March Antitrust Bulletin: Top-of-Mind Global Antitrust Issues

Our Take on Top-of-Mind Global Antitrust Issues

The EU adopts the FSR: On January 12, 2023, EU Regulation 2022/2560 on foreign subsidies distorting the internal market entered into force. The FSR, which will be effective later in 2023, gives the European Commission (EC) broad powers to investigate financial contributions granted by non-EU countries to companies engaging in an economic activity in the EU. Under its various tools, companies will need to make additional notifications both in a merger and acquisition (M&A) context and when engaging in public procurement procedures.

1. In the M&A context, companies must make suspensory notifications with very significant reporting requirements to the EC of certain acquisitions, including where (a) the target or the joint venture generates EU turnover of at least €500 million, and (b) the parties to the transaction received aggregate financial contributions from non-EU countries exceeding €50 million in the past three years. Even where the thresholds are not met, the EC has the power to request notifications.
2. In a public procurement procedure, companies must make suspensory notifications with very significant reporting requirements to the contracting authority in public procurement procedures where (a) the estimated contract value is at least €250 million; (b) if the tender is divided into lots, the aggregate value of the lot(s) applied for is at least €125 million; and (c) aggregate financial contributions of at least €4 million in a given non-EU country were granted to the bidder involved in the tender (including its subsidiaries, holding companies and, where applicable, main contractors and suppliers) in the three financial years prior to notification.

The EC may also launch investigations on its own initiative (ex-officio) if it suspects that distortive foreign subsidies may be involved in any market situation. The EC will be entitled to impose structural and behavioral redressive measures on companies, or accept them as commitments, to remedy market distortions.

Why it matters: The FSR — which will apply as of July 12, 2023, with notification obligations applying from October 12, 2023,— will have far-reaching implications for many businesses active in the EU and receiving, in any form, financial contributions from non-EU countries. As suggested in our December alert, businesses should start considering whether they could be subject to mandatory notification obligations in their future M&A and public procurement activities and, if so, prepare (e.g., identify and be ready to report all foreign financial contributions received, including grants, tax breaks, purchases from and sales to governments or government-linked companies).

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New York Office of the Attorney General announces new rules against price gouging: The New York Attorney General (NY AG), Letitia James, proposed new rules that give the NY AG Office increased power to investigate alleged price gouging and the ability to set clearer guardrails against price increases during emergencies. Many of these proposed rules are intended to address alleged instances of price gouging that occurred during the COVID-19 pandemic, which was the catalyst for legislation passed in 2020 by the New York legislature, giving the NY AG rulemaking authority on the issue. The proposed rules

1. clarify that a price increase over 10% during an abnormal market disruption may constitute price gouging 
2. prohibit corporations with large market shares from increasing profit margins during abnormal market disruptions 
3. set clearer guidelines for companies that rely on dynamic pricing
4. clarify what companies can claim as costs when setting prices 

Why it matters: These proposed rules would provide much clearer guardrails for companies on how to set pricing during emergencies, natural disasters, and other abnormal market disruptions. However, these new proposed rules on pricing — with an emphasis on companies with large market shares — suggest that the NY AG will be particularly aggressive with investigations of larger companies after abnormal market disruptions. Should the rules be enacted, companies may consider developing emergency plans around supply chains issue and pricing. The proposed rules are open to comment for a 60-day public comment period. 

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UK’s CMA is granted permission to appeal judgment limiting its information gathering powers: In a joint judgment delivered last month, the High Court of England and Wales and the CAT unanimously found that the CMA had acted beyond its powers when requiring the German-incorporated entities of BMW and Volkswagen to hand over documents during the course of an antitrust investigation. The CMA has now been granted permission to appeal this judgment. 

Why it matters: The February judgment significantly affects the CMA’s ability to compel the production of information and documents from foreign-domiciled companies without a territorial connection to the UK. This power is an important tool enabling the CMA to gather evidence and information during antitrust/competition investigations. Further, post-Brexit, the CMA no longer has the benefit of being part of the European Competition Network, through which members can exchange evidence and other information, and it has yet to sign a cooperation agreement with the European Commission. Without the necessary tools, the CMA may find it difficult to establish itself as a global regulator, and it will be hoping for a more favorable outcome on appeal. 

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The UK CAT delivers important ruling for collective proceedings: On February 20, 2023, the CAT delivered its ruling on a case that related to a standalone opt-out collective damages claim against Meta for alleged abuse of dominance, with a purported class size of 45 million people seeking damages of approximately £2.3 billion plus interest. The CAT denounced the methodology used by the applicant to calculate the potential damages arising from three alleged abuses. The CAT considered that the methodology failed to establish clearly a nexus among each alleged abuse, its corresponding counterfactual analysis, and the method of quantifying the resulting consumer loss. Demanding a proper “blueprint to trial,” the CAT stayed the proceedings for six months to allow the applicant to improve its proposed methodology. 

Why it matters: This judgment reiterates that the calculation of damages in collective proceedings must offer a realistic prospect of establishing loss on a class-wide basis. Further, in the instance where the market is two-sided — as in this case with users and advertisers — the CAT suggested that any methodology for calculating damages should consider the interaction of both sides of the market. Although the proceedings are currently stayed, this ruling signals that the CAT will take a cautious approach to certifying proposed claims as suitable for trial, particularly when the methodology for calculating damages is not sound.

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Changes to the DOJ corporate criminal enforcement program: In a speech to the American Bar Association National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco outlined several key changes to the DOJ corporate criminal enforcement program. First, as a common policy across its functions, the DOJ will not seek a guilty plea where a company has voluntarily self-disclosed, cooperated, and took remedial measures so long as there are not aggravating factors. Second, as part of any resolution, the DOJ’s Criminal Division will require companies to take steps to tether executive compensation to corporate compliance as well as reduce fines for companies that claw back compensation from culpable personnel. Deputy Attorney General Monaco announced additional resources to combat corporate crimes that pose national security risks, such as sanctions evasions and export control violations, as well as to buttress its focus on continuing to hold individuals accountable for wrongdoing. 

Why it matters: Deputy Attorney General Monaco’s remarks come amidst a growing crescendo of policy updates, speeches, and notable enforcement actions confirming the department’s emphasis on incentivizing corporate self-disclosure, linking resolution and credit to individual accountability, and taking a more aggressive approach to corporate crime. In the antitrust context, the policy changes promise to intensify an already increasingly challenging enforcement landscape at both the DOJ and Federal Trade Commission and will create increased pressures for companies to report potential wrongdoing to DOJ despite not being fully confirmed by internal investigations.

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