In these extraordinary times, economies around the World including Member States are pumping money into their economies.  Businesses and whole sectors are crying out for special support.  State support in the EEA above a low de minimis threshold is subject to strict state aid rules which requires pre-clearance by the European Commission under strict conditions. 

It is important to remember that as businesses struggle in these times to cope with issues like distribution, sourcing ingredients, components and other resources, they may look to collaborate with rivals.   In fact, many businesses have been doing exactly that.  Collaboration between competitors can be perfectly benign and may no anti-competitive effects (for example, in setting standards, lobbying efforts).  However, competition rules do apply and coordination of prices, market sharing, cost allocation, coordinated output reductions or sharing competitive sensitive information, would be prohibited.  Some restrictions are regarded as ‘hard core’ and rarely worthy of exemption (price fixing, customer and market allocations and quantity restrictions).  Penalties for infringement could lead to significant fines and possible private damages litigation.

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In recent months we have seen a number of horizontal mergers being scrutinized under national and EU merger rules. Since the fall-out from the Siemens/Alstom merger refusal, we have also seen a number of ministers from member states, including Poland, France and Germany, call for increased tolerance and indeed support for the emergence of so-called ‘national champions’. Recently in March there have been calls for companies to ‘reshore’ operations which they had outsourced to other countries – including not only third countries but also other member states. Targets included Peugeot and Renault and there have been calls for the European Commission to provide support for such moves.

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On January 31, the UK exited the EU, after more than three years of constitutional turmoil. The UK now embarks on a year of transition and negotiations as it heads out into a world of new trade relations, with opportunities and challenges in equal measure. This is a watershed moment for all companies who trade in or out of the UK or the EU. Whether trading in goods or services, companies face strategic re-assessments not just of where they trade, but how they organize their trading activities: upstream for inputs and downstream to their customers and markets. How will they be affected – from a regulatory, trade, customs, commercial, investment and disputes perspective?

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On 20 November 2018, the European Parliament, the Council and the Commission reached a political agreement on the proposed EU framework for screening of foreign direct investments (FDIs).

The proposal, put forward by the Commission in September 2017, aims at protecting key strategic industries and assets in Europe whilst maintaining the EU’s appeal to foreign investors.

While other countries such as Australia, Canada, China, India, Japan and the US, as well as 12 of the 28 EU Member States[1] already have FDI screening mechanisms in place, it is the first time that such a mechanism is introduced at the EU level.

The proposal is a response to growing concerns in the EU – especially from France, Germany and Italy – that state-owned or state-controlled foreign investors, notably from China, are increasingly acquiring control over high-tech companies and critical infrastructure in Europe.

The EU framework will not impose an obligation on Member States to establish FDI screening mechanisms but rather sets out common rules for Member States that already have such mechanisms in place or that are willing to create them. In any case, the prohibition of FDIs on security or public order grounds will still be decided at the national level.

Formal approval of the proposed Regulation by the European Parliament and the Council is expected by March 2019, ahead of the upcoming EU elections in May 2019.


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Introduction

On 25 July 2018, Advocate General (AG) Kokott issued a non-binding Opinion in case C-265/17 P, Commission v United Parcel Service, advising the Court of Justice of the EU (CJEU) to dismiss the Commission’s appeal against the judgement of the General Court (GC) that annulled the Commission’s decision to block the proposed acquisition of TNT by UPS.

UPS notified the proposed acquisition of TNT for approximately EUR 5 billion on 15 June 2012. More than six months later, on 30 January 2013 the Commission blocked the proposed merger based on concerns that it would lead to a significant impediment of effective competition (SIEC) on the market for international intra-EEA express deliveries for small packages in 15 Member States.

On 7 March 2017 the GC issued a favourable judgement for UPS (case T-194/13, United Parcel Service v Commission). The Court found that the Commission breached UPS’s rights of defence by relying on the latest version of an economic analysis which was not shared with the merging parties before the merger was blocked. The Commission appealed the GC’s judgement on 16 May 2017.

In the meantime, TNT was acquired by FedEx for EUR 4 billion, in January 2016, in a deal that received unconditional approval by the Commission. While UPS may have lost the chance to consolidate its express deliveries business with TNT, AG Kokott’s favourable Opinion will arguably boosts UPS’s chances to win an action for damages for EUR 1.7 billion against the Commission filed by UPS in February 2018 (case T-834/17, United Parcel Service v Commission).

AG Kokott’s Opinion, which is largely in line with the GC’s judgment, provides an important reminder – especially to the Commission – that the rights of defence should be upheld without excuses, including in merger control proceedings.


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In an increasingly interconnected world, businesses that conduct cross-border transactions will continue to navigate complicated and thorny legal regimes. As long as full compatibility between these regimes is unrealized, the doctrine of international comity will remain alive and well in U.S. litigation. Comity is a choice-of-law principle that concerns the extent “to which the law of one nation, as put in force within its territory, whether by executive order, by legislative act, or by judicial decree, shall be allowed to operate within the dominion of another nation.”[1] Comity is different from other closely-related doctrines like the act of state doctrine (a defense designed to avoid judicial inquiry into state officials’ conduct as opposed to private actors[2]) and the foreign sovereign compulsion doctrine (a defense where “corporate conduct which is compelled by a foreign sovereign” is also protected from liability “as if it were an act of the state itself”[3]).

This article discusses one flashpoint area in comity analysis—the question of what deference to give to a foreign sovereign’s interpretation of its own law, a pending question now before the Supreme Court. Adherence to one set of laws may or may not affect a court’s decision to abstain from jurisdiction. In the United States, circuit courts disagree about the degree of deference that should be given to foreign sovereigns who offer their own interpretations of their laws in litigation. For instance, the Ninth and Second Circuits have given a strong degree of deference to such interpretations, with the Second Circuit recently stating that it is “bound to defer” to such statements.[4] In contrast, the Sixth and D.C. Circuit past approaches show that they do not always compel strong deference to a foreign government’s interpretation of its laws.[5]


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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. 
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On September 12, Andrew Finch, the Acting Assistant Attorney General for Antitrust in the U.S. Department of Justice, confirmed the Trump Administration’s commitment to the criminalization of agreements among companies not to “poach” each other’s employees and agreements on employees’ wages, policies advanced significantly during the Obama Administration.

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