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.
The U.K. Government has an announced intention to introduce a subsidy control regime. Having such regimes in place both in the U.K. and the EU (the State aid regime) creates the space for a compromise solution.
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.
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.
Sir Jonathan Faull and James Webber (London-Antitrust) discussed the U.K.’s decision to develop an independent U.K. subsidy control regime, including the reasons to move away from EU State aid rules as well as the costs and opportunities it creates.
Under the leadership of Margrethe Vestager, the European Commission has taken an increasing interventionist stand across all areas of antitrust enforcement, in particular in merger control. The EU’s General Court dealt that aggressive agenda a massive blow by annulling the first of her many prohibition decisions.
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.
Over the last several months, a number of European countries have accordingly strengthened, or are in the process of strengthening, their FDI regulations, partially as a result of the COVID-19 pandemic.
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.
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.
Partners Jessica Delbaum (Antitrust – New York), Ben Gris, and David Higbee (Antitrust – Washington, DC) with Associate John Skinner (Antitrust – New York) recently authored “Edgewell/Harry’s: When a Maverick is More Than Its Market Share” published by M&A Lawyer in March 2020.
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.
In response to the COVID-19 crisis, the European Commission is urging EU Member States to launch foreign direct investment (FDI) screening, capital controls and “all other available options” to shield European businesses, infrastructure or technologies of strategic importance from foreign takeovers during this unprecedented turmoil. In its Guidance Paper of March 25, 2020, the Commission also vigorously prompts Member States to establish fully-fledged systems as twelve of them do not yet have screening mechanisms in place.
The first wave of discussion about the impact of COVID-19 on EU merger control was very much on the practical and procedural. What, impact if any, will the response to this crisis have on the substantive assessment of mergers going forward?
The ongoing COVID-19 outbreak has, at least temporarily, reshaped the way that many companies do business. Nevertheless, companies must continue to be vigilant about compliance with the antitrust laws and understand that the U.S. antitrust agencies will continue to scrutinize their behavior during this period (although EU competition authorities have taken an arguably more permissive approach, while maintaining that overt cartels at the expense of consumers will not be tolerated).
Member States of the EU and the U.K. are announcing massive support packages for companies affected by the coronavirus crisis. These interventions are on a vast scale. Unlike the 2008 financial crisis, the measures we are seeing this week are predominantly fiscal rather than monetary policy responses. The British Government announced today it will do “whatever it takes” to get businesses through the crisis, including an initial package of £330bn of government-back loans and guarantees to all businesses, as well as cash grants of £25,000 to hospitality sector businesses which don’t have insurance for pandemics such as coronavirus. Additionally, all businesses in the hospitality sector will pay no business rates for 12 months.
Partner Jessica Delbaum and associate John Skinner (both New York- Antitrust) recently authored the foreword for “Merger Remedies in the US: An Overview of the Leading Cases” published by Concurrences on March 5, 2020.
Partner James Webber (London-Antitrust) authored a paper entitled “All Change? UK State Aid after Brexit What Law? Whose Courts.” The paper outlines how the EU regards State aid control as critically important – not just to control subsidization but as one of the few executive powers available to the Commission. James outlines how a new solution is needed that “respects the sovereignty of the United Kingdom and the autonomy of the Union” while being properly focused on “prevent[ing] undue distortion of trade and competition” as agreed in the Political Declaration. James explains that the coming dispute over State aid rules can be resolved.
The new Competition Law (the “Competition Law”) of the Kingdom of Saudi Arabia (the “Kingdom”) was enacted by Royal Decree M/75 on 29/06/1440 Hijri (corresponding to 6 March 2019) and came into force on 24/01/1441 Hijri (corresponding to 23 September 2019). The Implementing Regulations of the Competition Law (the “Implementing Regulations”) were issued by the Board of Directors (the “GAC Board”) of the General Authority for Competition (“GAC”) and came into force on 25/01/1441 Hijri (corresponding to 24 September 2019). The Competition Law replaced the previous Competition Law enacted by Royal Decree M/25 dated 4/05/1425 Hijri (corresponding to 22 June 2004). This article provides a brief overview of some of the key provisions of the Competition Law and the Implementing Regulations.
On January 28, 2020, the U.S. Federal Trade Commission (FTC) announced the annual changes to the thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The new size of transaction threshold is $94 million. The new HSR Act thresholds will go into effect on February 27, 2020 and will apply to all transactions closing on or after that date.
The HSR Act requires parties with transactions exceeding certain thresholds to file premerger notification reports to the FTC and the Antitrust Division of the U.S. Department of Justice (unless an exemption applies) and then observe statutorily prescribed waiting periods (usually 30 days) prior to closing the transaction.
On Friday, the Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (“DOJ”) released joint draft Vertical Merger Guidelines (“Guidelines”) for public comment. This much anticipated revision to the Guidelines, which had not been updated in more than 35 years, outlines how the FTC and DOJ evaluate whether vertical mergers violate the federal antitrust laws. The Guidelines are notable both because they strike a more aggressive stance towards vertical mergers than prior guidance, and in that the two Democratic FTC Commissioners abstained from voting on the Guidelines, which they did not think were aggressive enough. The release of these Guidelines reinforce that vertical merger enforcement will continue to be a priority for both the FTC and DOJ.
Partner Ben Gris (Washington, D.C.-Antitrust) and counsel Sara Ashall (Brussels-Antitrust) have authored the chapter “European Union and United States: Antitrust and Data” in the GDR Insight Handbook 2020. The chapter provides an overview of the current activities of the EU and U.S. regulators in cases at the intersection of competition law and data issues.
Partners Matthew Readings (London-Antitrust) and Elvira Aliende Rodriguez (Brussels-Antitrust); counsel Mathias Stöcker (Frankfurt-Antitrust); and associates Agostino Bignardi (Brussels-Antitrust) and Simon Thexton (London-Antitrust) authored various chapters of the International Comparative Legal Guide to: Cartels & Leniency 2020. As well as authoring various chapters, Matthew and Elvira were also contributing editors for the 2020 edition.