With competition likely to be among the top issues keeping global counsels awake at night, what regulatory-related issues and trends lie ahead in 2014?
- Partners Bernd Meyring, in Brussels, and Nicole Kar, in London, see the following trends in Europe
- Clearing the Commissioner’s desk. As the current Competition Commissioner, Joaquín Almunia, reaches the end of his term next year, we may see a flurry of antitrust decisions to leave his successor with a relatively clean(er) desk. These include the long-anticipated settlement with Google and the high profile investigations into a number of banks’ Credit Default Swaps. Other high profile cases that are likely to progress further include the politically charged investigation into Gazprom’s natural gas arrangements in Central and Eastern Europe and the Visa and MasterCard cases – with DG Competition trying to keep ahead of the proposed interchange regulation.
- Testing the boundaries of antitrust law with more aggressive enforcement in the “grey zone”. In more recently opened investigations, the Commission appears to be testing the boundaries of antitrust law with enforcement activity without “smoke-filled rooms” – for example in relation to information exchanges, alleged price signalling (container shipping) and alleged benchmark distortion (the Platts investigation in oil and gas markets). In addition, the Commission is pushing parental liability to the minority shareholder level following victories in Dow (50/50 JV). These trends will continue to present compliance challenges for in-house legal and compliance teams.
- Record cartel fines. We anticipate a number of significant fines at unprecedented levels, relating to a range of on-going cartel proceedings. Until the decision on 4 December on interest rates,2013 had been a mild (if not timid) year for the number (and level) of the Commission’s cartel fines. We understand there to be at least 20 cartel investigations on-going in a wide range of sectors – from sugar to seatbelts and from envelopes to smart card chips. 2014 is likely to see some progress in those cases and decisions adopted in some of the longer outstanding investigations such as Power Cables.
- Patent wars. The pace of the so called “patent wars” continued to intensify in 2013 and 2014 is unlikely to see industry participants’ appetite for antitrust complaints subside. It is likely that Samsung’s commitments in relation to its standard essential patents on smartphones/tablets will become formally binding in early 2014. However, the IT sector remains a fierce battlefield – with on-going Commission proceedings in relation to Apple and Microsoft’s complaints against Motorola Mobility, the alleged patent troll complaint by Google against Microsoft and Nokia and the more recent complaint by Sierra Wireless about Nokia’s GSM/3G SEPs. 2014 may bring some progress in those cases with the Commission keen to bring swift but sustainable and equitable conclusions to the various cases.
- Private damages actions – swifter justice…..eventually? 2014 looks set to be the breakthrough year in which EU legislation is finally adopted to ‘harmonise’ antitrust damages actions. If political progress can be reached in the European Parliament and certain sceptical national governments can be convinced, it seems the “Actions for Damages” directive will be adopted before the European parliamentary elections in the summer. The proposed Directive is stated as aiming at removing all practical obstacles to compensation for all victims of infringements of EU competition law – and would be the result of an eight year project following on from a Commission Green Paper in 2005 on the subject. Whilst third party damages actions have already gained traction in some Member States such as Germany, the Netherlands and the United Kingdom, there is a desire to expand the ease for which private actions relating to antitrust infringements can be taken across the EU28.
- Benchmarking investigations. The DOJ, Commodities Futures Trading Commission and other agencies have been actively investigating allegations of coordination in connection with various benchmarking activities: LIBOR, gold and North Sea crude, and have just started looking at foreign exchange. We anticipate more activity in this area, as well as private follow-on class actions.
- Merger investigations. Merger regulators are more willing to go to court and are tougher on proposed remedies. In the wake of the US Air/American Airlines and Ardagh/Saint-Gobain transactions, we anticipate that the DOJ and FTC will become increasingly more aggressive when reviewing merger activity.
- Antitrust and Intellectual property. The FTC intends to conduct an important study of so-called patent assertion entities (“PAEs”). The FTC’s goal is to expand the empirical evidence on PAE activity and shed light on its likely costs and benefits. The study will potentially have far reaching implications for PAE activity both inside and outside the U.S. courtroom.
- Pharmaceutical Patent Settlement Agreements. In light of the Supreme Court’s decision in the Actavis case, expect to see even more aggressive review by the FTC of patent settlement agreements in the pharmaceutical arena.
- International Cooperation. 2013 marked a time of several challenges to principles of international cooperation among the US and global competition authorities. Both the DOJ and the FTC are expected to spend considerable time and resources in 2014 seeking to improve the level of that cooperation.
A re-invigorated anticompetitive practices agenda. To the extent that merger activity remains below historical levels, we are expecting the DOJ and FTC to focus significant attention on non-merger related areas of antitrust enforcement, particularly looking for alleged abusive practices by firms with strong market positions.
- China: Continued development of the law on RPM. In 2013, resale price maintenance (RPM) has been a particularly active and publicised enforcement area in China. Businesses are not reassured by the divergence in NDRC’s and the court’s positions towards RPM. While the Shanghai intermediate court has explicitly adopted a rule of reason approach in Rainbow v. Johnson & Johnson, NDRC is leaning towards or even essentially treating RPM as “per se illegal” in its enforcement. We anticipate that there will be more enforcement action targeting RPM in 2014 which will likely provide further insights into NDRC’s position and guidance for companies.
- China: Further focus on cartel enforcement. Although much of the cartel enforcement to date has focused on local violations by domestic companies, enforcement in this area is likely to continue and may become more active in targeting global cartels. For example, complaints reportedly have been filed with NDRC in relation to global price-fixing investigations of Japanese auto parts companies which have pleaded guilty in the US.
- China: Expansion into new high profile enforcement areas. While enforcement against cartels and RPM may continue to be robust, NDRC and SAIC have become more proactive as they have grown increasingly experienced and sophisticated. As a result, they have been increasingly broadening the enforcement scope to include new abuse of dominance theories. We understand that there are some on-going investigations that are likely to end during the course of 2014. In July 2013, SAIC announced it had begun investigating Tetra Pak for alleged tying of their machines and consumables. In 2014, the regulators may also start to shift focus to aspects such as collective dominance and excessive pricing practices (the Guangdong river sand case in 2013 may herald the new trend).
- China: Increasing scrutiny of IPR. SAIC reportedly is fine-tuning the draft regulation on antitrust enforcement in the intellectual property area and is likely to finalise it in 2014. The new rules will potentially have a far-reaching impact on the technology industry and build up momentum for enforcement action with respect to IPR. NDRC is also engaged in abuse of dominance investigations in the IP realm, including carrying out dawn raids on a number of Qualcomm offices in the second half of 2013 for suspected abuse of dominance in relation to its patent licensing agreements.
- China: More formalised merger control procedures. We expect that MOFCOM’s draft regulation on the designation of “simple cases” will be finalised in 2014, which will establish the substantive standards for designating concentrations of undertakings as “simple”. In addition, MOFCOM is reportedly working on a separate implementing regulation to flesh out details relating to merger review based on its experience accumulated during the past five years. This new regulation is likely to be promulgated in 2014 and reportedly would introduce a simplified review procedure applicable to “simple” transactions that is in line with international norms.
- China: Growing importance of private actions. Recently China’s Supreme Court decided to hear the appeal of Qihoo 360 v. Tencent, a high-profile antitrust lawsuit that involves two large Chinese internet firms disputing over abuse of market dominance. Another recent high-profile antitrust lawsuit, Huawei v. InterDigital, could also soon reach the Supreme Court. InterDigital, which lost on appeal, reportedly plans to appeal the appellant ruling that it had abused its dominant market position by charging Huawei unfairly high prices for standard essential patents. These cases are likely to enter spotlight in 2014. More broadly, with the introduction of the judicial interpretation for private antitrust litigation in 2012 and the inspiration of the above-mentioned landmark cases, private action is likely to step up in 2014.
- Hong Kong: Hong Kong is setting up its competition regime. It is expected that the Competition Ordinance will fully enter into force in late 2014 / early 2015, once the guidelines are published. Meanwhile, the Commissioners have been appointed and the Commission is recruiting its working staff. 2014 will be a year of transition during which businesses will ramp up to become compliant, including by identifying and correcting any risky practices and contracts.
- Wider Asia region: Competition laws will continue to develop in Asia, with new regulations being adopted and enforcement becoming more and more structured and sophisticated. The integration of ASEAN countries will lead to further cooperation between competition authorities, resulting in increased scrutiny, while Japan and Korea will continue to be very active enforcers.