ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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THE LATEST: Behavioral Remedy Satisfies European Commission in Rolls-Royce’s €720M Agreement to Purchase the Rest of ITP

by | Apr 21, 2017 | , ,

WHAT HAPPENED:
  • Rolls-Royce and SENER have a 47 percent/53 percent joint-venture in Industrial de Turbo Propulsores (ITP)–an aircraft engine components manufacturer.
  • Rolls-Royce, together with ITP, MTU and Safran, are members of a military engine consortium–Europrop International (EPI)–that supplies the engine to the Airbus’ A400M, the primary competitor to the Lockheed Martin C-130J.
  • The European Commission (EC) had concerns that Rolls-Royce’s full ownership of ITP would increase its influence in EPI such that Rolls-Royce could undercut the competitiveness of the EPI engine, and consequently subvert Airbus’ competitiveness vis-à-vis Lockheed Martin.
  • The EC and Rolls-Royce agreed to a behavioral remedy focused on EPI’s governance rules that would eliminate the potential conflict of interest and maintain EPI’s competitiveness. While the EC press release does not provide details, the agreement likely allows MTU and Safran to control the consortium’s decision making.
WHAT THIS MEANS:
  • Antitrust enforcers continue to investigate competitive impacts from vertical transactions.
  • While antitrust enforcers have a strong preference for structural remedies, when addressing vertical competition issues, there is greater potential that enforcers will accept a behavioral fix.
  • Antitrust enforcers continue to focus on antitrust impacts in narrow markets. Here, the remedy is designed to maintain competition between the Airbus A400M and Lockheed Martin’s C-130J – military turboprop transport aircraft.


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Antitrust M&A Snapshot: October – December 2016 Update

by , and | Jan 30, 2017 | , , , , ,

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read the full report here.

 



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Antitrust M&A Snapshot: July – September 2016 Update

by | Oct 31, 2016 | , ,

UNITED STATES:

Continuing an active first half of 2016, the Federal Trade Commission (FTC) and US Department of Justice (DOJ) have challenged several large mergers and acquisitions. In fact, trials for the two national health insurer deals are slated to begin Q4 of 2016 in Washington, DC, where the agencies have had success in obtaining preliminary injunctions this year. Adding to the regulators’ successes in Q3 was a victory for the FTC on appeal in the Penn State Hershey Medical Center/PinnacleHealth System transaction, in which the Third Circuit overturned the district court’s formulation of the geographic market. Indeed, with another appeal in a hospital merger outstanding in the Seventh Circuit, Health Care M&A is an active sector to monitor.

In addition to the agencies’ operations, the upcoming US presidential election has also propelled antitrust policy into a national discussion. For the first time in a few decades, antitrust has appeared on the Democratic Party’s platform, and Hillary Clinton has also issued a statement promising to strengthen antitrust enforcement if elected president.

EUROPEAN UNION:

The July to September period has seen 87 merger control notifications, the vast majority being candidate cases for simplified procedure. There were also eight clearance decisions, five of which were Phase I cases with remedies—in each case, structural remedies were preferred by the European Commission (EC).

Antitrust intervention seems to have been focused more on the telecoms and pharmaceutical sectors, with divestitures being offered in every telecom and pharma Phase I and Phase II clearance decision since July.

Read the full article here.



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The Concept of Full-Function Joint Venture in the EU

by and | Aug 26, 2016 | ,

In the European Union (EU), at the inception of a joint venture (JV), parent companies must determine whether the newly created structure presents a full-functionality nature, which depends on its degree of autonomy. The answer to this question will determine the legal framework applicable to it.

On the one hand, if the JV is full-function it will fall within the scope of the EU Merger Regulation (Council Regulation (EC) No 139/2004 of 20 January 2004), assuming that the turnover thresholds set out in the Regulation are met. Under these circumstances, the European Commission (EC) will assess the impact of the JV on competition on an ex ante basis.

On the other hand, if the JV is not full-function and takes the form of a partnership formalized by a legal structure to a large extent dependent on its parent companies, the creation of a JV will not have to be notified but the EC may operate a control ex post, in the light of Article 101(1) of the Treaty on the Functioning of the EU which prohibits anticompetitive agreements between undertakings. In such a context, it is up to the parent companies creating a JV to determine whether their JV is compatible with competition law rules.

The ex post control has the advantage of avoiding the notification process that delays the implementation of the JV. However, within that framework, companies may not obtain a clearance decision and the fate of their JV is subject to legal uncertainty. It is thus generally preferable for companies to make sure that their JV will fall within the scope of the Merger Regulation because a clearance decision is irrevocable and unlimited.

Read the full article to learn more.



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General Court of the EU Upholds Cartel Fines of €131 Million Imposed on Toshiba and Mitsubishi Electric, Dismisses Arguments Based on Principle of Equal Treatment

by | Jan 27, 2016 | , ,

By two judgments of January 19, 2015 (Case T-404/12 Toshiba v. Commission and Case T-409/12 Mitsubishi Electric v. Commission), the General Court of the European Union (GCEU) upheld the fines of €131 million imposed by the European Commission (EC) on Toshiba and Mitsubishi for their participation in a cartel on the market for gas insulated switchgear (GIS), dismissing a line of reasoning essentially based on the principle of equal treatment.

The cartel, involving 20 European and Japanese undertakings, consisted in an agreement between competitors with the objective of coordinating the commercial activity worldwide of the members. The cartel members developed a quota system aimed at determining the market shares to allocate between them. In parallel, the cartelists reached an unwritten understanding, according to which GIS projects in the European market and Japanese market were reserved to European members and Japanese members of the cartel, respectively.

In its 2007 decision, the EC found a single and continuous infringement of competition law on the GIS product market between 1988 and 2004 and imposed fines on Toshiba and Mitsubishi, inter alios, of €86.25 million and €113.92 million, respectively. It also found the two Japanese undertakings jointly and severally liable for up to €4.65 million. Both companies challenged the EC decision, which led to two judgments of the GCEU (Case T-113/07 Toshiba v. Commission and Case T-133/07 Mitsubishi Electric v. Commission), subsequently upheld by the Court of Justice of the European Union (CJEU) (Case C-498/11 P Toshiba v. Commission and Case C-489/11 P Mitsubishi Electric v. Commission). The GCEU annulled the fines imposed on the two Japanese undertakings, finding that the Commission had infringed the principle of equal treatment in calculating their fines. The reference year used to calculate the fines for the applicants was indeed different from that chosen for the European participants in the infringement.

Having been asked to reexamine its decision, the EC recalculated the fines imposed on Toshiba and Mitsubishi and fixed them at €56.79 million and €74.82 million, respectively, without changing the amount of the fine for which they were held jointly and severally liable. The two Japanese undertakings then lodged a new appeal before the GCEU seeking the annulment of the revised fines. In support of their action, the applicants alleged, inter alia, an infringement of the principle of equal treatment as regards the determination of their level of culpability as compared to the European participants in the infringement and the starting amount of the fine.

First, Toshiba and Mitsubishi argued that they were less culpable than their European counterparts because their participation had been limited to agreeing not to enter the European Economic Area (EEA) market, whereas the European undertakings had distributed the GIS projects on that same market through active collusion. In other words, they contended that their participation only consisted in a failure to act and that, consequently, they could not be held as liable as the European undertakings for the implementation of the cartel.

The GCEU reiterated its settled case-law, according to which the [...]

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EU’s Top Court Rules Cartel Victims Can Claim Damages From Cartelists Despite No Contractual Link

by | Jun 10, 2014 | ,

by Martina Maier, Philipp Werner and David Henry

In a landmark ruling, the EU’s top court, the European Court of Justice (ECJ) in Kone and Others C-557/12 of 5 June 2014, has held that, where a cartel causes competing companies to increase their prices, the members of the cartel may be held liable for losses incurred by victims of those price increases.

Please click here to read the full article.



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European Commission Adopts Revised Competition Regime for Technology Transfer Agreements

by | Mar 25, 2014 |

On 21 March 2014, the European Commission (Commission) adopted a revised set of rules for the assessment of technology transfer agreements by the Commission and national competition authorities. The new Technology Transfer Block Exemption Regulation and accompanying Technology Transfer Guidelines will enter into force on 1 May 2014. The revised regime provides clearer and, arguably much needed, guidance on licensing agreements. This enhanced clarity should make it easier for businesses to assess whether or not their licensing and other collaborative practices aimed at the transfer of technology are in compliance with EU competition law.

Click here to read the full article.



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EU National Courts May Have to Order Recovery of State Aid Before European Commission Makes Final Decision

by | Nov 26, 2013 | ,

The European Court of Justice decided on 21 November 2013 that EU national courts must assume that a measure qualifies as State aid, if the European Commission has opened an in-depth investigation into that measure.

This judgment is relevant to all cases in which the disputed measure was already granted, or is planned to be granted, and the European Commission has opened an in-depth investigation but not yet made a final decision on whether or not the measures qualify as State aid.

The European Court of Justice (ECJ) decided on 21 November 2013 in Deutsche Lufthansa AG v Flughafen Frankfurt-Hahn GmbH (C-284/12) on the obligations placed on national courts in EU Member States that have been asked by a third party to order the recovery of State aid that was granted to a beneficiary without approval by the European Commission.

The ECJ stated that, even though the assessment carried out by the European Commission in its decision to open an in-depth investigation is preliminary in nature, the decision to open an investigation has legal effect and is therefore binding for national courts in that they must find that the measure qualifies as State aid. If the aid was granted without approval by the European Commission, the national court will have to order its recovery.

Background

EU Member States cannot implement measures that qualify as State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) until those measures have been approved by the European Commission (“the standstill obligation”, established in Article 107(3)(3) TFEU). The European Commission has exclusive competence to approve State aid.

National courts may, however, find an infringement of the standstill obligation and order the recovery of State aid that was granted without European Commission approval. Although national courts may not authorise State aid, they are permitted to decide whether or not a measure qualifies as State aid.

State aid investigations by the European Commission begin with a first phase, in which the European Commission requests information from the relevant EU Member State and gives the State the opportunity to give its views on the qualification of the relevant measures as State aid and grounds for their authorisation.

In complex cases, the European Commission generally opens an in-depth investigation. When making its decision to initiate an in-depth investigation, the European Commission has to provide an initial assessment of the measure and explain why it has come to the preliminary conclusion that the measure qualifies as State aid.

In the case at hand, the competitor of an alleged aid beneficiary approached a German court seeking recovery of alleged aid given to the beneficiary and suspension of its implementation. According to the appellant, the measure qualified as State aid, was granted without approval by the European Commission and was therefore in violation of the standstill obligation. The European Commission opened an in-depth State aid investigation into the relevant measures in 2006, but the final decision is still outstanding.

Question Referred by [...]

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German Regulator Steps Up Enforcement of Merger Standstill Obligation

by | May 17, 2011 | , ,

by Martina Maier and Philipp Werner

The majority of merger control regimes around the world impose standstill or waiting period requirements for notifiable transactions, e.g. the US, the EU and most EU Member States. If a transaction meets the filing thresholds, it must be notified to the competent antitrust regulator and must not be closed without prior approval by the antitrust regulator or the expiration of the applicable waiting period.

Under German merger control rules, a notifiable merger must not be implemented without prior clearance decision. An infringement of the standstill obligation can (theoretically) lead to fines of up to 10 percent of the group’s worldwide turnover. In addition, the infringement of the standstill obligation renders the contracts ineffective under German merger control rules.

The German Federal Cartel Office (FCO) has recently taken a stricter approach to the enforcement of the merger standstill obligation. In the past, the risk of fines was minor if the merger did not lead to any serious competition concerns, if it was the group’s first infringement of the standstill obligation and if the company itself notified the FCO ex post of the implemented merger.

We see now a growing number of decisions imposing fines for the infringement of the standstill obligation (sometimes referred to as "gun jumping" in the United States). In May 2011, in the latest of a string of such decisions, the FCO imposed a substantial fine for infringement of the standstill obligation although the merger did not lead to any serious competition concerns and although the company had itself notified the implemented merger. These facts were only taken into account as mitigating factors for the calculation of the fine.

The European Commission has also recently imposed fines for the infringement of the standstill obligation.

In this changing environment, the filing requirement and the standstill obligation cannot be seen as a pure formality. It is therefore essential to always verify whether and in which jurisdictions a transaction is notifiable – and not to close the deal before the relevant competition authorities have cleared the deal.



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