Welcome to the Sidley Antitrust Bulletin — thoughts on topics that are top of mind for Sidley’s Antitrust team and why they matter to you. The European Commission has adopted new rules for assessing cooperation agreements between competitors, which will be effective starting July 1, 2023. Canada recently adopted no-poaching and wage-fixing enforcement guidelines on the conduct that became criminal under Canadian law on June 23, 2023. The government of the United Kingdom set out its expectations for the Competition and Markets Authority in a draft “strategic steer.” Meanwhile, in the United States, a challenge to the retroactive application of the 2022 Venue Act failed, and the antitrust agencies published a summary of a workshop related to merger review and enforcement in the pharmaceutical industry. Interested? Keep reading.…
Our Take on Top-of-Mind Global Antitrust Issues
European Commission adopts new horizontal block exemption regulations and guidelines: On June 1, 2023, the European Commission (EC) adopted a revised Research & Development Block Exemption Regulation and Specialization Block Exemption Regulation (collectively HBERs), alongside revised guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union (TFEU) to cooperation agreements between competitors (Horizontal Guidelines).
Why it matters: The HBERs provide a “safe harbor” from the application of European Union (EU) antitrust rules to defined categories of research and development (R&D) and specialization agreements that fulfill certain conditions, and the Horizontal Guidelines provide detailed guidance to help companies “self-assess” their compliance in relation to horizontal cooperation agreements. The new rules seek to increase clarity, reflect new case law, and support the green and digital transitions by making it easier for businesses to cooperate in economically desirable ways. In particular, there is a new chapter on agreements pursuing sustainability objectives that not only provides guidance on the EU antitrust assessment of such arrangements but also introduces a “soft safe harbor” related to industry standards provided six conditions are met. For details, please see our recent alert. The new rules will replace the current rules (dating from 2011) on July 1, 2023, and will remain in force for 12 years.
Canadian Competition Bureau publishes no-poaching, wage-fixing enforcement guidelines: Canada’s Competition Bureau released its no-poaching and wage-fixing enforcement guidelines in anticipation of criminal provisions that came into effect on June 23, 2023. Under the amended law, it is a criminal offense in Canada for unaffiliated employers to agree to fix, maintain, decrease, or control terms of employment or to refrain from hiring or soliciting one another’s employees. Further, the CAD 25 million cap on criminal agreements between competitors to fix prices, restrict supply, or allocate markets will be removed; instead, the amended provisions allow courts to use their discretion in determining fines.
Why it matters: The legislative reform and guidelines show that enforcers and regulators around the world continue to align their priorities to protect competition in labor markets. As reported previously, the U.S. Federal Trade Commission (FTC) has stated that noncompete restrictions harm both workers and competing businesses and constitute an unfair method of competition under Section 5 of the FTC Act. On June 2, 2023, the FTC approved a final order involving a manufacturing company that imposed noncompete restrictions on several hundred workers. To settle the charges, the company was banned from entering into, maintaining, enforcing, attempting to enforce, or threatening to enforce noncompete restrictions on the relevant workers. It is the fourth enforcement action by the FTC against companies using noncompete agreements this year. Outside of North America, EC Executive Vice President Margrethe Vestager previously highlighted that no-poach agreements are a form of cartel behavior that stifles innovation in the market by “restricting talent from moving where it serves the economy best.” Similarly, in February 2023 the UK’s Competition and Markets Authority (CMA) published guidance for employers outlining no-poach agreements as a form of illegal collusion.
UK government publishes draft “strategic steer” to the CMA: The draft strategic steer sets out the UK government’s expectations for where the CMA should focus its effort and resources and states that the CMA should consider the steer when setting its strategy. In particular, the government expects the CMA to concentrate on (i) tackling the cost of living crisis, (ii) boosting sustainable growth and productivity, and (iii) responding to the challenges and opportunities created by the growth of the digital economy.
Why it matters: This is the first government strategic steer to the CMA since July 2019. While government steers are nonbinding, the CMA may be guided by them in its work. The recently proposed Digital Markets, Competition and Consumers Bill, if enacted, would require the government to provide clear and regular strategic steers on its economic priorities to the CMA as well as oblige the CMA to regularly update the government on the state of competition in UK markets. This bill also provides the CMA with enhanced investigation and enforcement powers that may make it easier for the CMA to take a more preemptive approach (e.g., through market studies and investigations) in sectors relevant to the government’s economic priorities, and so in that sense strategic steers could become important predictors of the CMA areas of focus.
The Judicial Panel on Multidistrict Litigation (JPML) remands U.S. digital advertising antitrust lawsuit back to the Eastern District of Texas: A landmark litigation — brought by Texas and 16 other states accusing Google of monopolizing online display advertising — was transferred to the Southern District of New York in August 2021 for centralized pretrial proceedings in multidistrict litigation (MDL). On June 5, 2023, the JPML, in a four-page order, found that the State Antitrust Enforcement Act of 2021 (Venue Act), which was enacted in December 2022 as part of the Consolidated Appropriations Act, 2023, excuses state antitrust enforcement actions from MDL. The order moves the case back to the original venue of the Eastern District of Texas and prevents the MDL consolidation with the further cases. On June 22, 2023, Google filed an emergency writ of mandamus with the Second Circuit for an order reversing the remand decision.
Why it matters: The Venue Act restricts the transfer and/or removal of antitrust cases brought by state attorneys general. Prior to the Venue Act, the JPML was permitted to consolidate multiple cases that share one or more common questions of law or fact into a single district for litigation, with an exception for cases brought by the federal government. The State of Texas argued, successfully, that the Venue Act applies to all pending state antitrust enforcement actions, including those previously centralized actions. The JPML stated that “the Venue Act plainly is intended to allow state antitrust actions to proceed in the action’s original forum.” Accordingly, the JPML order underscores the potential for the Venue Act to be applied to already centralized, transferred, and/or removed actions (subject to the application to the Second Circuit). It also demonstrates an in-practice example of a defensive tool state attorneys general may deploy to retain their state antitrust litigation within the action’s original forum.
FTC, Department of Justice (DOJ) issue summary of pharmaceutical mergers workshop: On June 1, 2023, the U.S. antitrust enforcement agencies released a summary of a workshop expressing a renewed approach to merger review and enforcement in the pharmaceutical industry. “The Future of Pharmaceuticals” workshop, held jointly by the FTC and the DOJ in June 2022, brought together agency staff, representatives from state attorneys general, enforcement partners around the globe, and other experts to explore additional considerations for antitrust enforcement in the pharmaceutical industry.
Why it matters: During the workshop, FTC Chair Lina Khan expressed interest in identifying factors beyond traditional horizontal overlap concerns to be analyzed in pharmaceutical mergers, including how remedies, potential innovation, and prior “bad acts” might be incorporated into merger analysis. Both Assistant Attorney General Jonathan Kanter and FTC Commissioner Rebecca Slaughter emphasized that antitrust enforcement in the pharmaceutical industry should not be limited to existing and pipeline products but should consider competition to innovate and bring new drugs to market. Other ideas explored during the workshop included scrutinizing competition at all stages of innovation, seeking divestiture of existing drug products rather than focusing on pipeline drug products, and monitoring patent output levels post merger or requiring a commitment to maintain certain levels of R&D. The timing of the summary’s release is noteworthy as the views expressed by leaders during the workshop appear to mirror the agencies’ most recent enforcement initiatives.
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