In an unanimous decision, the Supreme Court has gutted the Second Circuit’s rule on deference to a foreign government’s interpretations of its law, holding that a federal court determining foreign law under Federal Rule of Civil Procedure 44.1 should accord “respectful consideration” to a foreign government’s submission, but a court “is not bound to accord conclusive effect” to these statements.

The case is Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd., which began as a multi-district class action alleging price fixing claims vitamin C exports sold to U.S. companies. Initially, plaintiffs won at a jury trial after the district court refused to credit the Chinese government’s statements that it compelled the defendants to fix the price and limit the supply of vitamin C. Then, the Second Circuit reversed, holding that the district court was  “bound to defer” to the Chinese government’s interpretation of its laws when the latter “directly participates” in U.S. proceedings through a “sworn evidentiary proffer regarding the construction and the effect of its laws and regulations,” as long as it is reasonable under the circumstances presented.

As previewed in our earlier analysis, this case has important repercussions for any business involved in cross-border transactions. We explore these further below in light of the Supreme Court opinion.

First, businesses whose operations span jurisdictions with potentially divergent legal regimes will need to continue to assess the conflict of law that may arise. The Supreme Court’s opinion makes it evident that “the appropriate weight in each case will depend upon the circumstances” when a federal court must make a decision about a foreign state’s view of its own laws. In practical terms, this may mean that businesses who want to engage in a certain type of conduct may want to analyze in detail any statements made by a foreign government that might be related to the contemplated behavior. As the Supreme Court acknowledges, “no single formula or rule will fit all cases in which a foreign government describes its own law.” An analysis would need to be undertaken of many factors, including each statement’s “clarity, thoroughness, and support; its context and purpose; the transparency of the foreign legal system; the role and authority of the entity of official offering the statement; and the statement’s consistency with the foreign government’s past positions.”

Second, our earlier analysis posited that a Supreme Court ruling which limits the deference afforded to a foreign government’s interpretation may in fact incentivize regulators to cooperate with each other early on in the course of an investigation or enforcement to avoid any potential conflict. The Supreme Court has done just that with its rejection of the Second Circuit’s “highly deferential” rule. And, somewhat presciently, it appears that Makan Delrahim, the Assistant Attorney General for the Antitrust Division, has begun to already make strides in bringing further convergence to the processes of antitrust enforcement. Recently, Delrahim announced a partnership between the United States and other leading antitrust agencies to finalize and join a Multilateral Framework on Procedures in Competition Law Investigation and Enforcement (“MFP”). The MFP will seek “meaningful compliance among competition agencies” on advancing competition through compliance mechanisms. Delrahim discussed the compliance mechanisms not as “establishing a formal and binding dispute settlement mechanism” but ensuring “sufficient incentives to comply with the common commitments.” If the MFP goes forward, it remains  an interesting question as to the degree of deference accorded to statements of MFP enforcers under the Supreme Court’s more flexible rule.

Finally, the Supreme Court’s opinion is a validation of the past and current administration’s approach under the Antitrust Guidelines for International Enforcement and Cooperation (2017). As the Guidelines and the Supreme Court amicus brief by the U.S. government assert, the weight accorded to the views of a foreign government depends on the circumstances. What this means for businesses evaluating agency enforcement likelihood is that the Guidelines will likely continue to be leaned on by this current administration.

Join Steptoe’s EU Competition team for a webinar on May 31, covering the opportunities and antitrust risks associated with bypassing distributors to sell directly to customers in Europe. In particular, we will discuss the growing trend of going “direct”, how to identify the related antitrust risks, and how to strike the right balance between direct and indirect channels. Participation is free of charge.

Date: May 31, 2018

Time: 4:00 p.m. – 5:00 p.m. CET
(Click here for the time in your area)

Click here to register.

If you are unable to participate in the live webinar but would like to receive a link to the recording, please let us know by requesting here.

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On February 16, 2018, the UK Court of Appeal adopted its much awaited ruling in the iiyama case. Taking stock of the Court of Justice (CoJ) ruling in Intel last year, the Court of Appeal allows plaintiffs in civil cartel damages actions to advance claims based on overcharges incurred by their supply chain operations outside of the European Union (EU), provided that such overcharges ultimately hit their finished goods sales within the EU.

This is perhaps an inevitable proposition, which will probably send shock waves way beyond the Channel. While this judgment does not bind the European Courts, this UK precedent will inspire other national courts across the EU. In addition, following Intel, the European Commission (EC) is most likely emboldened to prosecute non-EU based cartels affecting upstream activities with an indirect effect on sales of finished goods in the EU.

Read more here.

A few days after the Coty judgment,[1] the German Federal Court of Justice[2] (Bundesgerichtshof or BGH) upheld the decision of the Higher Regional Court of Düsseldorf in the Asics case,[3] confirming that Asics, the sport shoes manufacturer, may not prevent its selective distributors from cooperating with price comparison engines to promote the Asics branded products.

1. Background

From 2012 to 2015, the German subsidiary of Asics set up a selective distribution system which imposed a number of limitations on the online sales activities by authorized dealers in Germany. In particular, Asics prohibited its authorized distributors from (i) selling through online marketplaces such as Amazon and eBay, (ii) using price comparison engines, and (iii) using Asics trademark on the distributor’s online search advertisements.

Continue Reading I Want to “Run” Free: Authorized Dealers Cannot Be Prevented from Using Price Comparison Websites

Following an inquiry in July 2017, the House of Lords’ European Union Committee published on February 2, 2018, a report titled – ‘Brexit: competition and State aid’ – on the future of the UK’s competition law regime after Brexit.

The House of Lords report provides a detailed account of the most pressing issues that the UK’s competition law regime is facing ahead of Brexit. It also shows the high levels of uncertainty that businesses operating between the EU and the UK face.

This uncertainty suggests that businesses should – at least for now – adopt a cautious approach, for example, when formulating their distribution and acquisition strategies in the UK.

Whatever the statutory changes to the UK’s competition law regime after Brexit are, EU law will still remain an important factor to consider when taking business decisions, especially because of the geographical proximity and close trading relationships between the UK and the EU. This means that going forward businesses need to have guidance.

Steptoe has years of experience in successfully advising businesses on their strategic decisions in the EU and the UK. Our experienced lawyers can help your business to successfully navigate the demands and potential opportunities of Brexit.  Continue Reading House of Lords Report on Brexit and Competition: What Does it Mean for Businesses?

24 hours after the delivery of the eagerly awaited Coty judgement, the Steptoe EU Competition team is pleased to invite you to an in-person event to debate with lead stakeholders on the consequences of this judgment for the online resale of branded goods in the EU.

The event will be held at our premises in Brussels on December 7 from 5:00 pm to 6:00 pm and it will also be video live streamed for those who cannot attend in person.

More information in this link.

(Participation is free of charge)