Competition teams are vital to companies of all types, as The Lawyer Awards 2011 shortlist shows, says Joshua Freedman
That the red tape-cutters of the competition and regulatory world are among the most valuable of all lawyers is hardly news. But the list of nominees for Competition/ Regulatory Team of the Year for The Lawyer Awards 2011 shows that legal teams in this sector are not only ensuring the green light for deals in the big business arena but are also giving a helping hand to the underdogs of the commercial scene.
Lawyers have had to deal with groundbreaking cases involving new legal and commercial issues as well as political stresses. Our shortlist contains firms that have fought battles everyone expected them to lose. Other teams have successfully acted for minnows in duels with big business or the authorities. Some have fought cases that gave the go-ahead for companies developing priceless medical treatments.
Norton Rose had a fight on its hands when it was instructed by PayPoint in a battle against a competitor threatening to dominate it.
PayPoint, which provides retail terminals for bill payments, attempted to stop National Lottery operator Camelot from exploiting its monopoly position and moving into PayPoint’s market using its lottery terminals.
The Norton Rose team, led by competition partner Michael Grenfell, argued that Camelot’s actions squeezed out competition and breached laws in this regard. The firm pushed for the National Lottery Commission (NLC) to refuse Camelot consent to branch out of its main market and argued that granting this could breach EU Law.
The NLC – the lottery regulator and the forum for the case – ruled in PayPoint’s favour in March this year.
“PayPoint’s concern was that, whereas PayPoint had to fund its terminals, the National Lottery funds its terminals through lottery revenues,” says Grenfell. “Nobody else can collect lottery tickets and it would have been using that monopoly to enter the bill payments market. No independent commercial operator, however efficient, would ever be able to match Camelot’s unfair competitive advantage.”
The NLC decision virtually kept the client in business. “[PayPoint’s] share price went up almost 20 per cent on the day the decision was announced,” Grenfell adds.
The case was perceived to be particularly difficult, Grenfell says, as no comparable cases had previously been brought. And equally tough was the fight against a bigger power.
“It’s using the prohibition on abuse of dominance to prevent monopolists from using their monopoly rights to squeeze out competition in neighbouring markets,” he says. “It was the right outcome in line with fundamental competition law principles, even though many people thought it would be an uphill struggle for us to win.”
For Sidley Austin, facing the likes of LVMH, Nike and Estée Lauder could have been a daunting task, but Brussels partner Stephen Kinsella and his team advised eBay to get involved early in lobbying the European Commission on new regulations dealing with vertical agreements that were due to expire in May 2010.
Kinsella helped eBay put together meetings with officials and the industry to promote its and the online sales industry’s interests, and also put its argument forward to the academic community and the public. It was as much a PR task as a legal one. The outcome was a success for online sellers, limiting suppliers’ ability to restrict the online sale of their products.
Getting in early was the slingshot that meant well-known names such as Nike were left in eBay’s wake.
“I was a little surprised that our opponents didn’t get organised earlier – having stolen a march on them was helpful,” Kinsella says. “In the latter stages, obviously the other brands had a lot more money to spend on it, but they had left it too late and were too disorganised.
“They had far more star power. They could wheel out celebrities and big names, but the reality was that we were better organised. We ought to have been the underdogs.”
Wragge & Co partner Bernardine Adkins admits to being “up against it” when she defended construction company Thomas Vale against a £2m fine from the OFT for engaging in cover pricing.
The OFT raided Thomas Vale’s offices in 2006 seeking evidence of bid-rigging but the client was convinced it had no involvement in unlawful activities.
For Adkins the challenge was convincing the management at Thomas Vale as well as the sector that companies faced fines for taking part in widespread activities of this sort.
“It was a tough ride for a long time, getting people to realise how serious [the situation] was,” Adkins says.
As part of a quest for leniency from the OFT the firm argued that cover pricing was endemic in the sector and that the sector refused to believe this was bid-rigging. After an appeal that saw Adkins represent Thomas Vale as an advocate, the OFT cut the fine to £171,000, representing a 90 per cent reduction.
“It really was a one-off,” concludes Adkins.
Political tensions put Bristows in a tough situation as it acted for Servier Laboratories in a dispute over access to its Protelos drug for women with postmenopausal osteoporosis.
The team successfully appealed against a decision by the National Institute for Health and Clinical Excellence (Nice) to restrict access to the drug based on a cost-effectiveness analysis.
The court held Nice’s reasons for rejecting Protelos to be inadequate. It was the first time anyone had successfully brought a challenge against a decision on the cost-effectiveness of drugs in the UK.
Bristows IP regulatory head Marie Manley had the task of explaining to the judge why this was the case – science and all.
“We had the difficult role of raising the issue of rationality – what we were saying was that Nice was being irrational,” comments Manley on the attempt to prove that Nice had no basis for its decision to restrict access to a drug that brought significant benefits for patients with osteoporosis.
“The effect of the decision touches people’s lives – that’s why we got so excited,” Manley adds.
Statistics were the obstacle that led Macfarlanes to be in the underdog position as it represented generic drugs manufacturer Pinewood Laboratories in an abuse of dominance case.
The firm submitted a complaint to the OFT claiming that Reckitt Benckiser had acted to restrict competition from a generic drug as an alternative to its market-leading out-of-patent heartburn medicine Gaviscon.
Lead partner Marc Israel says his biggest challenge was persuading the OFT to take the case. The trouble was that the OFT only pursues a tiny fraction of abuse of dominance cases, so Macfarlanes’ reasoning needed to be strong. “They receive lots of complaints but don’t often take cases on,” Israel says.
Macfarlanes successfully argued that the market in question was narrower than Reckitt had previously claimed, covering ’alginates and antacids’ in which Reckitt had at least an 85 per cent share.
The OFT concluded that Pinewood’s market definition was correct and in October 2010 Reckitt admitted liability and settled the case by agreeing to a £10.2m fine.
This is the largest amount the OFT has fined a party for an abuse of dominance case and was the first time anyone in the UK had admitted liability in such a matter.
Freshfields Bruckhaus Deringer had the other side of the coin to deal with when it was instructed to advise on the Competition Commission’s review of Zipcar’s acquisition of Streetcar.
The OFT referred the deal to the commission in August 2010 out of fears it would restrain competition in the car club market.
The merged entity had more than a 90 per cent share of the market and Zipcar had previously been a strong competitor to its tie-up partner.
Acting for Zipcar and Streetcar, Freshfields built an argument based on how new the sector was and how much commercial potential it offered. But the use of new market analysis tools to estimate the impact of a merger, based on the latest academic thinking, made it a tricky area.
“We had to think carefully about new economics tools – how to address them in the presentation of the case and alongside the other available economic evidence,” says Simon Priddis, who led the mandate for the magic circle firm. “That was a complex picture, given that the use and interpretation of the tools is so uncertain.”
The novelty and complexity was compounded by the intense scrutiny from investment analysts, as the case came just before Zipcar was set to float in the US. Freshfields won unconditional clearance for the client in December, a month ahead of schedule, and the matter is the talk of the competition community.
“The case has been a de rigeur topic at conferences – it’s the only published case where the antitrust community can see how the commission uses these new tools in context,” Priddis adds.
Derivatives to the people
While Freshfields was acting for a potential giant of one market our final nominee Shearman & Sterling had the groundbreaking task of bringing an industry to the masses.
The firm was instructed by LMAX on setting up the first-ever multi-asset retail derivatives exchange, allowing customers to trade contracts for differences (CFDs) in equity indices, commodities, bonds and other products. It gave retail investors a more transparent way of trading foreign exchange and CFDs than other options available.
Shearman had to ensure the project passed regulatory approval – a tough task given the dangerous nature of the derivatives sector. It was also unique as LMAX was developing its own software for the new exchange.
“It’s a way of life that previously has only been available to corporates,” says Shearman partner Barney Reynolds. “As a pure legal and regulatory matter, it’s huge.
“The City is a wholesale market, not a retail market. There are places where you can buy equity and bonds, but there’s nobody standing for derivatives. You’re putting the City with the people. Companies have had the appetite for years – why shouldn’t the people?”
Last Year’s competition & regulatory Team of the Year
Winner: O’Melveny & Myers
Working on one of the biggest competition cases of the year was always going to be a feather in the cap for O’Melveny & Myers, but winning it against the odds and securing a record-breaking fine in the process shows what a remarkable job the team pulled off.
The case in question saw AMD take on the might of Intel, accusing its rival computer chip manufacturer of abusing its position. At stake was a business worth $30bn (£20.29bn) annually.
An O’Melveny team fronted by Riccardo Celli and Christian Riis-Madsen was first contacted by AMD after the initial investigation had stalled three years in, with the European Commission concluding that its client’s complaints were unfounded. The team had to turn around the commission’s stance before building its own case over six years. The result of the team’s work was a record €1bn (£830,000) fine for Intel and what AMD’s European vice president Tom McCoy called “a game changer” for the industry. One judge said the case “has the feel of a David taking on not one but two Goliaths – Intel and the European Commission”. The case was followed by a private US litigation which ended with a $1.25bn settlement in favour of AMD.
Second: Arnold & Porter
Arnold & Porter’s ability to secure European Commission clearance for Kraft’s hostile approach for Cadbury was proof positive that a small practice with the right blend of expertise and experience can get a crucial role on even the biggest of deals. A tight timetable meant that Arnold & Porter competition partners Tim Frazer and Susan Hinchliffe had only two months to prepare to submit to the Commission, which had identified a number of markets where there were concerns over competition issues. Failure to produce the evidence to satisfy these concerns could have been a body blow for the deal. Kraft’s trust in the Arnold & Porter team, selected over and above several larger firms, shows the high esteem in which the practice is held.
Third: Shearman & Sterling
Innovation was the name of the game when Shearman & Sterling advised ICE Clear Europe on the creation of Europe’s first credit default swap (CDS) clearing service. The team led by financial institutions chief Barney Reynolds navigated its way through a minefield of complex regulatory issues, liaising with all the major players in the world’s major CDS markets to draft rule books and membership documentation from scratch. The judges highlighted the level of innovation required to pull off a deal that has helped address some of the regulatory headaches associated with the CDS market.
- Bond Pearce
- Freshfields Bruckhaus Deringer and Herbert Smith