As part of CAPP’s Future of Work initiative, the discussion was moderated by Matthew Rooney, Managing Director of the Bush Institute-SMU Economic Growth Initiative, and featured Marcos Andrés Antil, CEO and Founder of XumaK; Mey Hung, Walmart Corporate Affairs Leader for Honduras and Guatemala; and Kathia Yacaman, Executive Vice President at Grupo Karim.

The discussion centered on ways Northern Triangle and Central American countries can promote investment and encourage companies and workers to get involved in the region. Transparency, licensing regulations, and workforce training were identified by the panelists as some of the more pressing issues and opportunities for growth for governments and industry leaders.

Marcos Andres explained that the issue is not a lack of talent in the region. He pointed out that, at least in his experience in Guatemala, there are many skilled people who are willing and able to learn. The fact that half of Guatemala is bilingual, while many others in the country are even trilingual, proves to Andres that the workforce is intelligent and capable, but in need of better training and direction for those wishing to enter the workforce.

Yacaman echoed this sentiment, spending much of her time discussing the failure of governments and organizations in the Northern Triangle countries to provide adequate, useful training. While Yacaman said there were often training programs in these countries, they were usually small and unfocused, and therefore often resulted in only wasted resources and unprepared workers. The need for focused, in-depth programs that teach skills that will be useful in the future is greater than ever, especially with movement towards a digital world, something COVID-19 proved as inevitable, according to Yacaman.

Mey Hung agreed that the move to a digital society and workforce is something Latin American countries do not want to get left behind on. She pointed out that digitalization means transparency, something the region struggles with and is currently lacking. Hung said more transparency means better understanding and increased trust, therefore, more competition and investment.

Though each panelist had a different background and involvement in Latin America, they all agreed that digitalization is a powerful opportunity for governments and businesses in the region. A shift to a digital world would be a shift towards increased transparency but would also need to be accompanied by investments in training and education so the talented, but undertrained population, could take advantage of the opportunities of the digital world.

Programs like the Bush Institute’s Future of Work Initiative should continue to investigate possibilities for economic growth in countries across the world. Additionally, by bringing persons that are familiar with and involved in the region to the table, such programs can effectively identify the most pressing issues and most effective solutions available in these countries. The willingness to work is there, but now Latin America must effectively ride the digitalization wave and ensure no talent is left behind.

By Rachel Sims

The countries named in the Petition are Bahrain, Brazil, Croatia, Egypt, Germany, Greece, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, South Korea, Spain, Taiwan, and Turkey.  In the petition, it alleges that these countries are “dumping,” meaning that they are exporting the product at issue, CAAS, at a lower market price than it would charge normally in its own market in its home country.

The alleged anti-dumping margins for each country are as follows:

Bahrain: 56.98 percent

Brazil: 30.23 percent to 44.20 percent

Croatia: 32.01 percent

Egypt: 31.5 percent

Germany: 37.22 percent

Greece: 61.25 percent

India: 122.8 to 151.0 percent

Indonesia: 32.12 percent

Italy: 28.97 percent

South Korea: 41.88 percent

Oman: 15.90 percent to 62.80 percent

Romania: 56.22 percent

Serbia: 40.61 percent

Slovenia: 30.88 percent

South Africa: 78.25 percent

Spain: 25.26 percent

Taiwan: 27.22 percent

Turkey: 42.45 percent

The product here, CAAS, is an aluminum product that is flat-rolled and could be used commercially in a variety of ways depending on the industry. It could be used in transportation, construction, or electrical work. The only use of CAAS that is outside of the scope of this petition is its use for aluminum cans.

Currently, the issue is under investigation by both the Department of Commerce and the International Trade Commission. The investigations will determine whether the imports are, in fact, injuring the U.S. trade industry through an unlawful dumping process.

If this product is of interest to you or your company could potentially be impacted, please contact Camelia Mazard, Esq. of Doyle, Barlow, and Mazard, PLLC for a consultation at either cmazard@dbmlawgroup.com or (202) 589-1837.

Under U.S. law, a domestic industry can petition the government to initiate an AD investigation into the pricing of an imported product to determine whether it is sold in the United States at less than fair value (i.e., “dumped”).  A domestic industry can also petition the initiation of a CVD investigation of alleged subsidization of foreign producers by their government.  Additional duties can be imposed if DOC determines that imported goods are dumped and/or subsidized, and if the ITC also determines that the domestic industry is materially injured or threatened with such injury by reason of subject imports.

If the ITC and DOC make preliminary affirmative determinations, U.S. importers will be required to post cash deposits in the amount of the AD and/or CVD duty rates for all entries on or after the date DOC’s preliminary determination is published in the Federal Register.  The preliminary AD/CVD rates can change in the final DOC determination, especially if foreign producers and their governments participate fully in the investigations.

Here the petition alleges that fabricated structural steel from Canada, China, and Mexico is being sold at less than fair value in the U.S. market and benefitting from countervailable subsidies. The alleged average dumping margins are 31.46 percent for Canada, 218.85 percent for China, and 41.39 percent for Mexico.

The products covered by this petition include carbon and alloy (including stainless) steel products such as angles, columns, beams, girders, plates, flange shapes, channels, hollow structural section shapes, base plates, plate-work components, and other steel products that have been fabricated for assembly or installation into a structure. Typical fabrication processes include cutting, drilling, welding, joining, bolting, bending, punching, pressure fitting, molding, adhesion, and other finishing processes. Fabricated structured steel is used in constructing structures such as buildings (commercial, office, institutional, and multi-family residential), industrial and utility projects, parking decks, arenas and convention centers, medical facilities, and ports, transportation, and infrastructure facilities.

Subject goods are classifiable under HTSUS 7308.90.9590, 7308.90.3000, and 7308.90.6000 and may also enter under HTSUS 7216.91.0010, 7216.91.0090, 7216.99.0010, 7216.99.0090, 7228.70.6000, 7301.10.0000, 7301.20.1000, 7301.20.5000, 7308.40.0000, 7308.90.9530, and 9406.90.0030.

The petition excludes fabricated steel concrete reinforcing bar under certain condition, fabricated structural steel used for bridges and bridge sections, pre-engineered metal building systems, and steel roof and floor decking systems designed and manufactured to Steel Deck Institute standards.

The Department of Commerce and the International Trade Commission will next determine whether to launch AD and CV duty and injury investigations, respectively, on these products. There are strict statutory deadlines associated with these proceedings, so affected companies that wish to protect their interests should contact trade counsel as soon as possible.

For more information, please contact

Camelia Mazard
(202) 589-1837
cmazard@dbmlawgroup.com

or

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

The announcement of exclusion procedures coincided with the imposition of the first phase of tariffs on July 6, 2018 covering 818 tariff subheadings listed in USTR’s Federal Register notice on June 20. https://www.gpo.gov/fdsys/pkg/FR-2018-06-20/pdf/2018-13248.pdf. The tariffs were imposed following USTR’s investigation of the Chinese government related to technology transfer, intellectual property and innovation. The goods identified relate to  industrial sectors that are part of China’s Made in China 2025 initiative.

Interested persons have until October 9, 2018 to request a product exclusion. Requests will be open for response within 14 days after the request is posted in USTR’s docket number USTR-2018-0025 at www.regulations.gov. Replies to responses will be due 7 days after the close of the 14-day response period.

Requests will be considered on a case-by-case basis but the USTR has indicated that exclusions will provide tariff relief principally where: (1) the product is only available in China; (2) duties would cause “severe economic harm;” or (3), the product is not strategically important or related to Chinese industrial programs including, in particular, “Made in China 2025.”

Product exclusion procedure

To address situations that warrant excluding a particular product from the 25% tariff, the USTR is implementing a product exclusion procedure:

• Who is eligible?
  
  
• What is the scope of exclusions?
  
  
• What is the process? 
  
  
• What information should the request form include?
  
  
• What will USTR consider in making its decision?
  
  
• When is the response due?
  
  
• When will I know if my exclusion request is approved?
  
  

What steps should you take now?

• Identify the number of specific, distinct products that are subject to the tariff based on country of origin and classification.
• For each product subject to the tariff, compile the following information:
  
  

If you need help, we are experienced in representing companies that are impacted by import tariffs. We are well positioned to represent your company and its trade interests before the USTR, CBP, and other agencies engaged in trade regulation.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

This is MOFCOM’s second block since it started conducting merger reviews approximately six years ago.  This is the first time that MOFCOM blocked a transaction between foreign firms.

Background

Maersk, MSC and CMA CGM are three large global shipping companies.  On June 13, 2013, the parties announced their decision to establish a long-term operational alliance or a joint venture whereby they would combine 250 ships in order to more efficiently utilize their capacity and reduce costs.  In October 2013, the parties entered into an agreement to form a Network Center in England and Wales, responsible for the operational affairs of the parties’ international liner shipping business on certain international trade routes.  The structure of the joint venture was for efficiency purposes as each individual shipping company was to independently price, sell and market.

The P3 Alliance vessels would have been operated independently by a structurally separate network operating center.  The three shipping companies would have continued to have fully independent pricing, sales, marketing and customer service functions.  The stated goal of the arrangement would have permitted the shipping companies to cut billions of dollars in annual costs by using each other’s ships and port facilities.  The agreement included firewalls for the joint venture, which were designed to protect against the flow of competitively sensitive information between the individual shippers.

Both the U.S. Federal Maritime Commission (“FMC”) and the EC approved the joint venture.  The FMC approved the transaction because of its benefits to U.S. consumers and efficiencies claimed by the parties.  The FMC recognized that monitoring of the P3 Alliance was necessary because of the potential to reduce services and raise rates in the future.  The FMC directed its staff to issue reporting requirements so the FMC could monitor the P3 Alliance going forward.  The EC cleared the P3 Alliance without any conditions.

MOFCOM’s Review

On September 18, 2013, the transaction was notified.  On December 19, 2013, MOFCOM accepted the notification.  On January 18, 2014, MOFCOM initiated a Phase II review.  On April 18, 2014, MOFCOM began its Phase II review.  MOFCOM blocked the deal on the 180^th day after failed negotiations for a remedy.

As is common practice, MOFCOM consulted the Ministry of Transportation and the National Development and Reform Commission, as well as competitors, other market players, and local trade associations, to conduct its review.  China’s shipping industry voiced opposition to the planned P3 Alliance.  This led to tough negotiations.  In the past, parties pulled their filing and re-filed to get another 180 days.  This time, however, the P3 Alliance chose not take advantage of this strategy.

MOFCOM’s Competition Analysis

Because of Chinese law, MOFCOM treated the joint venture as a de facto merger despite the parties’ effort to separate pricing, marketing, and sales from the alliance.  MOFCOM examined three international trade routes in its review:

(1)     Asia-Europe Trade: the Far East-Northern Europe and the Far East­ Mediterranean trades;

(2)     Transpacific Trade: the Far East-North America West Coast. the Far East-North America East Coast and the Far East-United States/Gulf of Mexico trades; and

(3)     Transatlantic Trade: the Northern Europe-United States East Coast.

MOFCOM, however, focused its review on the on the Asia-Europe Trade routes.  MOFCOM analyzed the competitive impact of the transaction in terms of, (i) the degree and scope of cooperation resulting from the alliance, (ii) market shares, (iii) market concentration level, (iv) barriers to entry, and (v) the impact of the alliance on competitors and the industry.  MOFCOM concluded that the alliance would eliminate or restrict competition.  There were several reasons why MOFCOM finally blocked the combination.

First, MOFCOM was concerned that the alliance would result in a tighter and more integrated form of cooperation, which would have been much different from the traditional alliances between container liners, which are based on vessel-sharing and slot­ exchange agreements.  In contrast, the P3 Alliance would have allowed the members to consolidate certain activities on the Asia-Europe Trade routes, the Transpacific Trade routes and the Transatlantic Trade routes.

Second, MOFCOM was concerned about market concentration.  MOFCOM determined that the combination of the market shares of Maersk (20%), MSC (15%) and CMA CGM (11%) in the Asia-Europe container liner shipping market would have resulted in an anticompetitive effect.  Basically, the alliance would have had approximately 46% of the market and there would have been no strong second player in the market.  Given the market concentration level, MOFCOM presumed that the market would be harmed.  In addition, MOFCOM found that barriers to entry are high because international container liner shipping is a capital intensive industry and is characterized by economies of scale.

Third, MOFCOM determined that the alliance would harm competitors, other industry players, and customers (shippers).  Indeed, MOFCOM found that the alliance would have placed smaller Chinese shippers at a greater disadvantage and even the larger Chinese shippers would have lost bargaining power.

MOFCOM’s decision did not explain why the procompetitive cost savings and synergies did not outweigh the anticompetitive concerns.  Similarly, the MOFCOM decision does not address the parties’ efforts to structure a joint venture which, while it integrated capacity, left marketing, sales, and pricing decisions to the three entities acting independently.  The decision simply states characterizes the market as concentrated and that the P3 Alliance was not in the public interest.

Some Chinese experts speculate that the decision to block the P3 Alliance was predictable because the shipping industry is of national strategic importance to China.  China is the world’s largest goods trader so it needs to protect its own shipping industry in an effort to keep prices low.  Besides keeping its shipping industry competitive, some commentators believe MOFCOM was also protecting its national security interests.

Lessons Learned

MOFCOM’s decision to block the transaction is noteworthy because this was the first time that MOFCOM blocked a multi-national transaction between foreign parties that was approved without conditions by the U.S. and European regulatory authorities.  There are a few lessons to be learned.

First, MOFCOM is not influenced by U.S. or European regulatory authorities.  MOFCOM focuses on Chinese competition concerns.  The P3 Alliance raised separate issues in the United States, Europe, and China.  The differing outcomes resulted from each authority analyzing only the effects of the deal relating to its respective market.  The FMC did not analyze Asia-Europe routes since it has no jurisdiction over it and, conversely, MOFCOM did not analyze Europe-North America routes.  For example, the P3 Alliance would raise more concerns among Asian regulators than U.S. regulators because several Asian nations have container fleets, while the United States does not.  This decision clearly demonstrates that MOFCOM attaches more weight to the Chinese market in its merger reviews.  China is a major manufacturing and export hub as well as a massive consumer, giving those industries and related government agencies added heft in antitrust discussions.  China’s approach reflects fundamental differences in its economy versus those in the United States and Europe.

Second, MOFCOM scrutinized a joint venture as a de facto merger despite the parties’ effort to separate pricing, marketing, and sales from the “network operating center.”  This was done because Chinese law allows MOFCOM to consider a joint venture as a de facto merger.  By treating it as a merger, MOFCOM found that the P3 Alliance would raise horizontal concerns.  Here, the P3 Alliance involved the world’s three largest container shipping lines on the Asia-Europe Trade, a strategic and lucrative trade route both for China’s exporters and container shipping lines.  MOFCOM found that the alliance would have resulted in significant market concentration and that entry barriers were high.

Third, MOFCOM’s analysis was based on its reliance on external consultants.  MOFCOM is understaffed with only 20 case handlers and 30 individuals reviewing competition matters.  Therefore, MOFCOM is willing to consider expert advice in complex cases.

Fourth, Chinese law allows MOFCOM to look more widely at the industrial consequences.  MOFCOM is particularly sensitive to the opinions of the Chinese stakeholder. The P3 Alliance would have transformed the Chinese shipping industry harming Chinese shipping companies.  As the world’s largest trading nation, China has an interest in making sure that shipping costs remain low and MOFCOM believed that the P3 Alliance would lead to higher prices.  It is natural that China may have different interests than other jurisdictions.

Fifth, MOFCOM considered this concentration of undertakings would have raised the groups’ control of the vital Asia-Europe routes to levels that would stifle competition and harm the public interest.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

Shane Wu
(202) 589-1834
swu@dbmlawgroup.com

On July 1, 2014, Actavis announced that it has completed the acquisition of Forest in a cash and equity transaction currently valued at approximately $28 billion. The combination creates one of the world’s fastest-growing specialty pharmaceutical companies, with annual revenues of more than $15 billion anticipated for 2015.

On a pro forma combined basis for full year 2014, the combined company will have an approximately $2 billion CNS franchise; Gastroenterology (GI) and Women’s Health franchises valued at approximately $1 billion each; a Cardiovascular franchise that generates approximately $500 million; and Urology and Dermatology/Established Brand franchises approaching $500 million a year in sales each.

The combined company will be led by Paul Bisaro, Chairman and CEO of Actavis plc. The integration of the two companies will be led by the Actavis and Forest senior management teams, with integration planning expected to begin immediately in order to assure a rapid transition to a single company following close. Actavis has agreed that three members of the Forest Board of Directors will be named to the Actavis Board of Directors following the close.

The proposed transaction has been unanimously approved by the Boards of Directors of Actavis and Forest, and is enthusiastically supported by the management teams of both companies. The transaction is subject to the approval of the shareholders of both companies, as well as customary regulatory approvals, including a Hart-Scott-Rodino review in the United States.

Almost immediately, the FTC issued a complaint against the acquisition. The FTC cited four markets of concern – the markets for drugs:

• Generic diltiazem hydrochloride extended release capsules (AB4) (generic Tiazac) (“generic diltiazem hydrochloride (AB4)”).It is used to treat hypertension and chronic stable angina. The market for generic diltiazem hydrochloride (AB4) is highly concentrated, with only three current suppliers—Actavis, Forest, and Sun Pharmaceutical Industries, Ltd. The Acquisition would reduce the number of suppliers of generic diltiazem hydrochloride (AB4) from three to two and increase the Herfindahl-Hirschman Index concentration (“HHI”) by 2700, from 3550 to a post-merger total of 6250.
• Generic ursodiol tablets (“generic ursodiol”); these are used to treat primary biliary cirrhosis of the liver. Four firms – Actavis, Forest, which distributes its product pursuant to an authorized generic arrangement with Prasco Laboratories, Par Pharmaceutical Companies, and Glenmark Pharmaceuticals, Ltd. – currently supply generic ursodiol in this highly concentrated market. The Acquisition would reduce the number of suppliers of generic ursodiol from four to three and increase the HHI by 342, from 5416 to a post-merger total of 5758.
• Generic propranolol hydrochloride extended release capsules (“generic propranolol hydrochloride”), used to treat hypertension. The market for generic propranolol hydrochloride is highly concentrated with only four current suppliers—Actavis, Forest, which distributes its product through Breckenridge Pharmaceutical LLC, Rouses Point Pharmaceuticals, and Upsher-Smith Laboratories. The Acquisition would reduce the number of suppliers of generic propranolol hydrochloride from four to three and increase the HHI by 1408, from 4523 to a post-merger total of 5931.
• Lamotrigine orally disintegrating tablets, a version of which is currently marketed under the brand name Lamictal ODT; it is a lamotrigine orally disintegrating tablet used to treat seizures. Forest currently manufactures Lamictal ODT for GlaxoSmithKline plc (“GSK”). GSK owns the New Drug Application for Lamictal ODT and markets the product. No companies currently market a generic version in the United States. Actavis holds the only approved Abbreviated New Drug Application to market generic Lamictal ODT. Thus, absent the Acquisition, Actavis is likely to be the first generic entrant and would be the sole competitor to Forest/GSK’s branded Lamictal ODT product for a significant period of time. The Proposed Acquisition would likely delay or preclude the entry of Actavis’ generic product.

The FTC also does not believe that any entry to these markets for these drugs will be timely or sufficient to offset the reduction in competition that is the result of this merger, due to long drug development times and likely regulatory delays from the Food and Drug Administration.

Under the proposed FTC settlement order, the companies have agreed to relinquish their rights to market generic diltiazem hydrochloride (AB4) to Valeant Pharmaceuticals International, Inc.; sell generic ursodiol and generic lamotrigine ODT to Impax Laboratories, Inc.; and sell generic propranolol hydrochloride to Catalent Pharma Solutions, Inc. Under the terms of the proposed settlement, Actavis and Forest must ensure the viability, marketability, and competitiveness of the drugs that are being divested until they are sold.

The Commission vote approving the final order was 5-0.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

Amazon, in response, stated that Bonnier AG wanted Amazon to charge prices for its e-books that would have been higher than its hard-copy books. According to Amazon, their regular course of action is to charge lower prices for e-books compared to the hard copies. Amazon has been caught in similar disputes, including one with French publisher Hachette Book Group. Amazon is thought to be attempting to boost its margins in its e-books division by negotiating lower prices from publishers.

Similar cases may give prediction to Amazon’s course of action in the face of antitrust investigation. In 2012, Apple Inc. and four publishers changed the pricing model for e-books in Europe in the face of scrutiny from EU antitrust authorities. They were suspected to have conspired to keep Amazon from charging less for e-books.

In addition to this case, Amazon’s tax arrangements with Luxembourg are also believed to be under investigation by EU authorities.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

In 2009, the European Commission (“EC”) concluded that Intel engaged in anticompetitive practices.  According to the EC, Intel’s alleged anticompetitive behavior included giving rebates to PC makers Dell, Hewlett-Packard, NEC and Lenovo to discourage them from using computer chips made by its rival Advanced Micro Devices. Intel was also alleged to have paid German retail chain Media Saturn Holdings to only stock computers that use Intel chips.

While the $1.44 billion fine is a record fine by the EC, European competition officials say it is a mild amount given that the EC could have exacted a fine as high as 10% of Intel’s turnover in 2008.  The fine only represents 4.15% of Intel’s 2008 turnover.

Many companies have recently settled with the EC instead of pursuing a court battle, perhaps deterred by the ever rising level of fines. Both Google and Samsung have recently settled outstanding cases with the EC.

The fine was lowered after SK Retail, part of the Severnoi company group, told the FAS that it acquired fish that had already been imported from Norway, and therefore did not benefit from neither the existence of the cartel nor limited competition.

The fine was reportedly lowered from 43 roubles (approximately $1.3 million) to 100,000 roubles (approximately $3,000). The FAS reportedly initiated the antitrust case in July 2013, while the fine was initially levied in December 2013.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

In addition, Mr. Hirano was charged with persuading company employees to destroy records that would reveal the conspiracy. According to the indictment, Mr. Hirano learned of a Department of Justice (“DOJ”) raid in February 2012, and the same month he encouraged his employees to destroy potentially incriminating documents.

Executives and company employees must understand that the destruction of documents during and prior to a government investigation will only cause more legal problems.  Because of technology advancements, the government will learn of the destruction because hitting the delete button is not the end of the document.  The document still exists somewhere.  The proliferation of electronic data storage means that an attempt to destroy documents is much more complicated than it used to be.  A potential evidence destroyer must canvass emails, hard-drives, cloud storage spaces as well as the traditional paper copies. Those who are not thorough enough usually make a bad situation worse, as is the case of Mr. Hirano and Tokai Rikai.  

Andre Barlow
202-589-1838
abarlow@dbmlawgroup.com

Mark Ye
202-589-1834
mye@dbmlawgroup.com

The companies involved were Votorantim Cimentos, Cimpor, InterCement, Itabira Agro Industrial, Holcim, and Itambe, which were convicted. Lafarge settled with CADE in November 20007 for 43m Brazilian reais ($19.5 million). Cimpor attempted to settle with CADE on two occasions, once on the eve of the trial against the cartelists, but failed to reach an agreement with CADE.

According to CADE, the defendants have for decades promoted consolidation, verticalization and forged cross-ownership structures combining cement and concrete assets as a means to reduce competition in both markets as well as eliminate rivals. CADE gathered the bulk of its evidence against the cartelists in a dawn raid dating back to February 2007. The oldest piece of evidence dated back to 1987, according to CADE.

In addition to the fines and mandatory divestitures of at least 20% of the cartel’s concrete and cement capacities, the defendants are also banned from forming joint ventures or merge with each other for five years. During that time, they are also banned from starting green-field ventures. They are also to unwind the existing cross-ownership structures that were key in holding together the cartel.

However, should the cartelists appeal, it may be over a decade before compliance is finally secured. Previous fines against the steel and gas cartels, dating back to 1999 and 2010, respectively, are still not paid as the defendants’ appeals wind through court.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

In addition, some rail parts manufacturers are being accused of counterfeiting certificates of quality for parts supplied to KR.

Finally, KR officials stand accused by the Board of Audit and Inspection of overlooking the bid-rigging conducted by construction companies in the railway building tenders for a new project that will create a new link between Wonju and Gangneung provinces.

Around 100 investigators have been sent by the prosecutor to the suppliers’ companies, the homes of KR officials allegedly involved in the affairs, and to KR’s offices.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

In the allegations put forth by the employees, the management of GSK China directed staff to purchase fake receipts to cover up the cost of the bribes paid. In some instances, managers’ bribe directives were sent over personal emails, while junior employees were instructed to take out expenses (on the bribes) on behalf of their managers. All this was done to boost the sale of GSK drugs. These employees were also warned to not implicate their managers in any inquiries.

In March, disgruntled GSK China employees sent 25 representatives to GSK’s China headquarters in Shanghai, demanding reimbursements amounting to thousands of dollars per employee. They also accused the management of threatening them with denied bonuses and dismissal for the bribes, despite simply following the orders of their superiors.

This has come on the heels of a high-profile Chinese probe in July 2013 into bribery and other illicit practices conducted by GSK China. GSK’s China sales have subsequently tumbled, despite the country being a growth market prioritized by the head office in London.

Consequently, GSK announced that it is redoubling efforts to audit expenses claims made by GSK China. In April, the company announced that a “very small percentage” of its 7000-strong China team has been dismissed following an audit of expense claims.

In addition, the company announced a change in the company’s marketing practices, including an end to target-based pay to sales representatives.

The reason the EC reached this agreement with Samsung is because SEPs give their owners significant market power, since it is not possible to manufacture products that comply with a certain standard without obtaining licensing for the SEPs. As a result, the EU requires SEP owners to issue licenses based on fair, reasonable and non-discriminatory (“FRAND”) terms. An SEP owner, such as Samsung, can use injunctions to stop other companies from gaining access to the SEP and thus restricting competition, so the EC is interested to limiting injunctions only to instances where companies seeking SEP licenses is unwilling to do so on FRAND terms.

Samsung agreed to the following terms in this agreement with the EC:

For a period of five years, Samsung has committed not to seek any injunctions in the European Economic Area (“EEA”) on the basis of any of its SEPs, present and future, that relate to technologies implemented in smartphones and tablets against any company that agrees to a particular framework for licensing the relevant SEPs.

The licensing framework provides for:

• a negotiation period of up to 12 months; and
• if no agreement is reached, a third party determination of FRAND terms by a court if either party chooses, or by an arbitrator if both parties agree on this.

An independent monitoring trustee will advise the Commission in overseeing the proper implementation of the commitments. Mark Ye 202-589-1834 mye@dbmlawgroup.com

The “Short-form Opinion” (“SfO”) tool has been launched on a trial basis and follows the UK Office of Fair Trade’s 2010 trial SfO process. But the CMA’s SfO has extended the scope of the process to cover not only horizontal but also vertical agreements.

The process is based on the principle that businesses should self-assess the compliance of their agreements with competition law, rather than notify them for clearance or exemption by competition authorities.

Parties should formulate a reasoned request providing details of the future agreement to the CMA. Parties should also state why the criteria to issue a SfO are met and the novel and unresolved questions on which guidance is sought.

This way, UK regulators can save time on “novel or unresolved” questions when the issue is identical or similar to questions raised in cases pending before a Court of the European Union (ECJ), the European Commission (EC) or national competition authorities.

Once submitted, the CMA staff will review the information and will issue a SfO within the envisaged timeframe of two to three months from receipt of the request. A non-confidential version of each issued SfO will be published on the CMA’s webpage.

The UK regulator will cooperate in this stage with sector regulators when an application for a SfO relates to a regulated sector.

A SfO is a non-binding opinion and cannot prejudge the assessment of the same question by EC, ECJ, the Competition Appeal Tribunal or any UK court.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

In particular, foreign players, such as Germany’s Allianz and Canada’s Manulife Financial Corp, will have the opportunity to acquire domestic companies with a nationwide license to reach target distribution scale.

In addition, many smaller insurance companies, struggling in recent years due to their lack of scale despite the rapidly expanding insurance market, may find financial succor from larger and more financially healthy peers in the form of M&A.

This development came after a change CIRC announced in October 2012, which broadened the range of markets into which insurers may invest.

For more information about China’s rapidly changing Merger and Acquisition rules, please see:

https://www.antitrustlawyerblog.com/mofcom-steps-up-enforcement-of-merger-report-rules

https://www.antitrustlawyerblog.com/mofcom-publishes-long-awaited-interim-rule-on-applicable-standards-for-simple-merger-review-cases

and

https://www.antitrustlawyerblog.com/mofcom-update-draft-rules-on-simplified-merger-review-procedure

Mark Ye
202-589-1834
mye@dbmlawgroup.com

Many observers have noted that MOFCOM is attempting a “carrot and stick” strategy to coax companies to follow more closely MOFCOM’s antitrust rules. The aforementioned developments would compose the “stick” part of MOFCOM’s strategy, while MOFCOM’s well-publicized work on the new “simplified merger review process,” designed to reduce the burden on companies that file mergers, represent the “carrot” part of MOFCOM’s strategy.

We have followed the “simplified merger review process” closely on our blog, and the relevant articles can be found at:

https://www.antitrustlawyerblog.com/mofcom-publishes-long-awaited-interim-rule-on-applicable-standards-for-simple-merger-review-cases

and 

https://www.antitrustlawyerblog.com/mofcom-update-draft-rules-on-simplified-merger-review-procedure

Mark Ye
202-589-1834
mye@dbmlawgroup.com

Attendees reported that MOFCOM showed a much simplified notification form, which could significantly reduce the burden of proof companies have to provide to MOFCOM for “simple” merger reviews.

A total of six sections, or sections 8 – 13 on the current notification form, were omitted in the simplified version. These sections dealt with the supply and demand structure in markets affected by the merger, market entry, horizontal or vertical agreements, possible efficiencies the mergers may create, trade associations in the relevant sector, and information on whether the merger involves bankrupt or distressed companies. According to the draft rules, once a case is accepted for simple review, it will be notified to the public for 10 days should it fall into the simple case notification threshold.

The lawyers who attended the meeting hailed the development as important and positive; in particular, they noted the significant alleviation of the burden of conducting complicated economic analysis by the merging parties. However, they were reserved on the short-term relevance of the form, since MOFCOM did not issue any procedures on who should file, and how to file a merger for simple review. As we have noted in our previous article (linked below), MOFCOM is currently separating simple from normal cases at its internal discretion, and so far MOFCOM have not issued any notifications for simple review.

As a result, lawyers advise that those seeking to file merger review with MOFCOM continue to use the existing rules, lest the MOFCOM reject a simple merger filing and force companies to re-submit using old filing procedures, increasing both the cost and delay of MOFCOM approval.

Link to our previous article on the development of MOFCOM’s Simple Review Procedure:
(https://www.antitrustlawyerblog.com/mofcom-publishes-long-awaited-interim-rule-on-applicable-standards-for-simple-merger-review-cases/)

Mark Ye
202-589-1834
mye@dbmlawgroup.com

During the same time period, the number of merger filings increased by 8%, while the number of accepted cases increased by 12.8%, to 212.

Four of the proposals were conditionally cleared last year:

• Glencore’s acquisition of Xstrata
• Marubeni’s acquisition of Gavilon
• MediaTek’s acquisition of MSTAR
• Bexter’s acquisition of Campbell

According to the director of MOFCOM’s Anti-Monopoly Bureau, Ming Shang, the number of merger and acquisition cases review by MOFCOM has increase rapidly since the inception of the Anti-Monopoly Law in 2008. By the end of 2013, MOFCOM has received 886 merger notification filings, with 797 accepted and 740 closed. Of all the closed cases, MOFCOM approved 717 cases (97%), imposed conditions on 22 cases and blocked only one.

Shang said one task facing MOFCOM would be the formulation of support measures to the “Interim Rule Regarding the Applicable Standards of Simple Merger Review Cases.”

Since the creation of its Anti-Monopoly Law (“AML”), MOFCOM has released about two regulations per year on average. In five years, MOFCOM has established a multi-layered legal framework for the enforcement of AML.

Shang said this year the MOFCOM will also be looking closely at failed merger notifications, and it will also continue to expand international cooperation with international anti-trust agencies, including those of the U.S. and EU.