Matthew Hall EU competition law hot topics December 2016

McGuireWoods | 1 CONFIDENTIAL 1

Hot Topics in Antitrust Compliance and Enforcement (US and the EU)

McGuireWoods | 2 CONFIDENTIAL

Presenters

Matthew HallSolicitor (England & Wales/Ireland) Brussels+32 2 629 [email protected]

Bethany Gayle LukitschRichmond [email protected]


Agenda

• Beyond the Smoke-Filled Room (EU)• Price Signaling (US)• Distribution and Online Selling (EU)• Resale Price Maintenance (US)• Antitrust Liability for Third Parties (EU)• Class Action Litigation (US) • Increased Risk of Private Litigation (EU)• Brexit and Antitrust/Competition Law


Beyond the Smoke-Filled Room (EU)

• Recent investigations have shown authorities push the limits of antitrust in the EU

• “Cartel” focus now goes beyond the “smoke-filled room” and includes:

- pure information exchange- collusion on different fora- “unilateral” conduct, e.g. signalling- collusion on non-price parameters- facilitation

These are “next generation cartels”



European Court of Justice, Case C-74/14 ‘Eturas’ UAB and Others, 21 January 2016:• Information exchange over an e-commerce platform

(administrator messages)• Presumed participation in a concerted practice if aware of the

message• Unless:

- publicly distanced; or- reported it to the regulator (whistleblowing); or- adduced other evidence to rebut

Judgment available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=173680&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=760456



European Commission, Case AT.39850 – Container Shipping, 7 July 2016:• Regular announcements of intended future increases of prices• Websites, press, etc.• Amount of the increase in $/TEU, affected route and date• 3-5 weeks before date• Followed by similar announcements• Sometimes postponed or modified, “possibly aligning them”



European Commission, Case AT.39850 – Container Shipping, 7 July 2016:• Little value for customers• Does not set out actual price• “Limited committal value”• Allows parties to explore intentions and to coordinate• “May have enabled the parties to ‘test’ … whether they could

reasonably have implemented a price increase”• “Reduced strategic uncertainty and diminished incentives to

compete” Commission decision available at: http://ec.europa.eu/competition/antitrust/cases/dec_docs/39850/39850_3377_3.pdf



Key issues on pure information exchange:• Generally looking at private arrangements involving actual or

potential competitors• Direct or indirect, formal or informal• No need for bilateral exchange• Concerns arise where competitively sensitive and no legitimate

purpose• Not only prices; if has any value in predicting future commercial

behaviour then there is a risk

Does the IE reduce strategic uncertainty aroundfuture commercial policy?


Hot Topics in Price Signaling (US)

What is signaling?

Company’s unilateral statement on competitive topics, likely to be heard by a competitor, but without an agreement.

Where/How?

Media, analyst meetings, industry conferences, websites, annual reports, industry publications



• U.S. Antitrust Laws prohibit invitations to colludeM Sherman Act Section 1 applies only if there’s an illegal

agreementM But Section 5 of the FTC Act prohibits broadly “unfair

methods of competition” including invitations to collude

• Though unilateral disclosures of pricing or other future plans are generally permissible (or even encouraged as beneficial)…some unilateral statements are problematic to the extent they could be construed as an invitation to collude and increase the risk that the government could infer the existence of an agreement



In the Matter of Valassis Communications, Inc. (2006)

• In 2006 the FTC settled charges that a producer of coupon inserts for newspapers in Michigan communicated “proposed terms of coordination” to its single competitorM Based on CEO’s statements on a quarterly call with analystsM For example: “[W]e will quote all News America…

customers at the floor price which…will not go below $6 for a full page [ad] and $3.90 for a half page [ad].”

• The FTC has said that these statements provided information that wouldn’t ordinarily have been disclosed and would not have been made “except in the expectation” that the competitor was listening.



In the Matter of U-Haul Int’l, Inc. (2010)

• In 2010, U-Haul settled FTC Act charges stemming from communications directives given to its sales reps and statements made by its Chairman on an earnings call.M U-Haul instructed sales reps to instruct dealers to “tell your

Budget/Penske rep that U-Haul[’s prices are] up and they should be too.”

M U-Haul’s Chairman stated that the company was trying “to show price leadership” and that Budget shouldn’t “throw the money away. Price at cost at least.”

• The FTC alleged that U-Haul acted with the specific intent to “facilitate collusion”



In re Delta/AirTran Baggage Fee Antitrust Litig. (2010)

• Plaintiffs alleged that the airlines used earnings calls and industry conferences to enter into a conspiracy that led to the imposition of first-bag fee on checked bags and capacity reductions.

“We have to do [capacity cuts] in conjunction with the other carriers because certainly the capacity cuts that we can do on our won, while they will help us, will not remedy the industry’s woes.”

• Motion to dismiss denied. Class certified in July 2016.


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Hot Topics in Price Signaling Practice Tips (EU/US)

• Appreciate the risk• Focus on your company• Treat Q&A sessions/earnings calls with caution

M Don’t disclose specific pricing/capacity informationM Don’t speak of industry or marketM Don’t speculate on competitors’ actions

• Final decisions vs. future pricing• Extra care in special situations – previous price wars, history of

public price statements


Hot Topics in Distribution and Online Selling (EU)

Numerous recent examples of regulatory investigations, including:

• UK: Bathroom Fittings, Commercial Refrigeration, Pride Mobility Products, Roma, Ping, OTAs, private motor insurance, Amazon

• Germany: Dornbracht, Gardena, Bosch Siemens, Adidas, ASICS, online car selling, LEGO, Amazon, OTAs

• Germany online RPM: CIBA Vision, Recticel/Metzeler, Garmin/United Navigation, Alessi, Phonak, Wala

• European Commission: Consumer Electronics, Amazon, Pay TV

Clear enforcement focus on online sales,including of tangible goods



European Commission, Sep. 2016:

• “The [preliminary e-commerce sector inquiry] report should be a reason for companies to review their current distribution contracts and bring them in line with EU competition rules if they are not.”

• “The preliminary findings of the sector inquiry suggest that a number of territorial restrictions may raise concerns regarding their compatibility with EU competition rules.”

Basic EU vertical agreements framework remains in place,

but specific issues with online selling



Various restrictions of online sales are imposed by suppliers:• Ban on Internet sales• Ban on Internet advertising/marketing• IMAP• RPM• Dual pricing• Use of logo/brand• Use of price comparison sites• Use of third party platforms• Retail MFN/price parity clauses• Geo-blocking• Other developing practices?

Fines can be and are imposed for “hardcore” restrictions.Care is needed with all these restrictions


Hot Topics in Resale Price Maintenance (US)

• Resale price maintenance (“RPM”) — or “vertical price fixing” — is an agreement between participants at different levels of the market (e.g., an agreement between a manufacturer and its retailer or distributor) setting the prices at which products or services will be resold.

• The concern with RPM is that it could result in higher prices than would otherwise be charged if retailers/distributers were free to set prices themselves.M Minimum RPM: agreements that set prices below which goods

cannot be resold. M Maximum RPM: agreements that set prices above which goods

cannot be resold.



Leegin Creative Leather Products v. PSKS, Inc.• Prior to 2007, minimum RPM agreements were per se illegal

under federal antitrust law.

• In 2007, the Supreme Court held in Leegin that minimum RPM agreements are subject to a rule of reason analysis, which involves balancing the anticompetitive harms against the procompetitive justifications.

• Efforts to repeal Leegin were unsuccessful.



Aftermath of Leegin (State Law)• States vary in their treatment of RPM following Leegin,

for example:M Maryland – Adopted a law making RPM per se illegal. M California – California law continues to be interpreted to mean that

minimum RPM is per se illegal. The California AG is active in this area.M New York – New York AG has been vocal in stating that RPM should

remain per se illegal and has brought enforcement actions, but New York courts have disagreed that RPM is per se illegal under New York law.

M Illinois – An enforcement action by the Illinois AG suggests that the AG views RPM as per se illegal, but case law has held that RPM is subject to the rule of reason under Illinois law.

• Landscape is still unclear – many states have not addressed the issue and antitrust agencies have not given much guidance



Unilateral Pricing Policies (UPPs) or “Colgate” Policies

• In United States v. Colgate Co., the Supreme Court held that the federal antitrust laws do not preclude a manufacturer from adopting a unilateral policy in which it simply announces its desired minimum price and declines to deal with any retailers who refuse to sell the product at or above that minimum price.

• Implementation of such policies is a challenge because there is a very fine line between what is coerced agreement and what is unilateral conduct.



Contact Lens Cases

• In 2014 Johnson & Johnson instituted a minimum RPM policy for all resellers of contact lenses

• Costco sued J&J over the policy in 2015, alleging a violation of the Leegin rule of reason holdingM J&J defended the policy by arguing that it was a UPP permissible

under ColgateM Costco and J&J agreed to settle, after J&J amended the RPM

policy• Dozens of other class actions were filed and consolidated in an

MDL in Florida• Maryland AG sued J&J in February 2016


Antitrust Liability for Third Parties (EU)

“When appropriate, [antitrust/competition compliance] may also mean providing training for … distributors, agents, and

contractors”

Speech by Brent Snyder, Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice, 9 September 2014, available at https://www.justice.gov/atr/file/517796/download

Applies equally in the EU; think carefully before employing (or acting as) a third party



A well-known concept but often not (sufficiently) focused on:

• Commercial agents

• Joint ventures/subsidiaries/minority shareholdings

• Employees

Compliance policy needs to cover use of agents, contractors and other third party service providers



European Court of Justice, Case C-542/14 VM Remonts and Others, 21 July 2016:• Concerns “controlled [third party] service providers”• Liability may arise in three situations:

M employee in disguiseM company aware and intended to contribute by its own

conductM company could reasonably have foreseen and was prepared to

accept the risks

Need to consider processes for vetting, selecting and managing

Judgment available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=181950&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=2167345


Hot Topics in Class Action Litigation (US)Representative Evidence

Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016)\

• Although not an antitrust case, potentially important implications for antitrust class actions

• A six-Justice majority of the Supreme Court refused to issue a broad rule against using representative—including statistical—evidence to establish class-wide injury or damages

• Instead, such evidence must be evaluated on a case-by-case basis, whether individual or class action

• Key litigation points: no Daubert challenge of statistical evidence expert; no bifurcation of liability and damages; Tyson lacked records necessary to calculate individual damages; jury awarded single verdict of $2.9 million in unpaid wages


Hot Topics in Class Action Litigation (US)Representative Evidence

Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016)

• Case posed two related damages issues:M How to distribute a lump-sum damages award among differently

situated class members without knowing how jury reached that sum?M How to ensure that uninjured class members do not receive part of the

lump-sum award?• The Supreme Court declined to address the question of whether, and

to what extent, a class may include uninjured members• Chief Justice Roberts expressed doubt that the district court could

distribute damages without windfalls to uninjured class members• The district court approved plaintiffs’ distribution model – found that

the jury instructions and the model proposed by their expert to prevented uninjured class members from recovering


Hot Topics in Class Action Litigation (US)International Comity

In re Vitamin C Antitrust Litigation (E.D.N.Y./2d Cir.)

• Litigation spans back more than a decade• Plaintiff purchasers accused Chinese vitamin C

manufacturers of establishing a price-fixing cartel• Defendants argued that their coordinated actions were

required by Chinese law• In 2013, the district court case culminated in a rare

antitrust jury trial and a $147 million (trebled) damages award


Hot Topics in Class Action Litigation (US)International Comity

In re Vitamin C Antitrust Litigation (E.D.N.Y./2d Cir.)• In September 2016, the Second Circuit vacated the district court

judgment, finding that the defendants’ 2008 motion to dismiss should have been granted on the basis of international comity

• Second Circuit found there to be a “true conflict” between U.S. law and Chinese law, requiring the district court to abstain from exercising jurisdiction over the case

• The Chinese government (specifically, its Ministry of Commerce) appeared as amicus curiae for the first time in history, both in the district court and the Second Circuit

• Last month the Second Circuit declined rehearing and rehearing en banc


Hot Topics in Class Action Litigation (US)Pleading Standards

ATM Access Fee cases (D.D.C./D.C. Cir.)

• Plaintiffs alleged that credit card network rules about ATM fees suppressed potential price competition by non-bank ATM operators

• The district court dismissed for lack of standing, finding that the plaintiffs’ complaint did not show injury or redressability

• In August 2015 the D.C. Circuit vacated the dismissal, finding that:M the plaintiffs’ theories of harm were susceptible to proof at trial,

andM plaintiffs had adequately alleged concerted action among the

credit card networks and their member banks


Hot Topics in Class Action Litigation (US)Pleading Standards

ATM Access Fee cases (D.D.C./D.C. Cir.)• The Supreme Court granted certiorari to consider “[w]hether

allegations that members of a business association agreed to adhere to the association’s rules and possess governance rights in the association, without more, are sufficient to plead” a Section 1 conspiracy

• Oral argument was supposed to be held today before the Supreme Court, but on November 17, the Court dismissed its writs of certiorari as improvidently granted

• The Court found that the petitioners had relied on a different argument in their merits briefing than the argument that persuaded it to grant certiorari

• The cases will now continue in district court


Increased Risk of Private Litigation (EU)

Board-level issue; magnitude of EU private antitrust litigation risk (and opportunities) is significant and increasing

• Follow-on claims

• Stand-alone claims

• Class actions

• UK fast-track

Currently mainly UK, NL and Germany, but…



EU Antitrust Damages Directive (EU/EEA)

• Implementation by 27 December 2016

• A framework to build on

• Major change for some countries

Huge potential for growth in litigation: “only 25% of EC antitrust decisions over 2008-2012 followed by civil actions for damages”



Key points:• All 28 EU countries covered by the EU Antitrust Damages Directive• Also applies to national law investigations• In investigation/allegation situations, consider litigation risk early• Claims from customers, suppliers, shareholders (?)• Liability for third parties • Private antitrust litigation can be used as a “sword” and as a “shield”• UK leading the way:

M fast-trackM injunctionsM cost capsM class actions M follow-on and stand-alone


Brexit and Antitrust/Competition Law

Practica

l Points

• Reinforce the message that antitrust/competition law continues to apply in the UK

• Be careful having discussions with competitors on the impact of Brexit

• Consider the post-Brexit options but take care with joint lobbying

• Review trading agreements• Consider litigation strategy• Use legal advisers to ensure privilege

protection• Consider State aid and EU funding More information available at: https://www.mcguirewoods.com/Client-Resources/Alerts/2016/7/Brexit-Preparing-for-the-Unknown.aspx and https://www.mcguirewoods.com/Client-Resources/Alerts/2016/7/Competition-Antitrust-Law-Brexit.aspx

Companies are

and sh

ould be

preparin

g now!

https://www.mcguirewoods.com/Client-Resources/Alerts/2016/7/Brexit-Preparing-for-the-Unknown.aspx

https://www.mcguirewoods.com/Client-Resources/Alerts/2016/7/Brexit-Preparing-for-the-Unknown.aspx


Questions or Comments?

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Matthew Hall EU competition law hot topics December 2016