Cartel Digest


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Shearman & Sterling Responds to the EC Market Definition Notice Consultation

In her first speech upon being reappointed as Competition Commissioner, Commissioner Vestager announced that a review would be undertaken of the Commission’s Market Definition Notice (the “Notice”); the consultation on that review closed Friday,  October 9th. The Notice is an important document in European competition law; it sets out the analytical framework under which the Commission decides who competes with who, a process which has determinative implications in both merger control and antitrust enforcement. The Notice is however older than most law firm trainees and clearly showing its age. Revising the Notice now can act as a release valve in response to calls for radical reforms to the merger review process in the wake of its controversial Siemen / Alstom prohibition, without regulation or treaty change, which could open a pandora’s box for the Commission. The consultation also needs to be considered in the context of a plethora of other reform initiatives to EU competition law aimed at harnessing U.S. tech giants.

Proposed HSR Rules Affect Investment Firms/Master Limited Partnerships and Minority Acquisitions

The U.S. Federal Trade Commission (FTC) and U.S. Department of Justice Antitrust Division (“DOJ” and collectively, the “Agencies”) recently proposed changes to two aspects of the Hart-Scott-Rodino Act (“HSR Act”). The proposed rules are subject to public comment and are unlikely to come into effect for at least a few months to a year or even longer.

Navigating Systemic Risk: Protecting Financial Institutions from Avoidable Losses

COVID-19 has acted as an accelerator, bringing into play scenarios which were previously only contingencies and making contingencies of (and requiring planning for) situations which were previously barely imaginable. The debt build-up from the corporate sector, in many cases kept going through governmental life-support, means that non-performing loans are likely to explode. Numerous companies are at levels of debt that mean they cannot realistically take on much more. Preferred equity investments are possible but provide less protection for the banks.

CMA Signals New Path for UK Clamp Down on Big Tech

On 1 July 2020, the U.K. Competition and Markets Authority (CMA) published a statement outlining a series of regulatory initiatives aimed at Google and Facebook, focussed on digital advertising. This follows the release of the CMA’s report on digital advertising and online platforms the same day.

DOJ/FTC Release Long-Awaited Vertical Merger Guidelines

The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) (collectively, “Agencies”) released the final version of the Vertical Merger Guidelines (“Vertical Guidelines”) on June 30, 2020. The new Vertical Guidelines, which had not been updated in more than 35 years, outline how the Agencies will evaluate whether vertical mergers violate the federal antitrust laws.

UK Supreme Court Gives Important Judgment in the Visa/Mastercard ‘Interchange Fee’ Litigation

The U.K. Supreme Court has handed victory to a group of British retailers (the “respondents”) in a long-running dispute with Mastercard and Visa Europe (the “appellants”) finding that the default “multilateral interchange fees” (MIFs) set by Mastercard and Visa and charged by institutions that issue debit/credit cards to customers (the “issuers”) to institutions that provide payment services to merchants (here, the retailers) (the “acquirers”) restrict competition.

European Commission Expands Arsenal to Curtail Foreign Subsidies

On June 17, 2020, the European Commission published its highly anticipated White Paper detailing its “anti-subsidy tool”, aimed at rectifying supposed distortions in the EU caused by foreign subsidies. Stakeholders have until September 23, 2020 to submit their views – a pre-COVID type timescale representing the significance of this shift.

The current Commission has ambitions to be a “geopolitical European Commission” as proclaimed by Commission President von der Leyen – boosting ‘European sovereignty’ and fostering national champions into formidable competitors capable of competing on the global stage.

The White Paper supports these goals and aims to patch over gaps in the Commission’s trade and competition toolkits. However, the gaps are not as obvious as that. There are no specific examples referred to by the Commission in justifying the proposal and the three “Modules” it proposes raise a number of issues, including extra-territorial enforcement challenges, expansion of Commission executive power and conflicting regimes. Ultimately, there are questions as to whether EU citizens will actually benefit – or if this is to protect European firms.

Shearman & Sterling Contributes to Global Legal Insights: AI, Machine Learning & Big Data 2020

Shearman & Sterling attorneys acted as contributors to the 2020 edition of Global Legal Insights: AI, Machine Learning & Big Data, a book published by Global Legal Group Ltd, London. The publication covers the latest trends, legal issues, board governance considerations and market practices in 29 global jurisdictions around artificial intelligence and its intersection with the laws of each country.

Competition Litigation Update

The English Courts will continue this year to consider several issues that will shape the future of private damages actions for infringements of competition law.

Airlines: EU State Aid Rules, Future M&A Considerations and Irish Exposure to Airlines

Although the EU's introduction of a Temporary Framework has enabled governments to offer extensive State-backed loans, the airline industry needs more than just credit – it will need equity. However, State aid to the aviation industry is strictly regulated by the European Commission (the "Commission"), and so only airlines that can show their business will be viable post-pandemic are likely to receive further aid. It is unlikely that the Covid-19 outbreak will cause changes to the stringent regulation on airline mergers. However, the suspension of the "use-it-or-lose-it" slot rule may have implications for any airline insolvencies, and will likely continue the trend of slot trades at reduced valuations. Finally, the extent and structure of aircraft leases in Ireland, under which banks have excessive exposure by lending 85% of the cost of each aircraft, may create an extra risk of a banking crisis in Ireland.

COVID-19 Insights Series: Considerations When Buying Distressed Energy Assets (Oil & Gas; Power & Renewables)

For those with capital to spend, low commodity prices and market unrest has created opportunities to acquire assets and distressed companies, including acquisitions of asset packages, acquisitions of companies, and take-private transactions. On this call, Nathan Meredith (Dallas-Mergers & Acquisitions), Jeremy Kennedy (Houston-Project Development & Finance), Rob Freedman (New York-Project Development & Finance), John Beahn (Washington, D.C.-CFIUS) discussed considerations involved in these transactions.