuit would “reaffirm that principles of international comity require district courts to treat official statements of a foreign government with a high degree of deference and respect, and with due caution about the court’s ability to determine accurately the law of an unfamiliar legal system.” Id.
by John Z.L. Huang, Alex An, Bryan Fu and Cook Xu
China’s National Development and Reform Commission (NDRC) recently outlined its latest efforts in the enforcement of the Anti-Monopoly Law and price supervision. This newsletter summarizes the noteworthy information NDRC disclosed.
Beginning on October 28, 2013, all merger control cases before China’s Ministry of Commerce (MOFCOM) will have to be filed, and only be filed, in electronic form. In the past, it was required by MOFCOM to provide both hard and soft copies (i.e., paper or scanned copies) of all materials submitted. The new filing system uses software developed by MOFCOM itself (System) that incorporates a digitalized merger notification form updated by MOFCOM in June 2012 (please see “China Streamlines Antitrust Notification Process” https://www.mwechinalaw.com/news/2012/chinalawalert061c.htm).
The System appears to work well. Generally, the System allows a filing party to submit all data and information required by MOFCOM in electronic form (i.e., either by typing into or choosing an option in the software). A data package, incorporating all data and documentation submitted in support of the filing, will be generated by the software automatically.
The launch of this new System is unlikely to change the procedure of merger filing to any great extent. However, it does allow MOFCOM to collect and compile data in a much more efficient and timely manner. This new System also allows MOFCOM to much more easily compare information provided by others in the same or a similar industry, and to compare information submitted by the same party in different cases. The new System will therefore require a higher level of vigilance by notifying parties to ensure they provide accurate and consistent information. Also, counsel practicing in this area can expect to see an improvement in efficiency, and likely more sophisticated assessment by MOFCOM of mergers, acquisitions and joint ventures, as this new tool should help with data analysis.
Resale Price Maintenance in China: Enforcement Authorities Imposing Large Fines for Anti-Monopoly Law Violations
Recently Shanghai High People’s Court reached a decision in the first lawsuit involving resale price maintenance (RPM) since China’s Anti-Monopoly Law (AML) came into effect five years ago. Shortly thereafter, a key enforcement agency announced RPM-related fines against six milk powder companies, five of which are non-Chinese. Both cases clearly show that RPM can be a violation of the AML, and that RPM is currently under much greater scrutiny by enforcement authorities. It would be prudent for all foreign corporations active in China’s consumer markets to take heed of these changes in China and conduct an immediate review of any potential RPM violations.
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