As in the past, the Chicago Forum on International Antitrust Issues at Northwestern Pritzker Law School on June 16-17 provided a unique perspective on global issues facing multinational companies. A number of panels demonstrated the challenges for multinational companies in complying with competition laws around the globe. Some of the key points included:
Differences in Cartel Enforcement in the EU, U.S. and Brazil Mean Differences in Assessing Risk and in Considering Leniency and Settlements
Marisa Tierno Centella, Deputy Head of Cartels Unit at the European Commission, emphasized that the penalties for cartels depend on the culture of the country imposing the fines. There is no "one stop shop" for leniency in the EU. Risk assessment in the EU is focused primarily at the national level, although member states can bring cartel actions, and there is a trend towards individual criminal liability in certain member states. In those member states where there are criminal sanctions, there are also different leniency systems. Statistics from the member states show new case investigations of 100 or more over a decade in Austria, Germany, France, Hungary, Italy, The Netherlands and Spain. Settlement procedures (which are not available in the U.S.) have worked well in the EU. About 46% of cartel cases in the EU have utilized the settlement procedure with only one appeal pending.
A noticeable shift has occurred in Brazil in that now domestic companies are also seeking leniency. Penalties can include fines and prison terms. Settlement procedures are also available and frequently used in Brazil. Revenues from settlements to the Administrative Council for Economic Defense ("CADE") in 2014 and 2015 were unprecedented. Civil suits are not yet being filed in Brazil.
While corporate accountability is important, in the U.S. the trend continues to include individual accountability and indictments. This emphasis on individual accountability poses greater risk for officers and employees, but it also provides opportunity for cooperation. Because leniency is only available for the first to report, accepting responsibility early on is particularly important.
Inhouse Panel Emphasized Importance of Setting Aside Preconceptions in Foreign Matters
The panel on inhouse war stories agreed that it is better not to make assumptions in dealing with foreign agencies. Differences in language and culture can often result in differences in procedure and substance. In jurisdictions where there is a new law or little precedent, it is often necessary "to build the road as we walk." While U.S. precedents may be instructive, they may not be as important as the international norms that are now being confirmed by the ICN.
In litigation outside the U.S. there appears to be more of an emphasis on documents than on testimony. There are different rules for ex parte communications, greater use of academicians as experts, and often decision makers who are not lawyers. There are also fewer (if any) procedures for an early determination, and in some countries the political considerations are paramount and should not be overlooked.
Because of differences in merger control among different jurisdictions, it is important at the outset to identify timelines for filings and to understand that many jurisdictions require more information than the U.S. for the initial filing. This means that it may take more time to prepare a filing outside the U.S. than an HSR filing. Global consistency, which is often the responsibility of inhouse counsel, is critical, particularly if waivers are provided so that information can be shared across jurisdictions. It is also important to take into account local issues that go beyond competition considerations. Transparency is particularly important in preparing to deal with these issues.
Substantive differences for abuse of dominance, including tying, excessive pricing, predatory pricing, may come as a surprise to even the most knowledgeable U.S. counsel.
Significant Changes in Brazil's Enforcement Have Improved the Quality and Efficiency of CADE
Having overcome a number of major challenges in quality and efficiency, the changes in Brazil's enforcement have resulted in it receiving a "4 star rating" from Global Competition Review. There is now both a fast track and full review for mergers with the average review time being about 29 days. As noted above, leniency applications and plea bargaining have increased. Dawn raids are now covering local as well as international cartels. CADE has issued numerous guidelines – on gun jumping, compliance, settlements, leniency, horizontal mergers – which have been of immense value in clarifying what is required for compliance.
International Competition Network ("ICN") Continues to Work Towards Greater Global Convergence on Both Procedural and Substantive Issues
Organized in 2001 the ICN's membership has grown from 14 jurisdictions to 120. It has produced over 100 work products, including recommended practices for government enforcement, handbooks and manual for agency staffs, practice guides, papers, surveys and workshops, most of which is available on the ICN website – http://www.internationalcompetitionnetwork.org/. It has become an important resource for agencies, practitioners and consumers by focusing attention on substantive and procedural international norms that exemplify fairness, good government and effective enforcement. The hope and expectation are that, as newer or less experienced agencies increase enforcement activities, the work of the ICN will be of increasing importance, providing value not only to the government agencies that enforce competition laws but also to companies doing business on a global basis.
Merger Reform is Among Many New Developments in China
Recently, China's Ministry of Commerce ("MOFCOM") has made significant changes to its divisional structure and review procedures. Starting with its introduction of the "simple case" review system in February 2014 and then followed by its structural reforms for a single case team review in September 2015, MOFCOM has attempted to provide a more efficient review process. MOFCOM has also acted recently to impose fines for failure to comply with filing obligations and for gun jumping.
Although China's Anti-Monopoly Law was just passed in 2008, China’s three enforcement agencies, MOFCOM, National Development and Reform Commission ("NDRC"), and the State Administration for Industry and Commerce ("SAIC") have actively engaged in enforcement. In addition to implementing rules and guidelines, they have brought numerous enforcement actions. Between them, about 500 investigations were opened in 2015. Although most (over 300) are merger reviews by MOFCOM, there are about 100 anticompetitive agreements challenged by NDRC and about 58 abuse of dominance cases brought by SAIC.
A number of policy initiatives suggest that there may be more changes to come. In 2013 the Plenum of the Communist Party of China called for further reform "to let the market play the decisive role in allocating resources" and the legislation agenda for the Chinese State Council includes plans to study amendment of the Anti-Monopoly Law. In the Summer of 2015 China also announced the establishment of a Fair Competition Review system to coordinate competition policies with other industrial policies. Time will tell what, if any, changes are forthcoming.
Differences in Analysis of Vertical Restrictions and Abusive Practices in EU and China Continue
The U.S. differs significantly from the EU and other countries in its rule of reason approach to vertical restraints. While there are exceptions for "hub and spoke" conspiracies initiated by horizontal competitors and certain state enforcement of resale price maintenance, the U.S. view of vertical restraints, including online restrictions, is generally more permissive. For historical and other reasons, the EU's desire for a single market has resulted in distinctions between active and passive sales in territorial restrictions and prohibitions against online restrictions. Resale price maintenance remains an object offense under EU law, although suggested prices are permissible. China differs in that its law on vertical non-price restraints focuses on market share, and two of its agencies seem to differ with its courts on whether resale price maintenance is per se illegal. Suggested prices are also permissible in China.
Exchanging Price Information and Signaling are Hot Topics in the EU
In considering the differences in U.S. and EU law on the exchange of price information and signaling between competitors and potential competitors, the panel distinguished between public and private communications. In the U.S. both are subject to a rule of reason analysis, and it is unlikely that a violation will be found without some showing of anticompetitive effect, typically by way of a price fixing agreement. With respect to public price announcements, it is important to ask if there is a legitimate purpose for the announcement? What's the business reason? How does it help my company? Sometimes an announcement is just an announcement and not a "signal" or an "invitation to collude."
In the EU there is a greater likelihood that an unlawful agreement would be inferred from the exchange of pricing or other competitively sensitive information, particularly in a private exchange between competitors. Public price announcements are more likely to result in an investigation in the EU. In all jurisdictions, a course of conduct that includes not only the exchange of information but also meetings with competitors is more likely to raise suspicion or establish an agreement. In general, public statements about the future of the industry or likely market reactions are more likely to raise concerns than individual factual statements about a company’s own plans.
Differences in IP Guidelines in the U.S., EU, Canada, China and Korea Require Assessment on a Country by Country Basis
While innovation is highly valued by all, jurisdictions vary in their view and treatment of intellectual property ("IP") under the antitrust laws. In the U.S. practitioners look to the 1995 IP Guidelines issued by the FTC and DOJ and the 2007 DOJ and FTC Report on Antitrust Enforcement and Intellectual Property Rights. In the EU there is the Technology Transfer Guidelines and its Technology Transfer Block Exemption. In China there are three agencies proposing guidelines -- the SAIC which issued rules effective in August 2015 and has recently issued more guidelines on IP abuse, the NDRC, which issued its draft guidelines in December 2015, and the State Intellectual Property Office. Efforts are underway to consolidate and integrate these guidelines to the extent possible. Canada and Korea also have IP Guidelines which have recently been revised.
Generally, most of these jurisdictions agree that intellectual property does not confer market power upon its owner, that licensing is generally procompetitive and subject to a rule of reason analysis, and that there can be abuses in licensing or refusing to license. However, the jurisdictions differ on a number of important issues such as the conduct that is considered abusive, whether a patent owner can refuse to license standard essential patents or non-standard essential patents to a potential competitor, whether safe harbors are provided, and what is covered in the guidelines. For example, some jurisdictions like the U.S. and Canada include "safety zones" while others like Korea do not. Some like the EU cover royalty obligations while others like the U.S. do not. Some like the EU, Canada and Korea address settlement agreements including pay for delay, but others like the U.S. and China do not. Some address standard essential patents, non-practicing entities and product switching, but most do not. Thus, until the law becomes more settled and there is more consensus among the various jurisdictions, the antitrust analysis of IP will depend on the laws of each country.
Should Counseling Be Different Where There is No Attorney-Client Privilege?
While many countries recognize that communications between a lawyer and a client should be afforded special protection from disclosure, this concept is not recognized on a global basis. In the U.S. and UK, for example, an attorney-client privilege is extended to advice from all lawyers, included in-house counsel and general counsel. However, the EU and a number of countries in the EU restrict the privilege to outside counsel licensed to practice in the EU (or member country). In some other countries a privilege may be limited to documents and information retained by registered attorneys. In still other countries, particularly those outside North America, the EU and Australia, there is no privilege at all. Because in today's global marketplace, litigation and arbitration frequently involved more than one jurisdiction, the attorney-client privilege may be lost or unavailable.
In dealing with this challenging situation, best practices suggest that it is important to know in advance whether a privilege is recognized, and it is often best to assert a privilege even in those jurisdictions where it is not clear that one exists. Because a lawyer's communication with his or her client is paramount, particularly with respect to risk assessment, lack of the privilege should not be allowed to interfere with a lawyer’s advice. On the other hand, lawyers should take care in communications with clients and, to the extent possible, avoid written communications that can later serve as admissions in litigation or arbitration.