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April 6, 2018 |
Are Disgorgement’s Days Numbered? Kokesh v. SEC May Foreshadow Curtailment of the FTC’s Authority to Obtain Monetary Relief

Dallas partner M. Sean Royall, Denver partner Richard Cunningham and Dallas associate Ashley Rogers are the authors of “Are Disgorgement’s Days Numbered? Kokesh v. SEC May Foreshadow Curtailment of the FTC’s Authority to Obtain Monetary Relief,” [PDF] published in the American Bar Association’s Antitrust Magazine in Spring 2018.

December 1, 2017 |
Examining actions for damages claims based on the state aid rules – Part 1, 2 & 3

Brussels partner David Wood and of counsel Lena Sandberg are the co-authors of “Examining actions for damages claims based on the state aid rules – Part 1,2 & 3,” originally published as a three-part series in Competition Law Insight, Volume 16 Issues 10-12 (October, November and December 2017) © Informa UK 2017. For more information visit https://www.competitionlawinsight.com/.

March 28, 2018 |
Antitrust in China – 2017 Year in Review

Click for PDF China’s antitrust regulators had a noteworthy year of enforcement of the Anti-Monopoly Law (“AML“) in 2017. Although there were fewer high-profile, record-breaking cases, 2017 saw China’s antitrust regulators expand their scope of enforcement in both merger and non-merger cases and expend significant effort into producing new legislation and guidelines. This client alert highlights the most significant developments from 2017 and what to expect for 2018. 2018 marks the tenth anniversary of the AML and is expected to be another active and notable year for the continued development of antitrust enforcement in China.  Notably, the Chinese State Council announced on March 13, 2018 that it would seek to merge the three existing antitrust regulators into a centralized agency, called the “National Markets Supervision Management Bureau”.  This merger is likely to lead to a better allocation of resources among the agencies, which should increase the level of enforcement. 1.    Legislative/Regulatory Developments Amendments to the Anti-Unfair Competition Law (“AUCL”). On January 1, 2018 amendments to the AUCL came into force.   The amendments streamline China’s antitrust legislation, so that abuse of dominant position, abuse of administrative power by government agencies and bid-rigging are no longer within the scope of the AUCL and are exclusively dealt with under the AML. The provisions establishing a new prohibition on abuses of a relatively superior position, which had been included in earlier consultation drafts, were not included in the final version. NDRC Guidelines on Pricing Behaviours of Trade Associations. On July 20, 2017 the NDRC issued guidelines with the aim of preventing trade associations from distorting competition.[1]  The guidelines address price-related behaviours of trade associations which are at risk of infringing the Price Law or violating the price fixing provisions of the AML.    The guidelines specifically deal with the release of price information and set out factors that are relevant for considering whether this has breached the Price Law or the AML. Revised Draft Measures on the Review of Concentrations of Business Operators. On September 8, 2017, MOFCOM released second draft amendments to its merger review measures for public consultation.[2] These consolidate the existing implementing rules relating to the merger control provisions of the AML. A first draft had been published in July 2017. The second draft amendments contain significant changes in relation to the meaning of control, the treatment of interrelated transactions, the calculation of turnover and the treatment of concentrations which are below the turnover thresholds. The second draft amendments clarify that, when analysing control, the ability to influence decisions relating to budget, strategy and appointments of senior management should be taken into account. Interrelated transactions through which one undertaking obtains control over another will be considered as one concentration.  Turnover calculations will be required to reflect the entities that the undertaking controls at the time of filing, which may lead to a need for amendments to audited financial statements. Lastly, and perhaps most notably, the draft amendments set out a procedure for MOFCOM to review transactions that fall below the thresholds.  It is unclear when the final guidelines will be released and come into force. Potential Amendments to the AML. In 2017, China’s antitrust enforcement agencies and legislators commenced its work to revise the AML. This will result in the first revisions to the AML in its ten-year life.  At this stage, it is unclear when an initial draft will be released for consultation. Second Draft Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights (Draft for Comments). On March 23, 2017, the Anti-Monopoly Commission of the State Council published the second draft of the “Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights” for public comment.[3] The draft guidelines have been jointly produced by China’s three antitrust enforcement agencies and the State Intellectual Property Office. The draft guidelines introduce a case-specific analytical framework to determine whether an undertaking’s exercise of its IP rights is anti-competitive. They address the definition of the relevant market and provide that, in some cases, it may be appropriate to consider the relevant technology market (as opposed to the relevant product market).  They also address specific areas of anti-competitive conduct under the AML and introduce a safe harbour provision in respect of certain agreements that would otherwise fall foul of the AML. The application of the AML to intellectual property rights has been a contentious issue ever since the law first came into force. These draft guidelines do not resolve all potential issues; in particular, they lack a definition of “intellectual property right” and do not provide hypothetical examples which would assist in the NDRC’s application of the analytic framework. Planned merger of the antitrust regulators and the establishment of the new agency. On March 13, 2018, the Chinese State Council announced that as part of a wider restructuring of its government agencies, it will consolidate its three competition agencies – NDRC, SAIC and MOFCOM – into a single, centralized regulator. Called the “National Markets Supervision Management Bureau”, the centralized authority “will undertake unified antitrust enforcement and standardize and safeguard market order” by overseeing mergers, pricing and non-pricing issues.[4] This move will bring to an end the eight year-old tripartite system, which had been criticized for its fragmented enforcement and arbitrary assignment of duties. On March 20, 2018, the National Markets Supervision Management Bureau has been formally established. Zhang Mao will be the head and the deputy party secretary of the new agency.[5] 2.    Merger Control MOFCOM received 400 merger filings in 2017. 30% of the cases were considered as “non-simple cases” and foreign-related M&A cases accounted for about 70% of the total in 2017.[6] MOFCOM has improved its efficiency in 2017. As compared to 2016, MOFCOM’s average official launch time after accepting merger reviews has reduced by 19% to 28 days, and the length of merger reviews by an average of 6.9% to 39 days.[7] Approximately 97% of all “simplified procedure” cases that were filed were concluded during the preliminary review stage.[8] In addition, during the course of 2017, MOFCOM removed remedies in 11 transactions out of a total of 34 cases where it has granted conditional approvals since 2008.[9] The remaining 23 deals remain subject to MOFCOM’s remedies and supervision. Published Decisions. Only those MOFCOM decisions prohibiting a transaction, or imposing or removing remedies are published. While MOFCOM did not prohibit any transaction in 2017, it imposed remedies in seven cases, representing a significant increase from two conditional clearances in 2016.[10] On April 29, 2017, MOFCOM conditionally approved the Dow/DuPont merger, by ordering the divestiture of certain assets and business units of DuPont and Dow. MOFCOM further ordered that, within five years after the completion of the proposed merger, Dow and DuPont must: (1) supply Chinese companies with certain active pharmaceutical ingredients (“API“s) and rice herbicide preparations on a non-exclusive basis and at reasonable prices; (2) for plant hopper control, supply Chinese companies with sulfoxaflor and sulfoxaflor-only solutions available for sale in China on a non-exclusive basis and at reasonable prices; and (3) refrain from requiring Chinese distributors to sell certain APIs and existing preparations for Dow’s sulfoxaflor and rice herbicides in China on an exclusive basis.[11] On August 22, 2017, MOFCOM imposed conditions on the Broadcom/Brocade merger clearance, namely: (i) the establishment of a fire wall to protect confidential information on third-party fibre channel adapter products and switch products; (ii) interoperability between Broadcom’s switch products and third-party adapters; (iii) the continued usage of existing terms for Broadcom’s switch products; and (iv) a commitment not engage in tying or bundling. In early November 2017, MOFCOM conditionally approved two transactions, namely: the proposed merger between Agrium and Potash Corporation, and the proposed acquisition of Hamburg Süd by Maersk Line[12]. In the former, MOFCOM required the merged entity to: (i) ensure the Canadian Potash Export Corporation’s (“Canpotex“) stable and reliable supply of potash fertilizer to China on competitive terms; (ii) promote Canpotex’s supply of potash fertilizer to China, with an export volume equivalent to or higher than the average in the last five years, and subject to negotiated terms and conditions; and (iii) maintain its current sales practices.[13] In the latter case, MOFCOM’s approval was subject to Maersk Line’s commitment not to extend a vessel sharing agreement on the Far East Asia – West Coast of South America trade route, to which Hamburg Süd was a party. Maersk Line also committed to terminate Hamburg Süd’s membership of a vessel sharing agreement on the Far East Asia – East Coast of South America trade route as early as possible under the contract terms. On November 24, 2017, MOFCOM conditionally approved ASE’s proposed acquisition of Siliconware. Despite the parties’ market shares in China not exceeding 30%, the decision imposed a two-year “hold-separate” condition, under which the two companies must remain independent of each other for 24 months, by keeping their financial, HR, pricing, sales, production capacity and procurement matters separate.[14] Furthermore, under the conditions, the holding company must exercise limited shareholders’ rights during this period. In addition, the parties must provide semi-conductor packaging and testing services to clients in a non-discriminatory way and set the prices and transaction conditions in a reasonable manner. Lastly, both parties must not restrict customers’ selection of, or transition to, other providers and submit a biannual report to MOFCOM regarding their compliance with the hold-separate condition. Lastly, on December 28, 2017, MOFCOM conditionally cleared Becton Dickinson’s acquisition of CR Bard, under the condition that the parties divest Becton Dickinson’s soft tissue core needle biopsy device business and research assets. Enforcement Against Non-Notified Transactions. In 2017, MOFCOM published penalty decisions for failure to notify reportable transactions in more than 17 cases. In one of these cases, OCI was fined RMB150,000 (approximately $23,749) for failing to notify MOFCOM of a three-step acquisition prior to taking the first step. OCI had notified MOFCOM only before taking the second step of its acquisition. Similarly, Meinian Onehealth was fined RMB300,000 (approximately $47,499) for failing to notify MOFCOM until the final stage of the acquisition.[15] MOFCOM concluded that the various stages of the transaction were mutually dependent and served the same purpose, namely transferring control of Ciming  to Meinian Onehealth. 3.    Non-Merger Enforcement Until the three enforcement agencies are merged into a National Markets Supervision Management Bureau, both NDRC and SAIC enforce the nonmerger provisions of the AML. Due to the NDRC’s fine of RMB6.088 billion (approximately $963.9 million) on Qualcomm (which was the largest fine imposed on a single company in China), 2015 saw a record-setting level of penalties at a total of RMB7 billion (approximately $1.1 billion) imposed by the NDRC. 3.1    NDRC Enforcement Decisions In 2017, the fines imposed by the NDRC amounted to a total of approximately RMB466 million (approximately $73.8 million).[16] The NDRC continued its aggressive enforcement against the pharmaceutical sector during the course of 2017. In February 2017, the Shandong Provincial Price Bureau imposed a fine of RMB120,000 (approximately $18,999) on Weifang Longshunhe Pharmaceuticals Co., Ltd. (“Longshunhe“) for obstructing its on-site investigation into purported anti-competitive pricing activities.[17] This decision represents the first time that the NDRC has imposed a fine for such conduct. The alleged practices occurred while officials gathered evidence on the premises of Longshunhe on August 10, 2016. It has been reported that while officials tried to gather USBs as evidence, an employee of Longshunhe threw them outside of the premises and a number of other employees interfered with the officials’ efforts to retrieve the USBs.[18] 3.2    SAIC Enforcement Decisions In 2017,  the State Administration for Industry and Commerce (“SAIC“) commenced 18 new investigation.[19] The SAIC announced thirteen antitrust penalty decisions totaling approximately RMB49 million (approximately $7.8 million), involving both anti-competitive agreements and abuse of dominance cases.[20] Although the fines imposed by the SAIC in 2017 fall short of the record RMB720 million (approximately $114 million) of penalties it imposed in 2016, which included sanctions for the leading Swedish food processing and packaging solutions company, Tetra Pak, they are noticeably higher than the fines of RMB7.05 million (approximately $1.1 million) in 2015, and RMB14.5 million (approximately $2.3 million) in 2014.[21] Since 2008, SAIC has investigated a total of 86 cases, including 54 monopolistic agreements and 43 abuse of dominance cases. The most significant enforcement action related to Wuhan Xinxing Jingying Pharmaceuticals Co., Ltd. (“Wuhan Xinxing“). The Hubei Administration for Industry and Commerce (the “Hubei AIC“) imposed a fine of RMB372,321 (approximately $56,053) on the pharmaceutical company for imposing unreasonable conditions and abusing its market dominance. The Hubei AIC determined that Wuhan Xinxing had a dominant position in the Chinese markets for the sale of methyl salicylate API. The Hubei AIC concluded that Wuhan Xinxing abused its dominant position by: (i) distorting the competitive order in the relevant markets for methyl salicylate API and final products; (ii) imposing burdensome requirements on manufacturers of final products (such as the provision of production records, payment of deposits and appointment of Wuhan Xinxing as the exclusive distributor); and (iii) harming consumers’ interests, namely through a price increase from RMB 20,000 (approximately $3,167)/tonne to RMB 60,000 – 150,000 (approximately $9,500 – $23,750)/tonne, which was passed on to end customers.[22] The decision demonstrates the effects-based approach of the Hubei AIC: the authority carefully assessed the effect of the alleged anti-competitive practices before determining that they constituted an abuse of dominance. 4.    Civil Litigation 2017 saw the Guangdong High People’s Court hand down a landmark judgment which upheld the lower court’s decision in favour of Shenzhen Tsinghua Sware Software Hi-tech Co., Ltd. (“Sware“).[23] This represented one of China’s first cases where a private plaintiff has successfully challenged the anti-competitive behavior of a government entity by relying on the AML’s administrative monopoly provisions. Sware brought a case against the Guangdong Education Department, arguing that the authority had abused its administrative power to eliminate or restrict competition in 2014 by appointing one of Sware’s competitors, Glodon Software Company Limited, as the exclusive software provider to manage all of the Guangdong province’s project cost management competitions. The Guangdong High People’s Court rejected the Guangdong Education Department’s argument that the relevant conduct could not be challenged by private parties as well as its arguments based on public interest. The Court found that the Guangdong Education Department had in fact breached the AML by eliminating and restricting competition.    [1]   Guidelines on Pricing Behaviours of Trade Associations (《行业协会价格行为指南》) (released July 20, 2017), available at http://www.ndrc.gov.cn/zcfb/zcfbgg/201707/W020170725555925290946.pdf.    [2]   Notice of MOFCOM to Solicit Public Comments on the “Measures on the Review of Concentrations of Business Operators (Revised Draft for Comments)” (商务部关于《经营者集中审查办法(修订草案征求意见稿)》公开征求意见的通知) (released September 8, 2017), available at  http://tfs.mofcom.gov.cn/article/as/201709/20170902640565.shtml.    [3]   Guidelines on Prohibition of Abuses of Intellectual Property Rights (Draft for Comments) For Public Comment (公开征求《关于滥用知识产权的反垄断指南(征求意见稿)》的意见) (released March 23, 2017), available at http://fldj.mofcom.gov.cn/article/zcfb/201703/20170302539418.shtml.    [4]   Central Commission for Discipline Inspection, “Statement on the Institutional Reform Plan of the State Council – The First Session of the 13th National People’s Congress of the People’s Republic of China on March 13, 2018” (关于国务院机构改革方案的说明 — 2018年3月13日在第十三届全国人民代表大会第一次会议上) (released March 14, 2018), available at: http://www.ccdi.gov.cn/toutiao/201803/t20180314_166243.html.    [5]   Xinhua, “Establishment of the National Markets Supervision Management Bureau – Zhang Mao as the Head, and Bi Jingquan as Deputy Head” (国家市场监督管理总局成立 张茅任局长毕井泉任副局长) (released March 23, 2018), available at: http://www.xinhuanet.com/politics/2018-03/23/c_1122578408.htm.    [6]   MOFCOM press release, “Year- End Overview IX for Commerce Work in 2017 – Implement New Development Concept and Do a Good Job of Anti-monopoly Work in New Era” (January 10, 2018), available at http://english.mofcom.gov.cn/article/newsrelease/significantnews/201801/20180102701041.shtml.    [7]   MLex, “China’s MOFCOM lifts remedies in 11 transactions, 23 still under supervision, official says” (released December 15, 2017), available at http://www.mlex.com/GlobalAntitrust/DetailView.aspx?cid=946260&siteid=192&rdir=1.    [8]   Ibid.    [9]   Ibid. [10]   See footnote 4. [11]   MOFCOM 2017, No. 25 Announcement – Announcement of the Anti-monopoly Review Decision concerning Conditional Approval of Proposed Merger between the Dow Chemical Company and E.I. Du Pont Nemours and Company (released May 3, 2017), available at: http://english.mofcom.gov.cn/article/policyrelease/announcement/201705/20170502577349.shtml. [12]   MOFCOM 2017, No. 77 Announcement – Announcement of the Anti-Monopoly Review Decision concerning Conditional Approval of the Acquisition of Equity of Hamburg Südamerikanische Dampfschifffahrts –Gesellschaft KG by Maersk Line A/S (released November 9, 2017), available at: http://english.mofcom.gov.cn/article/policyrelease/buwei/201711/20171102672906.shtml. [13]   MOFCOM 2017, No. 75 Announcement – Announcement of the Anti-Monopoly Review Decision concerning Conditional Approval of Proposed Merger between Agrium and Potash Corporation (released November 7, 2017), available at: http://english.mofcom.gov.cn/article/policyrelease/announcement/201711/20171102672899.shtml. [14]   MOFCOM 2017, No. 81 Announcement – Announcement of the Anti-Monopoly Review Decision concerning Conditional Approval of Undertakings in the Case of Acquisition of Equity Interests of Siliconware Precision Industries Co., Ltd by Advanced Semiconductor Engineering, Inc. (released November 26, 2017), available at: http://english.mofcom.gov.cn/article/policyrelease/buwei/201711/20171102677556.shtml; also see our article, “MOFCOM Clears Semiconductor Merger with a Two-Year “Hold-Separate” Condition”  (released December 8, 2017), available at: https://www.gibsondunn.com/mofcom-clears-semiconductor-merger-with-a-two-year-hold-separate-condition/. [15]   MOFCOM 2017, No. 206 – Decision of Administrative Penalty: Meinian Onehealth Healthcare (Group) Co., Ltd., Failing to Notify of their Concentration (May 11, 2017), available at: http://fldj.mofcom.gov.cn/article/ztxx/201705/20170502573416.shtml. [16]   MLex, “China’s antitrust agencies bid farewell to slow 2017 as new year of expanded enforcement beckons” (released December 26, 2017), available at https://mlexmarketinsight.com/insights-center/editors-picks/antitrust/asia/chinas-antitrust-agencies-bid-farewell-to-slow-2017-as-new-year-of-expanded-enforcement-beckons. [17]   NDRC, Shandong Provincial Price Bureau Fines Longshunhe RMB120,000 for Obstruction of Antitrust Investigation, available at: http://www.ndrc.gov.cn/gzdt/201702/t20170213_837623.html. [18]   Ibid. [19]   PaRR, “SAIC investigates 18 antitrust cases in 2017 – China Competition Policy & Law Conference” (released January 11, 2018), available at https://app.parr-global.com/intelligence/view/prime-2566745. [20]   See footnote 14. [21]   Ibid. [22]   SAIC 2017, No. 4 Announcement – Antitrust Enforcement Announcement on the Case concerning the Abuse of Dominance Position in the Market by Xinxing Jingying Pharmaceutical Limited Company (竞争执法公告2017年4号 武汉新兴精英医药有限公司滥用市场支配地位案) (released March 9, 2017), available at: http://www.saic.gov.cn/fldyfbzdjz/jzzfgg/201703/t20170309_232297.html. [23]   Guangdong High People’s Court, Civil Administrative Appeal Judgment – Guangdong Education Department and Glodon Software Company Limited (广东省教育厅、广联达软件股份有限公司民政行政管理(民政)二审行政判决书) (released October 23, 2017). The following Gibson Dunn lawyers assisted in the preparation of this client update:  Sébastien Evrard, Rebecca Sambrook, Emily Seo and Kobe Chow. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these issues.  Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Antitrust and Competition Practice Group, or the following lawyers in the firm’s Hong Kong office: Sébastien Evrard (+852 2214 3798, sevrard@gibsondunn.com) Kelly Austin (+852 2214 3788, kaustin@gibsondunn.com) Emily Seo (+852 2214 3725, eseo@gibsondunn.com) Rebecca Sambrook (+852 2214 3729, rsambrook@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

March 1, 2018 |
Co-operating with the Authorities: The US Perspective

Washington, D.C. partner F. Joseph Warin, San Francisco partner Winston Chan, Washington, D.C. associate Pedro Soto and San Francisco associate Kevin Yeh are the authors of “Co-operating with the Authorities: The US Perspective,” [PDF] published in Global Investigations Review’s Practitioner’s Guide to Global Investigations in March 2018.  

February 1, 2018 |
Who’s Who Recognizes Six Gibson Dunn Partners as Thought Leaders in Competition

Who’s Who Legal has recognized six Gibson Dunn partners in its inaugural edition of Thought Leaders – Competition 2018.  Brussels partners Peter Alexiadis and David Wood, London partner Ali Nikpay, Los Angeles partner Daniel Swanson, San Francisco partner Gary Spratling, and Washington, D.C. partner Scott Hammond were selected due to their “experience advising on some of the world’s most significant and cutting-edge legal matters” and “their ability to innovate, inspire, and go above and beyond to deliver for their clients.”  The guide was published February 2018.

January 22, 2018 |
Law360 Names Gibson Dunn Among its Competition 2017 Practice Groups of the Year

Law360 named Gibson Dunn one of its five Competition Practice Groups of the Year [PDF] for 2017. The firm was recognized for scoring important wins for clients in high-stakes antitrust litigation last year, while also helping steer several major mergers through regulatory clearances. The firm’s Competition practice was profiled on January 22, 2018.

January 7, 2018 |
2017 Year-End German Law Update

Click for PDF “May you live in interesting times” goes the old Chinese proverb, which is not meant for a friend but for an enemy. Whoever expressed such wish, interesting times have certainly come to pass for the German economy. Germany is an economic giant focused on the export of its sophisticated manufactured goods to the world’s leading markets, but it is also, in some ways, a military dwarf in a third-tier role in the re-sketching of the new world order. Germany’s globally admired engineering know-how and reputation has been severely damaged by the Volkswagen scandal and is structurally challenged by disruptive technologies and regulatory changes that may be calling for the end of the era of internal combustion engines. The top item on Germany’s foreign policy agenda, the further integration of the EU-member states into a powerful economic and political union, has for some years now given rise to daily crisis management, first caused by the financial crisis and, since last year, by the uncertainties of BREXIT. As if this was not enough, internal politics is still handling the social integration of more than a million refugees that entered the country in 2015, who rightly expect fair and just treatment, education, medical care and a future. It has been best practice to address such manifold issues with a strong and hands-on government, but – unfortunately – this is also currently missing. While the acting government is doing its best to handle the day-to-day tasks, one should not expect any bold move or strategic initiative before a stable, yet to be negotiated parliamentary coalition majority has installed new leadership, likely again under Angela Merkel. All that will drag well into 2018 and will not make life any easier. In stark contrast to the difficult situation the EU is facing in light of BREXIT, the single most impacting piece of regulation that will come into effect in May 2018 will be a European Regulation, the General Data Protection Regulation, which will harmonize data protection law across the EU and start a new era of data protection. Because of its broad scope and its extensive extraterritorial reach, combined with onerous penalties for non-compliance, it will open a new chapter in the way companies world-wide have to treat and process personal data. In all other areas of the law, we observe the continuation of a drive towards ever more transparency, whether through the introduction of new transparency registers disclosing relevant ultimate beneficial owner information or misconduct, through obligatory disclosure regimes (in the field of tax law), or through the automatic exchange under the OECD’s Common Reporting Standard of Information that hitherto fell under the protection of bank secrecy laws. While all these initiatives are well intentioned, they present formidable challenges for companies to comply with the increased complexity and adequately respond to the increased availability and flow of sensitive information. Even more powerful than the regulatory push is the combination of cyber-attacks, investigative journalism, and social media: within a heartbeat, companies or individuals may find themselves exposed on a global scale to severe allegations or fundamental challenges to the way they did or do business. While this trend is not of a legal nature, but a consequence of how we now communicate and whom we trust (or distrust), for those affected it may have immediate legal implications that are often highly complex and difficult to control and deal with. Interesting times usually are good times for lawyers that are determined to solve problems and tackle issues. This is what we love doing and what Gibson Dunn has done best time and again in the last 125 years. We therefore remain optimistic, even in view of the rough waters ahead which we and our clients will have to navigate. We want to thank you for your trust in our services in Germany and your business that we enjoy here and world-wide. We do hope that you will gain valuable insights from our Year-End Alert of legal developments in Germany that will help you to successfully focus and resource your projects and investments in Germany in 2018 and beyond; and we promise to be at your side if you need a partner to help you with sound and hands-on legal advice for your business in and with Germany or to help manage challenging or forward looking issues in the upcoming exciting times. ________________________________ Table of Contents 1.  Corporate, M&A 2.  Tax 3.  Financing and Restructuring 4.  Labor and Employment 5.  Real Estate 6.  Data Protection 7.  Compliance 8.  Antitrust and Merger Control ________________________________ 1. Corporate, M&A 1.1       Corporate, M&A – Transparency Register – New Transparency Obligations on Beneficial Ownership As part of the implementation of the 4th European Money Laundering Directive into German law, Germany has created a new central electronic register for information about the beneficial owners of legal persons organized under German private law as well as registered partnerships incorporated within Germany. Under the restated German Money Laundering Act (Geldwäschegesetz – GWG) which took effect on June 26, 2017, legal persons of German private law (e.g. capital corporations like stock corporations (AG) or limited liability companies (GmbH), registered associations (eingetragener Verein – e.V.), incorporated foundations (rechtsfähige Stiftungen)) and all registered partnerships (e.g. offene Handelsgesellschaft (OHG), Kommanditgesellschaft (KG) and GmbH & Co. KG) are now obliged to “obtain, keep on record and keep up to date” certain information about their “beneficial owners” (namely: first and last name, date of birth, place of residence and details of the beneficial interest) and to file the respective information with the transparency register without undue delay (section 20 (1) GWG). A “beneficial owner“ in this sense is a natural person who directly or indirectly holds or controls more than 25% of the capital or voting rights, or exercises control in a similar way (section 3 (2) GWG). Special rules apply for registered associations, trusts, non-charitable unregulated associations and similar legal arrangements. “Obtaining” the information does not require the entities to carry out extensive investigations, potentially through multi-national and multi-level chains of companies. It suffices to diligently review the information on record and to have in place appropriate internal structures to enable it to make a required filing without undue delay. The duty to keep the information up to date generally requires that the company checks at least on an annual basis whether there have been any changes in their beneficial owners and files an update, if necessary. A filing to the transparency register, however, is not required if the relevant information on the beneficial owner(s) is already contained in certain electronic registers (e.g. the commercial register or the so-called “Unternehmensregister“). This exemption only applies if all relevant data about the beneficial owners is included in the respective documents and the respective registers are still up to date. This essentially requires the obliged entities to diligently review the information available in the respective electronic registers. Furthermore, as a matter of principle, companies listed on a regulated market in the European Union (“EU“) or the European Economic Area (“EEA“) (excluding listings on unregulated markets such as e.g. the Entry Standard of the Frankfurt Stock Exchange) or on a stock exchange with equivalent transparency obligations with respect to voting rights are never required to make any filings to the transparency register. In order to enable the relevant entity to comply with its obligations, shareholders who qualify as beneficial owners or who are directly controlled by a beneficial owner, irrespective of their place of residence, must provide the relevant entity with the relevant information. If a direct shareholder is only indirectly controlled by a beneficial owner, the beneficial owner himself (and not the direct shareholder) must inform the company and provide it with the necessary information (section 20 (3) sentence 4 GWG). Non-compliance with these filing and information obligations may result in administrative fines of up to EUR 100,000. Serious, repeated or systematic breaches may even trigger sanctions up to the higher fine threshold of EUR 1 million or twice the economic benefit of the breach. The information submitted to the transparency register is not generally freely accessible. There are staggered access rights with only certain public authorities, including the Financial Intelligence Unit, law enforcement and tax authorities, having full access rights. Persons subject to know-your-customer (“KYC“) obligations under the Money Laundering Act such as e.g. financial institutions are only given access to the extent the information is required for them to fulfil their own KYC obligations. Other persons or the general public may only gain access if they can demonstrate a legitimate interest in such information. Going forward, every entity subject to the Money Laundering Act should verify whether it is beneficially owned within the aforementioned sense, and, if so, make the respective filing to the transparency register unless the relevant information is already contained in a public electronic register. Furthermore, relevant entities should check (at least) annually whether the information on their beneficial owner(s) as filed with the transparency or other public register is still correct. Also, appropriate internal procedures need to be set up to ensure that any relevant information is received by a person in charge of making filings to the registers. Back to Top 1.2       Corporate, M&A – New CSR Disclosure Obligations for German Public Interest Companies  Effective for fiscal years commencing on or after January 1, 2017, large companies with more than 500 employees are required to include certain non-financial information regarding their management of social and environmental challenges in their annual reporting (“CSR Information“). The new corporate social responsibility reporting rules (“CSR Reporting Rules“) implement the European CSR Directive into German law and are intended to help investors, consumers, policy makers and other stakeholders to evaluate the non-financial performance of large companies and encourage companies to develop a responsible and sustainable approach to business. The CSR Reporting Rules apply to companies with a balance sheet sum in excess of EUR 20 million and an annual turnover in excess of EUR 40 million, whose securities (stock or bonds etc.) are listed on a regulated market in the EU or the EEA as well as large banks and large insurance companies. It is estimated that approximately 550 companies in Germany are covered. Exemptions apply to consolidated subsidiaries if the parent company publishes the CSR Information in the group reporting. The CSR Reporting Rules require the relevant companies to inform on the policies they implemented, the results of such policies and the business risks in relation to (i) environmental protection, (ii) treatment of employees, (iii) social responsibility, (iv) respect for human rights and (v) anti-corruption and bribery. In addition, listed stock corporations are also obliged to inform with regard to diversity on their company boards. If a company has not implemented any such policy, an explicit and justified disclosure is required (“comply or explain”). Companies must further include significant non-financial performance indicators and must also include information on the amounts reported in this respect in their financial statements. The CSR Information can either be included in the annual report or by way of a separate CSR report, to be published on the company’s website or together with its regular annual report with the German Federal Gazette (Bundesanzeiger). The CSR Reporting Rules will certainly increase the administrative burden placed on companies when preparing their annual reporting documentation. It remains to be seen if the new rules will actually meet the expectations of the European legislator and foster and create a more sustainable approach of large companies to doing business in the future . Back to Top 1.3       Corporate, M&A – Corporate Governance Code Refines Standards for Compliance, Transparency and Supervisory Board Composition Since its first publication in 2002, the German Corporate Governance Code (Deutscher Corporate Governance Kodex – DCGK) which contains standards for good and responsible governance for German listed companies, has been revised nearly annually. Even though the DCGK contains only soft law (“comply or explain”) framed in the form of recommendations and suggestions, its regular updates can serve as barometer for trends in the public discussion and sometimes are also a forerunner for more binding legislative measures in the near future. The main changes in the most recent revision of the DCGK in February 2017 deal with aspects of compliance, transparency and supervisory board composition. Compliance The general concept of “compliance” was introduced by the DCGK in 2007. In this respect, the recent revision of the DCGK brought along two noteworthy new aspects. On the one hand, the DCGK now stresses in its preamble that good governance and management does not only require compliance with the law and internal policies but also ethically sound and responsive behavior (the “reputable businessperson concept”). On the other hand, the DCGK now recommends the introduction of a compliance management system (“CMS“). In keeping with the common principle of individually tailored compliance management systems that take into account the company’s specific risk situation, the DCGK now recommends appropriate measures reflecting the company’s risk situation and disclosing the main features of the CMS publically, thus enabling investors to make an informed decision on whether the CMS meets their expectations. It is further expressly recommended to provide employees with the opportunity to blow the whistle and also suggested to open up such whistle-blowing programs to third parties. Supervisory Board In line with the ongoing international trend of focusing on supervisory board composition, the DCGK now also recommends that the supervisory board not only should determine concrete objectives for its composition, but also develop a tailored skills and expertise profile for the entire board and to disclose in the corporate governance report to which extent such benchmarks and targets have been implemented in practice. In addition, the significance of having sufficient independent members on the supervisory board is emphasized by a new recommendation pursuant to which the supervisory board should disclose the appropriate number of independent supervisory board members as well as the members which meet the “independence” criteria in the corporate governance report. In accordance with international best practice, it is now also recommended to provide CVs for candidates for the supervisory board including inter alia relevant knowledge, skills and experience and to publish this information on the company’s website. With regard to supervisory board transparency, the DCGK now also recommends that the chairman of the supervisory board should be prepared, within an appropriate framework, to discuss topics relevant to the supervisory board with investors (please see in this regard our 2016-Year-End Alert, section 1.2). These new 2017 recommendations further highlight the significance of compliance and the role of the supervisory board not only for legislators but also for investors and other stakeholders. As soon as the annual declarations of non-conformity (“comply or explain”) are published over the coming weeks and months, it will be possible to assess how well these new recommendations will be received as well as what responses there will be to the planned additional supervisory board transparency (including, in particular, by family-controlled companies with employee co-determination on the supervisory board). Back to Top 1.4       Corporate, M&A – Employee Co-Determination: No European Extension As set out in greater detail in past alerts (please see in this regard our 2016 Year-End Alert, section 1.3 with further references), the scope and geographic reach of the German co-determination rules (as set out in the German Co-Determination Act; Mitbestimmungsgesetz – MitbestG and in the One-Third-Participation Act; Drittelbeteiligungsgesetz – DrittelbG) were the subject of several ongoing court cases. This discussion has been put to rest in 2017 by a decision of the European Court of Justice (ECJ, C-566/15 – July 18, 2017) that held that German co-determination rules and their restriction to German-based employees as the numeric basis for the relevant employee thresholds and as populace entitled to vote for such co-determined supervisory boards do not infringe against EU law principles of anti-discrimination and freedom of movement. The judgment has been received positively by both German trade unions and corporate players because it preserves the existing German co-determination regime and its traditional, local values against what many commentators would have perceived to be an undue pan-Europeanization of the thresholds and the right to vote for such bodies. In particular, the judgment averts the risk that many supervisory boards would have had to be re-elected based on a pan-European rather than solely German employee base. Back to Top 1.5       Corporate, M&A – Germany Tightens Rules on Foreign Takeovers On July 18, 2017, the amended provisions on foreign direct investments under the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV), expanding and specifying the right of the Federal Ministry for Economic Affairs and Energy (“Ministry“) to review whether the takeover of domestic companies by investors outside the EU or the European Free Trade Area poses a danger to the public order or security of the Federal Republic of Germany came into force. The amendment has the following five main effects which will have a considerable impact on the M&A practice: (i) (non-exclusive) standard categories of companies and industries which are relevant to the public order or security for cross-sector review are introduced, (ii) the stricter sector-specific rules for industries of essential security interest (such as defense and IT-security) are expanded and specified, (iii) there is a reporting requirement for all takeovers within the relevant categories, (iv) the time periods for the review process are extended, and (v) there are stricter and more specific restrictions to prevent possible circumventions. Under the new rules, a special review by the German government is possible in cases of foreign takeovers of domestic companies which operate particularly in the following sectors: (i) critical infrastructure amenities, such as the energy, IT and telecommunications, transport, health, water, food and finance/insurance sectors (to the extent they are very important for the functioning of the community), (ii) sector-specific software for the operation of these critical infrastructure amenities, (iii) telecom carriers and surveillance technology and equipment, (iv) cloud computing services and (v) telematics services and components. The stricter sector-specific rules for foreign takeovers within the defense and IT-security industry are also expanded and now also apply to the manufacturers of defense equipment for reconnaissance and support. Furthermore, the reporting requirement no longer applies only to transactions within the defense and IT-security sectors, but also to all foreign takeovers that fall within the newly introduced cross-sector standard categories described above. The time periods allowed for the Ministry to intervene have been extended throughout. In particular, if an application for a clearance certificate is filed, the clearance certificate will be deemed granted in the absence of a formal review two months following receipt of the application rather than one month as in the past, and the review periods are suspended if the Ministry conducts negotiations with the parties involved. Further, a review may be commenced until five years after the signing of the purchase agreement, which in practice will likely result in an increase of applications for a clearance certificate in order to obtain more transaction certainty. Finally, the new rules provide for stricter and more specific restrictions of possible circumventions by, for example, the use of so-called “front companies” domiciled in the EU or the European Free Trade Area and will trigger the Ministry’s right to review if there are indications that an improper structuring or evasive transaction was at least partly chosen to circumvent the review by the Ministry. Although the scope of the German government’s ability to intervene in M&A processes has been expanded where critical industries are concerned, it is not clear yet to what extent stronger interference or more prohibitions or restrictions will actually occur in practice. And even though the new law provides further guidance, there are still areas of legal uncertainty which can have an impact on valuations and third party financing unless a clearance certificate is obtained. Due to the suspension of the review period in the case of negotiations with the Ministry, the review procedure has, at least in theory, no firm time limit. As a result, the M&A advisory practice has to be prepared for a more time-consuming and onerous process for transactions in the critical industries and may thus be forced to allow for more time between signing and closing. In addition, appropriate termination clauses (and possibly break fees) must be considered for purposes of the share purchase agreement in case a prohibition or restriction of the transaction on the basis of the amended AWV cannot be excluded. Back to Top 2. Tax 2.1       Tax – Unconstitutionality of German Change-of-Control Rules Tax loss carry forwards are an important asset in every M&A transaction. Over the past ten years the German change-of-control rules, which limit the use of losses and loss carry forwards (“Losses“) of a German target company, have undergone fundamental legislative changes. The current change-of-control rules may now face another significant revision as – according to the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) and the Lower Tax Court of Hamburg – the current tax regime of the change-of-control rules violates the constitution. Under the current change-of-control rules, Losses of a German corporation will be forfeited on a pro rata basis if within a period of five years more than 25% but not more than 50% of the shares in the German loss-making corporation are transferred (directly or indirectly) to a new shareholder or group of shareholders with aligned interests. If more than 50% are transferred, Losses will be forfeited in total. There are exceptions to this rule for certain intragroup restructurings, built-in gains and – since 2016 – for business continuations, especially in the venture capital industry. On March 29, 2017, the German Federal Constitutional Court ruled that the pro rata forfeiture of Losses (share transfer of more than 25% but not more than 50%) is not in line with the constitution. The BVerfG held that the provision leads to unequal treatment of companies. The aim of avoiding legal but undesired tax optimizations does not justify the broad and general scope of the provision. The BVerfG has asked the German legislator to amend the change-of-control rules retroactively for the period from January 1, 2008 until December 31, 2015 and bring them in line with the constitution. The legislative changes need to be finalized by December 31, 2018. Furthermore, in another case on August 29, 2017, the Lower Tax Court of Hamburg held that the change-of-control rules, which result in a full forfeiture of Losses after a transfer of more than 50% of the shares in a German corporation, are also incompatible with the constitution. The ruling is based on the 2008 wording of the change-of-control rules but the wording of these rules is similar to that of the current forfeiture rules. In view of the March 2017 ruling of the Federal Constitutional Court on the pro-rata forfeiture, the Lower Tax Court referred this case also to the Federal Constitutional Court to rule on this issue as well. If the Federal Constitutional Court decides in favor of the taxpayer the German tax legislator may completely revise the current tax loss limitation regime and limit its scope to, for example, abusive cases. A decision by the Federal Constitutional Court is expected in the course of 2018. Affected market participants are therefore well advised to closely monitor further developments and consider the impact of potential changes on past and future M&A deals with German entities. Appeals against tax assessments should be filed and stays of proceedings applied for by reference to the case before the Federal Constitutional Court in order to benefit from a potential retroactive amendment of the change-of-control rules. Back to Top 2.2       Tax – New German Tax Disclosure Rules for Tax Planning Schemes In light of the Panama and Paradise leaks, the respective Finance Ministers of the German federal states (Bundesländer) created a working group in November 2017 to establish how the new EU Disclosure Rules for advisers and taxpayers as published by the European Commission (“Commission“) on July 25, 2017 can be implemented into German law. Within the member states of the EU, mandatory tax disclosure rules for tax planning schemes already exist in the UK, Ireland and Portugal. Under the new EU disclosure rules certain tax planners and advisers (intermediaries) or certain tax payers themselves must disclose potentially aggressive cross-border tax planning arrangements to the tax authorities in their jurisdiction. This new requirement is a result of the disclosure rules as proposed by the OECD in its Base Erosion and Profit Shifting (BEPS) Action 12 report, among others. The proposal requires tax authorities in the EU to automatically exchange reported information with other tax authorities in the EU. Pursuant to the Commission’s proposal, an “intermediary” is the party responsible for designing, marketing, organizing or managing the implementation of a tax payer´s reportable cross border arrangement, while also providing that taxpayer with tax related services. If there is no intermediary, the proposal requires the taxpayer to report the arrangement directly. This is, for example, the case if the taxpayer designs and implements an arrangement in-house, if the intermediary in question does not have a presence within the EU or in case the intermediary cannot disclose the information because of legal professional privilege. The proposal does not define what “arrangement” or “aggressive” tax planning means but lists characteristics (so-called “hallmarks“) of cross-border tax planning schemes that would strongly indicate whether tax avoidance or abuse occurred. These hallmarks can either be generic or specific. Generic hallmarks include arrangements where the tax payer has complied with a confidentiality provision not to disclose how the arrangement could secure a tax advantage or where the intermediary is entitled to receive a fee with reference to the amount of the tax advantage derived from the arrangement. Specific hallmarks include arrangements that create hybrid mismatches or involve deductible cross border payments between related parties with a preferential tax regime in the recipient’s tax resident jurisdiction. The information to be exchanged includes the identities of the tax payer and the intermediary, details about the hallmarks, the date of the arrangement, the value of the transactions and the EU member states involved. The implementation of such mandatory disclosure rules on tax planning schemes are heavily discussed in Germany especially among the respective bar associations. Elements of the Commission’s proposal are regarded as a disproportionate burden for intermediaries and taxpayers in relation to the objective. Further clarity is needed to align the proposal with the general principle of legal certainty. Certain elements of the proposal may contravene EU law or even the German constitution. And the interaction with the duty of professional secrecy for lawyers and tax advisors is also still unclear. Major efforts are therefore needed for the German legislator to make such a disclosure regime workable both for taxpayers/intermediaries and the tax administrations. It remains to be seen how the Commission proposal will be implemented into German law in 2018 and how tax structuring will be affected. Back to Top 2.3       Tax – Voluntary Self-Disclosure to German Tax Authorities Becomes More Challenging German tax law allows voluntary self-disclosure to correct or supplement an incorrect or incomplete tax return. Valid self-disclosure precludes criminal liability for tax evasion. Such exemption from criminal prosecution, however, does not apply if the tax evasion has already been “detected” at the time of the self-disclosure and this is at least foreseeable for the tax payer. On May 5, 2017 the German Federal Supreme Court (Bundesgerichtshof – BGH) further specified the criteria for voluntary self-disclosure to secure an exemption from criminal prosecution (BGH, 1 StR 265/16 – May 9, 2017). The BGH ruled that exemption from criminal liability might not apply if a foreign authority had already discovered the non- or underreported tax amounts prior to such self-disclosure. Underlying the decision of the BGH was the case of a German employee of a German defense company, who had received payments from a Greek business partner, but declared neither the received payments nor the resulting income in his tax declaration. The payment was a reward for his contribution in selling weapons to the Greek government. The Greek authorities learned of the payment to the German employee early in 2004 in the course of an anti-bribery investigation and obtained account statements proving the payment through intermediary companies and foreign banks. On January 6, 2014, the German employee filed a voluntary self-disclosure to the German tax authorities declaring the previously omitted payments. The respective German tax authority found that this self-disclosure was not submitted in time to exempt the employee from criminal liability. The issue in this case was by whom and at what moment in time the tax evasion needed to be detected in order to render self-disclosure invalid. The BGH ruled that the voluntary self-disclosure by the German employee was futile due to the fact that the payment at issue had already been detected by the Greek authorities at the time of the self-disclosure. In this context, the BGH emphasized that it was not necessary for the competent tax authorities to have detected the tax evasion, but it was sufficient if any other authority was aware of the tax evasion. The BGH made clear that this included foreign authorities. Thus, a prior detection is relevant if on the basis of a preliminary assessment of the facts a conviction is ultimately likely to occur. This requirement is for example met if it can be expected that the foreign authority that detected the incorrect, incomplete or omitted fact will forward this information to the German tax authorities as in the case before the BGH. In particular, there was an international assistance procedure in place between German and Greek tax authorities and the way the payments were made by using intermediaries and foreign banks made it obvious to the Greek authorities that the relevant amounts had not been declared in Germany. Due to the media coverage of the case, this was also at least foreseeable for the German employee. This case is yet another cautionary tale for tax payers not to underestimate the effects of increased international cooperation of tax authorities. Back to Top 3. Financing and Restructuring 3.1       Financing and Restructuring – Upfront Banking Fees Held Void by German Federal Supreme Court On July 4, 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) handed down two important rulings on the permissibility of upfront banking fees in German law governed loan agreements. According to the BGH, boilerplate clauses imposing handling, processing or arrangement fees on borrowers are void if included in standard terms and conditions (Allgemeine Geschäftsbedingungen). With this case, the court extended its prior rulings on consumer loans to commercial loans. The BGH argued that clauses imposing a bank’s upfront fee on a borrower fundamentally contradict the German statutory law concept that the consideration for granting a loan is the payment of interest. If ancillary pricing arrangements (Preisnebenabreden) pass further costs and expenses on to the borrower, the borrower is unreasonably disadvantaged by the user (Verwender) of standard business terms, unless the additional consideration is agreed for specific services that go beyond the mere granting of the loan and the handling, processing or arrangement thereof. In the cases at hand, the borrowers were thus awarded repayment of the relevant fee. The implications of these rulings for the German loan market are far-reaching. The rulings affect all types of upfront fees for a lender’s services which are routinely passed on to borrowers even though they would otherwise be owed by the lender pursuant to statutory law, a regulatory regime or under a contract or which are conducted in the lender’s own interest. Consequently, this covers fees imposed on the borrower for the risk assessment (Bonitätsprüfung), the valuation of collateral, expenses for the collection of information on the assessment of a borrower’s financing requirements and the like. At this stage, it is not yet certain if, for example, agency fees or syndication fees could also be covered by the decision. There are, however, good arguments to reason that services rendered in connection with a syndication are not otherwise legally or contractually owed by a lender. Upfront fees paid in the past, i.e. in 2015 or later, can be reclaimed by borrowers. The BGH applied the general statutory three year limitation period and argued that the limitation period commenced at the end of 2011 after Higher District Courts (Oberlandesgerichte) had held upfront banking fees void in deviation from previous rulings. As of such time, borrowers should have been aware that a repayment claim of such fees was possible and could have filed a court action even though the enforcement of the repayment was not risk-free. Going forward, it can be expected that lenders will need to modify their approach as a result of the rulings: Choosing a foreign (i.e. non-German) law for a separate fee agreement could be an option for lenders, at least, if either the lender or the borrower is domiciled in the relevant jurisdiction or if there is a certain other connection to the jurisdiction of the chosen law. If the loan is granted by a German lender to a German borrower, the choice of foreign law would also be generally recognized, but under EU conflict of law provisions mandatory domestic law (such as the German law on standard terms) would likely still continue to apply. In response to the ruling, lenders are also currently considering alternative fee structures: Firstly, the relevant costs and expenses underlying such fees are being factored into the calculation of the interest and the borrower is then given the option to choose an upfront fee or a (higher) margin. This may, however, not always turn out to be practical, in particular given that a loan may be refinanced prior to generating the equivalent interest income. Secondly, a fee could be agreed in a separate fee letter which specifically sets out services which go beyond the typical services a bank renders in its own interest. It may, however be difficult to determine services which actually justify a fee. Finally, a lender might charge typical upfront fees following genuine individual negotiations. This requires that the lender not only shows that it was willing to negotiate the amount of the relevant fee, but also that it was generally willing to forego the typical upfront fee entirely. However, if the borrower rejects the upfront fee, the lender still needs to rely on alternative fee arrangements. Further elaboration by the courts and market practice should be closely monitored by lenders and borrowers alike. Back to Top 3.2       Financing and Restructuring – Lingering Uncertainty about Tax Relief for Restructuring Profits Ever since the German Federal Ministry of Finance issued an administrative order in 2003 (“Restructuring Order“) the restructuring of distressed companies has benefited from tax relief for income tax on “restructuring profits”. In Germany, restructuring profits arise as a consequence of debt to equity swaps or debt waivers with regard to the portion of such debt that is unsustainable. Debtors and creditors typically ensured the application of the Restructuring Order by way of a binding advance tax ruling by the tax authorities thus providing for legal certainty in distressed debt scenarios for the parties involved. However, in November 2016, the German Federal Tax Court (Bundesfinanzhof – BFH) put an end to such preferential treatment of restructuring profits. The BFH held the Restructuring Order to be void arguing that the Federal Ministry of Finance had lacked the authority to issue the Restructuring Order. It held that such a measure would need to be adopted by the German legislator instead. The Ministry of Finance and the German restructuring market reacted with concern. As an immediate response to the ruling the Ministry of Finance issued a further order on April 27, 2017 (“Continuation Order”) to the effect that the Restructuring Order continued to apply in all cases in which creditors finally and with binding effect waived claims on or before February 8, 2017 (the date on which the ruling of the Federal Tax Court was published). But the battle continued. In August 2017, the Federal Tax Court also set aside this order for lack of authority by the Federal Ministry of Finance. In the meantime, the German Bundestag and the Bundesrat have passed legislation on tax relief for restructuring profits, but the German tax relief legislation will only enter into force once the European Commission issues a certificate of non-objection confirming the new German statutory tax relief’s compliance with EU restrictions on state aid. This leaves uncertainty as to whether the new law will enter into force in its current wording and when. Also, the new legislation will only cover debt waivers/restructuring profits arising after February 8, 2017 but at this stage does not provide for the treatment of cases before such time. In the absence of the 2003 Restructuring Order and the 2017 Continuation Order, tax relief would only be possible on the basis of equitable relief in exceptional circumstances. It appears obvious that no reliable restructuring concept can be based on potential equitable relief. Thus, it is advisable to look out for alternative structuring options in the interim: Subordination of debt: while this may eliminate an insolvency filing requirement for illiquidity or over indebtedness, the debt continues to exist. This may make it difficult for the debtor to obtain financing in the future. In certain circumstances, a carve-out of the assets together with a sustainable portion of the debt into a new vehicle while leaving behind and subordinating the remainder of the unsustainable portion of the debt, could be a feasible option. As the debt subsists, a silent liquidation of the debtor may not be possible considering the lingering tax burden on restructuring profits. Also, any such carve-out measures by which the debtor is stripped of assets may be challenged in case of a later insolvency of the debtor. A debt hive up without recourse may be a possible option, but a shareholder or its affiliates are not always willing to assume the debt. Also, as tax authorities have not issued any guidelines on the tax treatment of debt hive ups, a binding advance tax ruling from the tax authorities should be obtained before the debt hive up is executed. Still, a debt hive up could be an option if the replacement debtor is domiciled in a jurisdiction which does not impose detrimental tax consequences on the waiver of unsustainable debt. Converting the debt into a hybrid instrument which constitutes debt for German tax purposes and equity from a German GAAP perspective is no longer feasible. Pursuant to a tax decree from May 2016, the tax authorities argue that the creation of a hybrid instrument amounts to a taxable waiver of debt on the basis that tax accounting follows commercial accounting. It follows that irrespective of potential alternative structures which may suit a specific set of facts and circumstances, restructuring transactions in Germany continue to be challenging pending the entry into force of the new tax relief legislation. Back to Top 4. Labor and Employment 4.1       Labor and Employment – Defined Contribution Schemes Now Allowed In an effort to promote company pension schemes and to allow more flexible investments, the German Company Pension Act (Betriebsrentengesetz – BetrAVG) was amended considerably with effect as of January 1, 2018. The most salient novelty is the introduction of a purely defined contribution pension scheme, which had not been permitted in the past. Until now, the employer would always be ultimately liable for any kind of company pension scheme irrespective of the vehicle it was administered through. This is no longer the case with the newly introduced defined contribution scheme. The defined contribution scheme also entails considerable other easements for employers, e.g. pension adjustment obligations or the requirement of insolvency insurance no longer apply. As a consequence, a company offering a defined contribution pension scheme does not have to deal with the intricacies of providing a suitable investment to fulfil its pension promise, but will have met its duty in relation to the pension simply by paying the promised contribution (“pay and forget”). However, the introduction of such defined contribution schemes requires a legal basis either in a collective bargaining agreement (with a trade union) or in a works council agreement, if the union agreement so allows. If these requirements are met though, the new legal situation brings relief not only for employers offering company pension schemes but also for potential investors into German businesses for whom the German-specific defined benefit schemes have always been a great burden. Back to Top 4.2     Labor and Employment – Federal Labor Court Facilitates Compliance Investigations In a decision much acclaimed by the business community, the German Federal Labor Court (Bundesarbeitsgericht – BAG) held that intrusive investigative measures by companies against their employees do not necessarily require a suspicion of a criminal act by an employee; rather, less severe forms of misconduct can also trigger compliance investigations against employees (BAG, 2 AZR 597/16 – June 29, 2017). In the case at hand, an employee had taken sick leave, but during his sick leave proceeded to work for the company owned by his sons who happened to be competing against his current employer. After customers had dropped corresponding hints, the company assigned a detective to ascertain the employee’s violation of his contractual duties and subsequently fired the employee based on the detective’s findings. In the dismissal protection trial, the employee argued that German law only allowed such intrusive investigation measures if criminal acts were suspected. This restriction was, however, rejected by the BAG. This judgment ends a heated debate about the permissibility of internal investigation measures in the case of compliance violations. However, employers should always adhere to a last-resort principle when investigating possible violations. For instance, employees must not be seamlessly monitored at their workplace by way of a so-called “key logger” as the Federal Labor Court held in a different decision (BAG, 2 AZR 681/16 – July 27, 2017). Also, employers should keep in mind a recent ruling of the European Court of Human Rights of September 5, 2017 (ECHR, 61496/08). Accordingly, the workforce should be informed in advance that and how their email correspondence at the workplace can be monitored. Back to Top 5. Real Estate Real Estate – Invalidity of Written Form Remediation Clauses for Long-term Lease Agreements On September 27, 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) ruled that so-called “written form remediation clauses” (Schriftformheilungsklauseln) in lease agreements are invalid because they are incompatible with the mandatory provisions of section 550 of the German Civil Code (Bürgerliches Gesetzbuch – BGB; BGH, XII ZR 114/16 – September 27, 2017). The written form for lease agreements requires that all material agreements concerning the lease, in particular the lease term, identification of the leased premises and the rent amount, must be made in writing. If a lease agreement entered into for a period of more than one year does not comply with this written form requirement, mandatory German law allows either lease party to terminate the lease agreement with the statutory notice period irrespective of whether or not a fixed lease term was agreed upon. The statutory notice period for commercial lease agreements is six months (less three business days) to the end of any calendar quarter. To avoid the risk of termination for non-compliance with the written form requirement, German commercial lease agreements regularly contain a general written form remediation clause. Pursuant to such clause, the parties of the lease agreement undertake to remediate any defect in the written form upon request of one of the parties. While such general written form remediation clauses were upheld in several decisions by various Higher District Courts (Oberlandesgerichte) in the past, the BGH had already rejected the validity of such clauses vis-à-vis the purchasers of real property in 2014. With this new decision, the BGH has gone one step further and denied the validity of general written form remediation clauses altogether. Only in exceptional circumstances, the lease parties are not entitled to invoke the non-compliance with the written form requirement on account of a breach of the good faith principle. Such exceptional circumstances may exist, for example, if the other party faced insolvency if the lease were terminated early as a result of the non-compliance or if the lease parties had agreed in the lease agreement to remediate such specific written form defect. This new decision of the BGH forces the parties to long-term commercial lease agreements to put even greater emphasis on ensuring that their lease agreements comply with the written form requirement at all times because remediation clauses as potential second lines of defense no longer apply. Likewise, the due diligence process of German real estate transactions will have to focus even more on the compliance of lease agreements with the written form requirement. Back to Top 6.  Data Protection Data Protection – Employee Data Protection Under New EU Regulation After a two-year transition period, the EU General Data Protection Regulation (“GDPR“) will enter into force on May 25, 2018. The GDPR has several implications for data protection law covering German employees, which is already very strictly regulated. For example, under the GDPR any handling of personnel data by the employer requires a legal basis. In addition to statutory laws or collective agreements, another possible legal basis is the employee’s explicit written consent. The transfer of personnel data to a country outside of the European Union (“EU“) will have to comply with the requirements prescribed by the GDPR. If the target country has not been regarded as having an adequate data protection level by the EU Commission, additional safeguards will be required to protect the personnel data upon transfer outside of the EU. Otherwise, a data transfer is generally not permitted. The most threatening consequence of the GDPR is the introduction of a new sanctions regime. It now allows fines against companies of up to 4% of the entire group’s revenue worldwide. Consequently, these new features, especially the drastic new sanction regime, call for assessments of, and adequate changes to, existing compliance management systems with regard to data protection issues. Back to Top 7. Compliance 7.1       Compliance – Misalignment of International Sanction Regimes Requires Enhanced Attention to the EU Blocking Regulation and the German Anti-Boycott Provisions The Trump administration has been very active in broadening the scope and reach of the U.S. sanctions regime, most recently with the implementation of “Countering America’s Adversaries Through Sanctions Act (H.R. 3364) (‘CAATSA‘)” on August 2, 2017 and the guidance documents that followed. CAATSA includes significant new law codifying and expanding U.S. sanctions on Russia, North Korea, and Iran. The European Union (“EU“) has not followed suit. More so, the EU and European leaders openly stated their frustration about both a perceived lack of consultation during the process and the substance of the new U.S. sanctions. Specifically, the EU and European leaders are concerned about the fact that CAATSA authorizes secondary sanctions on any person supporting a range of activities. Among these are the development of Russian energy export pipeline projects, certain transactions with the Russian intelligence or defense sectors or investing in or otherwise facilitating privatizations of Russia’s state-owned assets that unjustly benefits Russian officials or their close associates or family members. The U.S. sanctions regime differentiates between primary sanctions that apply to U.S. persons (U.S. citizens, permanent U.S. residents and companies under U.S. jurisdiction) and U.S. origin goods, and secondary sanctions that expand the reach of U.S. sanctions by penalizing non-U.S. persons for their involvement in certain targeted activities. Secondary sanctions can take many forms but generally operate by restricting or threatening to restrict non-U.S. person access to the U.S. market, including its global financial institutions. European, especially export-heavy and internationally operating German companies are thus facing a dilemma. While they have to fear possible U.S. secondary sanctions for not complying with U.S. regulations, potential penalties also loom from European member state authorities when doing so. These problems are grounded in European and German legislation aimed at protecting from and counteracting financial and economic sanctions issued by countries outside of the EU and Germany, unless such sanctions are themselves authorized under relevant UN, European, and German sanctions legislation. On the European level, Council Regulation (EC) No 2271/96 of November, 22 1996 as amended (“EU Blocking Regulation“) is aimed at protecting European persons against the effects of the extra-territorial application of laws, such as certain U.S. sanctions directed at Cuba, Iran and Libya. Furthermore, it also aims to counteract the effects of the extra-territorial application of such sanctions by prohibiting European persons from complying with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from such U.S. sanctions. For companies subject to German jurisdiction, section 7 of the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV), states that “[t]he issuing of a declaration in foreign trade and payments transactions whereby a resident participates in a boycott against another country (boycott declaration) shall be prohibited” to the extent such a declaration would be contradictory to UN, EU and German policy. With the sanctions regime on the one hand and the blocking legislation at EU and German level on the other hand, committing to full compliance with U.S. sanctions whilst falling within German jurisdiction, could be deemed a violation of the AWV.  Violating the AWV can lead to fines by the German authorities and, under German civil law, might render a relevant contractual provision invalid. For companies conducting business transactions on a global scale, the developing non-alignment of U.S. and European / German sanctions requires special attention. Specifically, covenants with respect to compliance with U.S. or other non-EU sanctions should be reviewed and carefully drafted in light of the diverging developments of U.S. and other non-EU sanctions on the one hand and European / German sanctions on the other hand. Back to Top 7.2       Compliance – Restated (Anti-) Money Laundering Act – Significant New Requirements for the Non-Financial Sector and Good Traders On June 26, 2017, the restated German Money Laundering Act (Geldwäschegesetz – GWG), which transposes the 4th European Anti-Money Laundering Directive (Directive (EU 2015/849 of the European Parliament and of the Council) into German law, became effective. While the scope of businesses that are required to conduct anti-money laundering procedures remains generally unchanged, the GWG introduced a number of new requirements, in particular for non-financial businesses, and significantly increases the sanctions for non-compliance with these obligations. The GWG now extends anti money laundering (“AML“) risk management concepts previously known from the financial sector also to non-financial businesses including good traders. As a matter of principle, all obliged businesses are now required to undertake a written risk analysis for their business and have in place internal risk management procedures proportionate to the type and scope of the business and the risks involved in order to effectively mitigate and manage the risks of money laundering and terrorist financing. In case the obliged business is the parent company of a group, a group-wide risk analysis and group-wide risk management procedures are required covering subsidiaries worldwide who also engage in relevant businesses. The risk analysis must be reviewed regularly, updated if required and submitted to the supervisory authority upon request. Internal risk management procedures include, in particular, client due diligence (“know-your customer”), which requires the identification and verification of customers, persons acting on behalf of customers as well as of beneficial owners of the customer (see also section 1.1 above on the Transparency Register). In addition, staff must be monitored for their reliability and trained regularly on methods and types of money laundering and terrorist financing and the applicable legal obligations under the GWG as well as data protection law, and whistle-blowing systems must be implemented. Furthermore, businesses of the financial and insurance sector as well as providers of gambling services must appoint a money laundering officer (“MLO“) at senior management level as well as a deputy, who are responsible for ensuring compliance with AML rules. Other businesses may also be ordered by their supervisory authority to appoint a MLO and a deputy. Good traders including conventional industrial companies are subject to the AML requirements under the GWG, irrespective of the type of goods they are trading in. However, some of the requirements either do not apply or are significantly eased. Good traders must only conduct a risk analysis and have in place internal AML risk management procedures if they accept or make (!) cash payments of EUR 10,000 or more. Furthermore, client due diligence is only required with respect to transactions in which they make or accept cash payments of EUR 10,000 or more, or in case there is a suspicion of money laundering or terrorist financing. Suspicious transactions must be reported to the Financial Intelligence Unit (“FIU“) without undue delay. As a result, also low cash or cash free good traders are well advised to train their staff to enable them to detect suspicious transactions and to have in place appropriate documentation and reporting lines to make sure that suspicious transactions are filed with the FIU. Non-compliance with the GWG obligations can be punished with administrative fines of up to EUR 100,000. Serious, repeated or systematic breaches may even trigger sanctions up to the higher fine threshold of EUR 1 million or twice the economic benefit of the breach. For the financial sector, even higher fines of up to the higher of EUR 5 million or 10% of the total annual turnover are possible. Furthermore, offenders will be published with their names by relevant supervisory authorities (“naming and shaming”). Relevant non-financial businesses are thus well advised to review their existing AML compliance system in order to ensure that the new requirements are covered. For good traders prohibiting cash transactions of EUR 10,000 or more and implementing appropriate safeguards to ensure that the threshold is not circumvented by splitting a transaction into various smaller sums, is a first and vital step. Furthermore, holding companies businesses who mainly acquire and hold participations (e.g. certain private equity companies), must keep in mind that enterprises qualifying as “finance enterprise” within the meaning of section 1 (3) of the German Banking Act (Kreditwesengesetz – KWG) are subject to the GWG with no exemptions. Back to Top  7.3       Compliance – Protection of the Attorney Client Privilege in Germany Remains Unusual The constitutional complaint (Verfassungsbeschwerde) brought by Volkswagen AG’s external legal counsel requesting the return of work product prepared during the internal investigation for Volkswagen AG remains pending before the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG). The Munich public prosecutors had seized these documents in a dawn raid of the law firm’s offices. While the BVerfG has granted injunctive relief (BVerfG, 2 BvR 1287/17, 2 BvR 1583/17 – July 25, 2017) and ordered the authorities, pending a decision on the merits of the case, to refrain from reviewing the seized material, this case is a timely reminder that the concept of the attorney client privilege in Germany is very different to that in common law jurisdictions. In a nutshell: In-house lawyers do not enjoy legal privilege. Material that would otherwise be privileged can be seized on the client’s premises – with the exception of correspondence with and work product from / for criminal defense counsel. The German courts are divided on the question of whether corporate clients can already appoint criminal defense counsel as soon as they are concerned that they may be the target of a future criminal investigation, or only when they have been formally made the subject of such an investigation. Searches and seizures at a law firm, however, are a different matter. A couple of years ago, the German legislator changed the German Code of Criminal Procedure (Strafprozessordnung – StPO) to give attorneys in general, not only criminal defense counsel, more protection against investigative measures (section 160a StPO). Despite this legislation, the first and second instance judges involved in the matter decided in favor of the prosecutors. As noted above, the German Federal Constitutional Court has put an end to this, at least for now. According to the court, the complaints of the external legal counsel and its clients were not “obviously without any merits” and, therefore, needed to be considered in the proceedings on the merits of the case. In order not to moot these proceedings, the court ordered the prosecutors to desist from a review of the seized material, and put it under seal until a full decision on the merits is available. In the interim period, the interest of the external legal counsel and its clients to protect the privilege outweighed the public interest in a speedy criminal investigation. At this stage, it is unclear when and how the court will decide on the merits. Back to Top 7.4       Compliance – The European Public Prosecutor’s Office Will Be Established – Eventually After approximately four years of discussions, 20 out of the 28 EU member states agreed in June 2017 on the creation of a European Public Prosecutor’s Office (“EPPO“). In October, the relevant member states adopted the corresponding regulation (Regulation (EU) 2017/1939 – “Regulation“). The EPPO will be in charge of investigating, prosecuting and bringing to justice the perpetrators of offences against the EU’s financial interests. The EPPO is intended to be a decentralized authority, which operates via and on the basis of European Delegated Prosecutors located in each member state. The central office in Luxembourg will have a European Chief Prosecutor supported by 20 European Prosecutors, as well as technical and investigatory staff. While EU officials praise this Regulation as an “important step in European justice cooperation“, it remains to be seen whether this really is a measure which ensures that “criminals [who] act across borders […] are brought to justice and […] taxpayers’ money is recovered” (U. Reinsalu, Estonian Minister of Justice). It will take at least until 2020 until the EPPO is established, and criminals will certainly not restrict their activities to the territories of those 20 countries which will cooperate under the new authority (being: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Germany, Greece, Finland, France, Italy, Latvia, Lithuania, Luxembourg, Portugal, Romania, Slovenia, Slovakia and Spain). In addition, as the national sovereignty of the EU member states in judicial matters remains completely intact, the EPPO will not truly investigate “on the ground”, but mainly assume a coordinating role. Last but not least, its jurisdiction will be limited to “offences against the EU’s financial interests”, in particular criminal VAT evasion, subsidy fraud and corruption involving EU officials. A strong enforcement, at least prima facie, looks different. To end on a positive note, however: the new body is certainly an improvement on the status quo in which the local prosecutors from 28 member states often lack coordination and team spirit. Back to Top 7.5       Compliance – Court Allows for Reduced Fines in Compliance Defense Case The German Federal Supreme Court (Bundesgerichtshof – BGH) handed down a decision recognizing for the first time that a company’s implementation of a compliance management system (“CMS“) constitutes a mitigating factor for the assessment of fines imposed on such company where violations committed by its employees are imputed to the company (BGH 1 StR 265/16 – May 9, 2017). According to the BGH, not only the implementation of a compliance management system at the time of the detection of the offense should be considered, but the court may also take into account subsequent efforts of a company to enhance its respective internal processes that were found deficient. The BGH held that such remediation measures can be considered as a mitigating factor when assessing the amount of fines if they are deemed suitable to “substantially prevent an equivalent violation in the future.” The BGH’s ruling has finally clarified the highest German court’s views on a long-lasting discussion about whether establishing and maintaining a CMS may limit a company’s liability for legal infringements. The recognition of a company’s efforts to establish, maintain and improve an effective CMS should encourage companies to continue working on their compliance culture, processes and systems. Similarly, management’s efforts to establish, maintain and enhance a CMS, and conduct timely remediation measures, upon becoming aware of deficiencies in the CMS, may become relevant factors when assessing potential civil liability exposure of corporate executives pursuant to section. 43 German Limited Liability Companies Act (Gesetz betreffend Gesellschaften mit beschränkter Haftung – GmbHG) and section 93 (German Stock Companies Act (Aktiengesetz – AktG). Consequently, the implications of this landmark decision are important both for corporations and their senior executives. Back to Top 8.  Antitrust and Merger Control In 2017, the German Federal Cartel Office (Bundeskartellamt – BKartA) examined about 1,300 merger filings, imposed fines in the amount of approximately EUR 60 million on companies for cartel agreements and conducted several infringement proceedings. On June 9, 2017, the ninth amendment to the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) came into force. The most important changes concern the implementation of the European Damages Directive (Directive 2014/104/EU of the European Parliament and of the Council of November, 26 2014), but a new merger control threshold was also introduced into law. Implementation of the European Damages Directive The amendment introduced various procedural facilitations for claimants in civil cartel damage proceedings. There is now a refutable presumption in favor of cartel victims that a cartel caused damage. However, the claimant still has the burden of proof regarding the often difficult to argue fact, if it was actually affected by the cartel and the amount of damages attributable to the infringement. The implemented passing-on defense allows indirect customer claimants to prove that they suffered damages from the cartel – even if not direct customers of the cartel members – because the intermediary was presumably able to pass on the cartel overcharge to his own customers (the claimants). The underlying refutable presumption that overcharges were passed on is not available in the relationship between the cartel member and its direct customer because the passing-on defense must not benefit the cartel members. In deviation from general principles of German civil procedural law, according to which each party has to produce the relevant evidence for the facts it relies on, the GWB amendment has significantly broadened the scope for requesting disclosure of documents. The right to request disclosure from the opposing party now to a certain degree resembles discovery proceedings in Anglo-American jurisdictions and has therefore also been referred to as “discovery light”. However, the documents still need to be identified as precisely as possible and the request must be reasonable, i.e., not place an undue burden on the opposing party. Documents can also be requested from third parties. Leniency applications and settlement documents are not captured by the disclosure provisions. Furthermore, certain exceptions to the principle of joint and several liability of cartelists for damage claims in relation to (i) internal regress against small and medium-sized enterprises, (ii) leniency applicants, and (iii) settlements between cartelists and claimants were implemented. In the latter case, non-settling cartelists may not recover contribution for the remaining claim from settling cartelists. Finally, the regular limitation period for antitrust damages claims has been extended from three to five years. Cartel Enforcement and Corporate Liability Parent companies can now also be held liable for their subsidiary’s anti-competitive conduct under the GWB even if they were not party to the infringement themselves. The crucial factor – comparable to existing European practice – is the exercise of decisive control. Furthermore, legal universal successors and economic successors of the infringer can also be held liable for cartel fines. This prevents companies from escaping cartel fines by restructuring their business. Publicity The Bundeskartellamt has further been assigned the duty to inform the public about decisions on cartel fines by publishing details about such decisions on its webpage. Taking into account recent efforts to establish a competition register for public procurement procedures, companies will face increased public attention for competition law infringements, which may result in infringers being barred from public or private contracting. Whistleblower Hotline Following the example of the Bundeskartellamt and other antitrust authorities, the European Commission (“Commission“) has implemented a whistleblowing mailbox. The IT-based system operated by an external service provider allows anonymous hints to or bilateral exchanges with the Commission – in particular to strengthen its cartel enforcement activities. The hope is that the whistleblower hotline will add to the Commission’s enforcement strengths and will balance out potentially decreasing leniency applications due to companies applying for leniency increasingly facing the risk of private cartel damage litigation once the cartel has been disclosed. Merger Control Thresholds To provide for control over transactions that do not meet the current thresholds but may nevertheless have significant impact on the domestic market (in particular in the digital economy), a “size of transaction test” was implemented; mergers with a purchase price or other consideration in excess of EUR 400 million now require approval by the Bundeskartellamt if at least two parties to the transaction achieve at least EUR 25 million and EUR 5 million in domestic turnover, respectively. Likewise, in Austria a similar threshold was established (EUR 200 million consideration plus a domestic turnover of at least EUR 15 million). The concept of ministerial approval (Ministererlaubnis), i.e., an extra-judicial instrument for the Minister of Economic Affairs to exceptionally approve mergers prohibited by the Bundeskartellamt, has been reformed by accelerating and substantiating the process. In May 2017, the Bundeskartellamt published guidance on remedies in merger control making the assessment of commitments more transparent. Remedies such as the acceptance of conditions (Bedingungen) and obligations (Auflagen) can facilitate clearance of a merger even if the merger actually fulfils the requirements for a prohibition. The English version of the guidance is available at: http://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Leitlinien/Guidance%20on%20Remedies%20in%20Merger%20Control.html; jsessionid=5EA81D6D85D9FD8891765A5EA9C26E68.1_cid378?nn=3600108. Case Law Finally on January 26, 2017, there has been a noteworthy decision by the Higher District Court of Düsseldorf (OLG Düsseldorf, Az. V-4 Kart 4/15 OWI – January 26, 2017; not yet final): The court confirmed a decision of the Bundeskartellamt that had imposed fines on several sweets manufacturers for exchanging competitively sensitive information and even increased the fines. This case demonstrates the different approach taken by courts in calculating cartel fines based on the group turnover instead of revenues achieved in the German market. Back to Top     The following Gibson Dunn lawyers assisted in preparing this client update:  Birgit Friedl, Marcus Geiss, Jutta Otto, Silke Beiter, Peter Decker, Ferdinand Fromholzer, Daniel Gebauer, Kai Gesing, Franziska Gruber, Johanna Hauser, Maximilian Hoffmann, Markus Nauheim, Richard Roeder, Katharina Saulich, Martin Schmid, Sebastian Schoon, Benno Schwarz, Michael Walther, Finn Zeidler, Mark Zimmer and Caroline Ziser Smith. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. The two German offices of Gibson Dunn in Munich and Frankfurt bring together lawyers with extensive knowledge of corporate / M&A, financing, restructuring and bankruptcy, tax, labor, real estate, antitrust, intellectual property law and extensive compliance / white collar crime experience. The German offices are comprised of seasoned lawyers with a breadth of experience who have assisted clients in various industries and in jurisdictions around the world. Our German lawyers work closely with the firm’s practice groups in other jurisdictions to provide cutting-edge legal advice and guidance in the most complex transactions and legal matters. For further information, please contact the Gibson Dunn lawyer with whom you work or any of the following members of the German offices: General Corporate, Corporate Transactions and Capital Markets Lutz Englisch (+49 89 189 33 150), lenglisch@gibsondunn.com) Markus Nauheim (+49 89 189 33 122, mnauheim@gibsondunn.com) Ferdinand Fromholzer (+49 89 189 33 170, ffromholzer@gibsondunn.com) Dirk Oberbracht (+49 69 247 411 510, doberbracht@gibsondunn.com) Wilhelm Reinhardt (+49 69 247 411 520, wreinhardt@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Silke Beiter (+49 89 189 33 170, sbeiter@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Annekatrin Pelster (+49 69 247 411 521, apelster@gibsondunn.com) Finance, Restructuring and Insolvency Sebastian Schoon (+49 89 189 33 160, sschoon@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Tax Hans Martin Schmid (+49 89 189 33 110, mschmid@gibsondunn.com) Labor Law Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Real Estate Peter Decker (+49 89 189 33 115, pdecker@gibsondunn.com) Daniel Gebauer (+ 49 89 189 33 115, dgebauer@gibsondunn.com) Technology Transactions / Intellectual Property / Data Privacy Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Corporate Compliance / White Collar Matters Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Finn Zeidler (+49 69 247 411 530, fzeidler@gibsondunn.com) Antitrust and Merger Control Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071 Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

December 18, 2017 |
The Beginning of the End, or the End of the Beginning? The General Court’s Ruling in the Coty Case

On 6 December 2017, the European Court of Justice (the “ECJ”), delivered a landmark Judgment in the Coty Case,[1] issuing a Preliminary Ruling in response to a series of questions posed by the Higher Regional Court of Frankfurt am Main in Germany.[2] In its Ruling, the ECJ confirmed that the manufacturer of ‘luxury’ goods was permitted to require distributors of its products that formed part of a so-called “selective distribution network” to refrain from selling its luxury goods on certain online marketplaces such as Amazon and eBay, at least insofar as such a requirement was directed towards the support of the luxury nature of its product. While the ECJ Ruling undoubtedly constitutes a major victory for the luxury goods industry, there continue to remain a number of open issues as to enforcement policy which suggest that the precedent leaves as many implementation questions open as it closes doctrinal disputes. The Facts The case arose from a dispute between the German operations of luxury perfume producer Coty and one of the distributors in its selective distribution network, Parfümerie Akzente. Coty sought to prevent Parfümerie Akzente from selling the contract luxury goods over the online platform ‘Amazon.de’. In doing so, Coty did not go so far as to prohibit the sale of such products over the Internet via the retailer’s own online store (‘electronic shop window’), nor did it impose any additional problematic constraints on its ability to sell via the more traditional “bricks and mortar” distribution chain. However, Coty did seek to prohibit sales via third party websites, given its concern that such third party online sales diminished the premium quality otherwise associated with its products and brand by consumers. Issues Before the National Courts When Parfümerie Akzente did not accept the imposition of such a restriction by Coty, it brought a case against the reseller, which it lost at first instance. On appeal, the Frankfurt Higher Regional Court was unsure whether the contractual prohibition was compatible with Article 101(1) of the Treaty of the Functioning of the European Union (‘TFEU’)[3] and the so-called Vertical Block Exemption Regulation (‘VBER’).[4] Article 101(1) TFEU inter alia prohibits horizontal and vertical anti-competitive agreements and concerted practices. While the VBER exempts from the prohibition of Article 101(1) TFEU those vertical agreements between a supplier and its selected resellers where the market shares of those parties fall below 30%, such an exemption does not extend to an agreement which contains a so-called ‘hardcore’ restriction of competition.[5] In hearing the appeal, the Frankfurt Court sought guidance from the ECJ in relation to a number of legal questions which related to the interpretation of EU competition law, including whether: a selective distribution system (such as that operated by Coty) is compatible with Article 101(1) TFEU if its main purpose is to preserve the ‘luxury image’ of high-end goods; an outright platform ban is compatible with Article 101(1) TFEU, irrespective of whether the quality standards of the supplier would be impaired in each particular instance; and a platform ban constitutes a ‘hardcore’ restriction, as defined in the VBER. The ECJ’s Judgment In its Judgment, the ECJ largely followed the Opinion of Advocate General Wahl, who delivered his Opinion in the Case in July 2017.[6] As regards the first question, the ECJ reiterated the principle that a vertical distribution agreement did not violate Article 101(1) TFEU as long as the so-called ‘Metro criteria’ were fulfilled.[7] The satisfaction of these criteria requires that: resellers be entitled to distribute the goods on the basis of objective criteria of a qualitative nature, laid down uniformly for all potential resellers and applied in a non-discriminatory fashion; the characteristics of the product in question necessitate the use of such a network in order to preserve their quality; and, finally, the criteria laid down do not go beyond what is necessary.[8] The ECJ confirmed that the quality of luxury goods was to be determined ‘by the allure and prestigious image which bestow on them an aura of luxury‘ and that the creation and maintenance of this aura was essential insofar as it allowed consumers to distinguish them from similar goods. An impairment of that aura of luxury was also likely to affect the actual quality of the goods in the eyes of the consumer.[9] Establishing a distribution system that ensured that the products were presented in a way that is reflective of their value was thus also considered to contribute to their special aura.[10] Based on this logic, the ECJ concluded that a selective distribution system might be necessary to preserve the contract product’s luxury image, and was hence compatible with Article 101(1) TFEU.[11] Importantly, the ECJ dismissed the argument that the Pierre Fabre Case suggested a different approach. In Pierre Fabre, the Court took the view that a specific clause banning online sales was incompatible with competition law rules, given that it imposed an outright ban on all sales of the manufacturer’s product over the Internet.[12] The situation in Coty was different, as it concerned the fundamental legality of a selective distribution system with regard to luxury products. Moreover, Pierre Fabre concerned cosmetic and body hygiene products, namely, non-luxury products that might not be associated with luxury in the consumer’s mind. The need to preserve the goods’ prestigious image was therefore found to not constitute a legitimate requirement for the purpose of justifying a comprehensive prohibition on sales via the Internet.[13] As regards the second question, the Court held that the clause banning sales over third party platforms had to be measured against the ‘Metro criteria’. The question at issue was whether such a ban was appropriate to preserve the luxury image of the goods in question and whether it went beyond what was necessary in the circumstances to achieve this objective.[14] As regards the appropriateness criterion, the ECJ stated that an obligation to sell only through the retailers’ own online shops provided the supplier with a guarantee that the sold goods would only be associated with the authorized retailer, which would in turn help to preserve the quality and luxury image of those goods.[15] This was true also in light of the fact that, on online market platforms, all kinds of goods were sold.[16] Moreover, only the direct contractual relationship with the retailer enabled the supplier to enforce quality conditions; if goods were to be distributed over third party platforms, there would be no such relationship.[17] Given that distributors were generally still allowed to sell online through their own webshops (which still constituted the main online distribution channel and were operated by over 90% of distributors), the prohibition was also found to be proportional, in that it did not go beyond what was necessary to achieve the object of preserving their luxury image.[18] Accordingly, the ECJ responded to the second question by concluding that the outright platform ban did not violate Article 101(1) TFEU in the circumstances, given the widespread availability of luxury goods through online means. Finally, the ECJ ruled that, with regard to the third question, the ban on sales over a particular platform did not constitute a hardcore restriction.[19]  In this regard, the ECJ Ruling runs counter the 2015 Decision of the German Cartel Office (Bundeskartellamt) in the Asics Case, in which it was found (as later confirmed by the Higher Regional Court of Düsseldorf) that a ban on third party platforms, even if required in the context of a selective distribution network, violated both the terms of Article 101 TFEU and the relevant VBER provisions.[20] Conclusions The ECJ Ruling, which now forms part of the corpus of German law, at first glance appears to sit uncomfortably against the decision-making of the Bundeskartellamt and the Regional Court’s Judgment in Asics. However, the positions can be reconciled because the ratio decidendi of the Coty Case is limited only to ‘luxury products’. It was the particular nature of these products which led the ECJ to rule that a platform ban was justified, given that the ‘luxury aura’ of these products might be otherwise compromised. By comparison, the running shoes in the Asics Case were merely considered to connote a particular level of quality. Thus, it would appear that the Rulings of the ECJ and the German authorities may be reconciled by reference to the distinction drawn between luxury goods and other goods.[21] However, the Advocate General had explicitly held that both luxury and quality products could, subject to the satisfaction of the “Metro criteria”, justify the use of a distribution system which is compatible with Article 101(1) TFEU. The ECJ took a narrower approach, having focused solely on the ‘luxury’ character of Coty’s products as the only determinant of whether the online platform restriction was legal. It hence remains unclear whether the Ruling can also be applied merely to higher ‘quality’ products that fall short of more widely understood notions of ‘luxury’. It seems the ECJ has missed  the opportunity to draw a more explicit line between those products which can benefit from a selective distribution system and those that cannot. One can hardly argue that luxury products, which usually require heavy investments in marketing, skilled staff, breadth of selection of product ranges and décor, do not justify favourable treatment under EU competition rules.[22] Having said that, where does one draw the line between Coty’s luxury cosmetics products and the supposedly unluxurious beauty creams considered in the Pierre Fabre Case (especially given that beauty is supposed to be in the eye of the beholder)? Why not include ‘quality’ products, too, where manufacturers try no less to preserve the reputation and uniform brand image of their products? Is the narrow exception of ‘luxury’ – which is favourable to manufacturers of luxury products but which is opposed by the online platforms that sell a wide range of goods – prone to generating arbitrary distinctions being drawn by national court judges faced with resolving competitive law disputes in the context of selective distribution? Surely, having provided the rationale for why the contract in Coty was not anti-competitive, the question needs to be asked why the category of exemption could not be wide enough to embrace all goods with serious connotation of ‘quality’, which can often be established by reference to a higher price. In a world where increasing market penetration is based on the uniqueness of a product, one would think that the ‘quality’ dimension should in principle justify the same treatment as that of ‘luxury’.[23] By not following the Advocate General’s more expansive view, the ECJ may have succeeded in narrowing the exception to the general rule against sales prohibitions, but may have inadvertently opened up a hornet’s nest of fine distinctions needing to be made by national judges across the EU. Perhaps it is the case that the Judgment, which is notable for its brevity, may be more helpful in theory than in practice for those operating selective distribution systems in the EU.    [1]   C-230/16 Coty Germany [2017] EU:C:2017:603. See here: http://curia.europa.eu/juris/document/document.jsf?text=&docid=197487&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=954093. For the press release, see here: https://curia.europa.eu/jcms/upload/docs/application/pdf/2017-12/cp170132en.pdf.    [2]   According to Article 267 TFEU, national courts can refer abstract questions of European Union law to the European court, which then provides a response. It is then up to the referring national court to interpret and apply to the facts of the particular case the statements of legal principle set forth by the ECJ in its Ruling.    [3]   For the relevant provision, see here: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E101:EN:HTML.    [4]   Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices. See here: http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32010R0330&from=EN.    [5]   “Hardcore” restrictions include provisions such as absolute sales ban based on territory or customer identity, Resale Price Maintenance, and so forth, whose anti-competitive effects are so significant that it would be unlikely for the restrictions to be justified by reference to the exemption criteria listed in Article 101(3) TFEU.    [6]   See Opinion of July 26, 2017, available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=193231&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=654963.    [7]   Case C-230/16, supra at para. 24.    [8]   See Case C‑26/76 Metro SB-Großmärkte [1977] EU:C:1977:167, especially at para. 20.    [9]   Case C-230/16, supra at para. 25.   [10]   Case C-230/16, supra at para. 27.   [11]   Case C-230/16, supra at para. 29.   [12]   See Case C‑439/09 Pierre Fabre [2011] EU:C:2011:649.   [13]   Case C-230/16, supra at paras. 32 and 34.   [14]   Case C-230/16, supra at para 43.   [15]   Case C-230/16, supra at paras 44 and 46.   [16]   Case C-230/16, supra at para 50.   [17]   Case C-230/16, supra at para 48.   [18]   Case C-230/16, supra at paras 52-54.   [19]   Case C-230/16, supra at para 68.   [20]   Decision B2-98/11 Bundeskartellamt v ASICS Deutschland GmbH, Neuss et al. of August 26, 2015. An English language summary can be found here: http://www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/Fallberichte/Kartellverbot/2016/B2-98-11.pdf?__blob=publicationFile&v=2. The full decision can be found in the German language at: http://www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/Entscheidungen/Kartellverbot/2015/B2-98-11.pdf?__blob=publicationFile&v=3. The Judgment of the Higher Regional Court (Case VI-Kart 13/15 (V)) of April 5, 2017 can be found in the German language at: https://www.justiz.nrw.de/nrwe/olgs/duesseldorf/j2017/VI_Kart_13_15_V_Beschluss_20170405.html.   [21]   Notably, the Bundeskartellamt’s Chief, Andreas Mundt, has commented that he expects the ECJ’s Ruling to have only a limited effect on the policy of his Office, as its Decisions have thus far involved brand manufacturers outside the luxury industries. See at http://www.wiwo.de/unternehmen/handel/eugh-urteil-zum-online-handel-luxus-muss-nicht-in-die-schmuddelecke/20677432.html. [22]   In this regard, refer to the Study prepared for the European Commission in 2007, which explains how competition for the supply of luxury cosmetics depends critically on non-price elements which add to the aura of the brand: Global Insight, Study of the European Cosmetics Industry, October 2007. Indeed, the possibility that selective distribution networks are more likely to promote non-price elements of competition explains why they are also less likely to produce price volatility; in this regard see Case 107/82 AEG Telefunken v. Commission [1983] ECR 3151 at paras. 33 ff, and Case T-67/01, JCB v. Commission EU.T.2004.3 at paras. 131-133. [23]   Selective distribution networks are also understood to be appropriate for the distribution of highly technical or industrial quality goods, although the rationale for preventing online sales for such products seems more problematic, given the technical knowledge possessed by the average purchaser of such products, e.g., bath fittings. At the other extreme, the view has been expressed by P. Ibanez Colomo that the exception identified in Coty should extend to all products distributed in such networks. See, e.g., blogpost of 6 December 2017 on Coty Case at: https://chillingcompetition.com/. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these issues.  Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Antitrust and Competition Practice Group, or the authors in the firm’s Brussels office: Peter Alexiadis (+32 2 554 72 00, palexiadis@gibsondunn.com) Jens-Olrik Murach (+32 2 554 72 40, jmurach@gibsondunn.com) Balthasar Strunz (+32 2 554 72 25, bstrunz@gibsondunn.com) Please also feel free to contact any of the following practice group leaders and members: Brussels Peter Alexiadis (+32 2 554 72 00, palexiadis@gibsondunn.com) Jens-Olrik Murach (+32 2 554 72 40, jmurach@gibsondunn.com) David Wood (+32 2 554 72 10, dwood@gibsondunn.com) London Ali Nikpay (+44 20 7071 4273, anikpay@gibsondunn.com) Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com) Charles Falconer (+44 20 7071 4270, cfalconer@gibsondunn.com) Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com) Deirdre Taylor (+44 20 7071 4274, dtaylor2@gibsondunn.com) Munich Michael Walther (+49 89 189 33-180, mwalther@gibsondunn.com) Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Hong Kong Sébastien Evrard (+852 2214 3798, sevrard@gibsondunn.com) Kelly Austin (+852 2214 3788, kaustin@gibsondunn.com) Washington, D.C. Scott D. Hammond (+1 202-887-3684, shammond@gibsondunn.com) F. Joseph Warin (+1 202-887-3609, fwarin@gibsondunn.com) D. Jarrett Arp (+1 202-955-8678, jarp@gibsondunn.com) David P. Burns (+1 202-887-3786, dburns@gibsondunn.com) Cynthia Richman (+1 202-955-8234, crichman@gibsondunn.com) David Debold (+1 202-955-8551, ddebold@gibsondunn.com) New York Randy M. Mastro (+1 212-351-3825, rmastro@gibsondunn.com) Eric J. Stock (+1 212-351-2301, estock@gibsondunn.com) Peter Sullivan (+1 212-351-5370, psullivan@gibsondunn.com) Lawrence J. Zweifach (+1 212-351-2625, lzweifach@gibsondunn.com) Denver Robert C. Blume (+1 303-298-5758, rblume@gibsondunn.com) Dallas Veronica S. Lewis (+1 214-698-3320, vlewis@gibsondunn.com) Brian Robison (+1 214-698-3370, brobison@gibsondunn.com) Robert C. Walters (+1 214-698-3114, rwalters@gibsondunn.com) San Francisco Rachel S. Brass (+1 415-393-8293, rbrass@gibsondunn.com) Trey Nicoud (+1 415-393-8308, tnicoud@gibsondunn.com) Los Angeles Daniel G. Swanson (+1 213-229-7430, dswanson@gibsondunn.com) Samuel G. Liversidge (+1 213-229-7420, sliversidge@gibsondunn.com) Steven E. Sletten (+1 213-229-7505, ssletten@gibsondunn.com) Jay P. Srinivasan (+1 213-229-7296, jsrinivasan@gibsondunn.com) Rod J. Stone (+1 213-229-7256, rstone@gibsondunn.com) Sarretta C. McDonough (+1 213-229-7227, smcdonough@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

December 8, 2017 |
Brexit – Initial deal agreed

The UK Government and the European Commission have issued a joint report setting out the progress of the phase 1 negotiations for the Brexit divorce terms. This report is being put forward with a view to the European Council recommending the commencement of phase 2 negotiations on the future trading relationship between the UK and the EU.  It is issued with the caveat that “nothing is agreed until everything is agreed”. A copy of the text of the UK-EU report is here. The key provisions are: Citizens’ rights: All EU citizens resident in the UK and all UK citizens resident in the EU at the date of Brexit will have ongoing rights to remain together with their immediate families (and future children) subject to various restrictions. After Brexit there will be a simple registration system for EU citizens coming to live and work in the UK. Ireland and Northern Ireland: In the absence of alternative agreed solutions (i.e. a satisfactory free trade deal between the UK and the EU), the UK will maintain full alignment with the rules of the single market and the customs union which support North-South cooperation in Ireland; the UK will also ensure that no new regulatory barriers develop between Northern Ireland and the rest of the UK. Financial settlement: There is no specific figure but the broad principles of the financial settlement have been agreed.  The UK government currently estimates the bill at around £35-£40 billion. Other high-level provisions relate to ongoing EU judicial procedures, the functioning of the EU institutions, agencies and bodies and police and judicial cooperation in criminal matters. The EU has dropped its demand for the divorce settlement to come under the direct jurisdiction of the Court of Justice of the European Union (CJEU).  However, the UK will pay “due regard” to European court rulings on citizens’ rights.  For at least eight years, British courts may also refer questions on EU law to the CJEU. The European Council is expected to approve the joint report on 14/15 December 2017.  This will mean negotiations can move on to details of a transitional period and the final post-Brexit EU-UK relationship. There are reports that the UK is expected to remain within the single market and customs union for a two year transitionary period.  Whilst there is no certainty on what will follow, there is a possibility that the EU and UK concessions on Ireland and Northern Ireland may help the UK to strike a long-term deal on staying in the customs union and single market (the so-called “soft Brexit”). There is still much to be discussed.  “We all know breaking up is hard, but breaking up and building a new relationship is harder,” commented Donald Tusk, European Council president.  “The most difficult challenge is still ahead.” This client alert was prepared by London partners Stephen Gillespie, Charlie Geffen and Nicholas Aleksander and of counsel Anne MacPherson. We have a working group in London (led by Stephen Gillespie, Nicholas Aleksander, Patrick Doris, Charlie Geffen, Ali Nikpay and Selina Sagayam) that has been considering these issues for many months.  Please feel free to contact any member of the working group or any of the other lawyers mentioned below. Ali Nikpay – Antitrust ANikpay@gibsondunn.com Tel: 020 7071 4273 Charlie Geffen – Corporate CGeffen@gibsondunn.com Tel: 020 7071 4225 Stephen Gillespie – Finance SGillespie@gibsondunn.com Tel: 020 7071 4230 Philip Rocher – Litigation PRocher@gibsondunn.com Tel: 020 7071 4202 Jeffrey M. Trinklein – Tax JTrinklein@gibsondunn.com Tel: 020 7071 4224 Nicholas Aleksander – Tax NAleksander@gibsondunn.com Tel: 020 7071 4232 Alan Samson – Real Estate ASamson@gibsondunn.com Tel:  020 7071 4222 Patrick Doris – Litigation; Data Protection PDoris@gibsondunn.com Tel:  020 7071 4276 Penny Madden QC – Arbitration PMadden@gibsondunn.com Tel:  020 7071 4226 James A. Cox – Employment; Data Protection JCox@gibsondunn.com Tel: 020 7071 4250 Gregory A. Campbell – Restructuring GCampbell@gibsondunn.com Tel:  020 7071 4236 Selina Sagayam – Corporate SSagayam@gibsondunn.com Tel:  020 7071 4263 © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 2, 2017 |
Recent Merger Challenge by California Attorney General Heralds Increased State AG Antitrust Enforcement During Trump Administration

State Attorneys General ("State AGs") have the authority to challenge M&A transactions under federal (and most state) antitrust laws but ordinarily do so in partnership with federal antitrust enforcers.  It has historically been the case, however, that State AGs with active antitrust divisions have sought to elevate their antitrust enforcement levels during periods when they have anticipated or perceived a reduction in federal enforcement.  Such an uptick in state antitrust enforcement is now in evidence and the business community should take note of the resulting enhanced risk when planning transactions and developing clearance strategies.  As the Chief of the Antitrust Bureau for the New York Attorney General’s office recently confirmed, New York and other states are preparing to increase their antitrust enforcement activities due to the possibility of reduced enforcement during the Trump Administration.[1]  This development is vividly reflected in the recent successful effort by the California Attorney General to block the acquisition by Valero Partners of two petroleum terminals in Northern California. In June, the California Attorney General—on its own—brought a federal lawsuit seeking to block Valero Partners’ acquisition of the two petroleum terminals in question.[2]  The two terminals are used to store and ship petroleum from refineries in Northern California to an interstate pipeline.  Other terminals provide the same service in the region, but California was concerned that those alternative terminals generally operate at or near capacity, thus allegedly making the two terminals in question the only ones with spare capacity.  Also of concern to California was the fact that the largest customers of the two terminals are competitors of Valero Energy Corporation, which California believed exercised effective control over Valero Partners (a limited partnership). In response to the lawsuit, the merging parties agreed to delay making any changes to the terminals’ operations, staff, or contracts pending a trial on the merits.  Due to that commitment, the Court denied California’s request for a temporary restraining order and preliminary injunction but expressed "serious concerns that the transaction [would] lead to higher prices at the pump."[3]  After the Court’s decision, the parties abandoned the transaction.[4] The Valero matter is not the only concrete sign of aggressive state AG antitrust enforcement during the Trump Administration.  State AGs also filed a petition for certiorari with the Supreme Court in the U.S. v. American Express case despite the Department of Justice’s decision not to seek review of the appellate decision overturning its trial victory.[5]  Other state AG antitrust actions have also been reported in the generic pharmaceuticals[6] and oil and gas[7] sectors.  These more recent examples illustrate that at this time State AGs are also willing and able to bring their own antitrust investigations and lawsuits even in the absence of action from their federal counterparts.  Clearance from federal antitrust agencies may not be the last word over the next several years.    [1]   Shylah Alfonso, David Chiappetta, Cori Gordon Moore, Takeaways From the ABA Antitrust Spring Meeting: Part 1 (April 3, 2017) https://www.law360.com/articles/901278/takeaways-from-the-aba-antitrust-spring-meeting-part-1.    [2]   Order re Motion for Preliminary Injunction, State of California v. Valero Energy Corp., No. C 17-03786 WHA, at 5 (N.D. Cal. August 23, 2017).    [3]   Id. at 6.    [4]   Mattias Gafni, After lawsuit, Valero backs out of planned East Bay oil terminal purchase, The Mercury News, Sept. 18, 2017, http://www.mercurynews.com/2017/09/18/after-lawsuit-valero-backs-out-of-planned-east-bay-refinery-purchase/.    [5]   Iowa, et al. v. American Express Co., et al, case number 16A923 (U.S. June 2, 2017).    [6]   Connecticut et al. v. Aurobindo Pharma USA Inc. et al., case number 3:16-cv-02056 (Conn. D.C. Dec. 16, 2016); see also Transfer Order, In re: Generic Pharmaceuticals Pricing Antitrust Litigation, MDL No. 2724, case number 3:16-cv-02056-VLB.  Twenty additional states joined the complaint later on.     [7]   Ivan Penn, California attorney general subpoenas oil refiners in gas-price probe, (June 30, 2016) http://www.latimes.com/business/la-fi-oil-refineries-subpoenas-20160630-snap-story.html. The following Gibson Dunn lawyers assisted in the preparation of this client update: Daniel Swanson, Joshua Soven, Eric Stock, Sean Royall, Joseph Vardner and Abiel Garcia. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have about these developments. To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work, or any of the following lawyers in the firm’s Antitrust and Competition practice group: Daniel G. Swanson – Los Angeles (+1 213-229-7430, dswanson@gibsondunn.com)M. Sean Royall – Dallas (+1 214-698-3256, sroyall@gibsondunn.com) Eric J. Stock – New York (+1 212-351-2301, estock@gibsondunn.com)Joshua H. Soven – Washington, D.C. (+1 202-955-8503, jsoven@gibsondunn.com) Mylan L. Denerstein – New York (+1 212-351-3850, mdenerstein@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 1, 2017 |
Anuario de Derecho de la Competencia 2017 (The Yearbook of Competition Law 2017)

​Brussels associate Pablo Figueroa is the co-author of Chapter 24 [PDF] of the Yearbook of Competition Law 2017 published by Civitas and Thomson Reuters in 2017, together with Maria Pilar Candedo Arrilaga. The chapter focuses on the application of competition rights in relation to recruitment and the anti-poaching guidelines of the DOJ and the FTC.

October 1, 2017 |
Culpa y Responsabilidad (Guilt and Responsibility)

Brussels associate Pablo Figueroa is the co-author of “Chapter 6 of the Cupla y Reponsabilidad,” [PDF] published by Thomson Reuters (Legal) Limited in 2017, together with Maria Pilar Candedo Arrilaga. The chapter focuses on the European Directive in relation to actions for damages derived from competition infringements in the European Union.

October 1, 2017 |
Anuario de Derecho de la Competencia 2017 (The Yearbook of Competition Law 2017)

Brussels associate Pablo Figueroa is the co-author of Chapter 24 [PDF] of the Yearbook of Competition Law 2017 published by Civitas and Thomson Reuters in 2017, together with Maria Pilar Candedo Arrilaga. The chapter focuses on the application of competition rights in relation to recruitment and the anti-poaching guidelines of the DOJ and the FTC.    

July 12, 2017 |
Will “Kokesh v. SEC” Put a Kink in the Federal Trade Commission’s Disgorgement Hose?

For decades, the Federal Trade Commission ("FTC") has sought and obtained monetary remedies as equitable "disgorgement" of ill-gotten gains.  Disgorgement amounts have exceeded a billion dollars in both antitrust and consumer protection matters and routinely total millions or tens-of-millions of dollars. Gibson Dunn partner Sean Royall and of counsel Rich Cunningham recently published an article titled Will "Kokesh v. SEC" Put a Kink in the Federal Trade Commission’s Disgorgement Hose? in the Washington Legal Foundation’s The Legal Pulse blog.  The article assesses whether the logic of the Supreme Court’s recent decision in Kokesh v. SEC extends to the FTC with the effect that the five-year statute of limitations in 28 U.S.C. § 2462 applies to the FTC’s disgorgement authority.  Gibson Dunn previously summarized the Kokesh decision in a June 5, 2017 Client Alert available here. Will "Kokesh v. SEC" Put a Kink in the Federal Trade Commission’sDisgorgement Hose? (click on link) © 2017, Washington Legal Foundation, The Legal Pulse, July 10, 2017. Reprinted with permission. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the authors of this Client Alert, the Gibson Dunn lawyer with whom you usually work, or one of the leaders of the firm’s Antitrust and Competition or Privacy, Cybersecurity and Consumer Protection Practice Groups: Washington, D.C. Scott D. Hammond (202-887-3684, shammond@gibsondunn.com) D. Jarrett Arp (202-955-8678, jarp@gibsondunn.com) Adam Di Vincenzo (202-887-3704, adivincenzo@gibsondunn.com) Howard S. Hogan ( 202-887-3640, hhogan@gibsondunn.com) Joseph Kattan P.C. (202-955-8239, jkattan@gibsondunn.com) Joshua Lipton (202-955-8226, jlipton@gibsondunn.com) Cynthia Richman (202-955-8234, crichman@gibsondunn.com) Joshua H. Soven (202-955-8503, jsoven@gibsondunn.com) New YorkAlexander H. Southwell (212-351-3981, asouthwell@gibsondunn.com)John A. Herfort (212-351-3832, jherfort@gibsondunn.com)Peter Sullivan (212-351-5370, psullivan@gibsondunn.com)Eric J. Stock (212-351-2301, estock@gibsondunn.com) Los AngelesDaniel G. Swanson (213-229-7430, dswanson@gibsondunn.com) Debra Wong Yang (213-229-7472, dwongyang@gibsondunn.com)Samuel G. Liversidge (213-229-7420, sliversidge@gibsondunn.com) Jay P. Srinivasan (213-229-7296, jsrinivasan@gibsondunn.com) Rod J. Stone (213-229-7256, rstone@gibsondunn.com) Sarretta C. McDonough (213-229-7227, smcdonough@gibsondunn.com)Eric D. Vandevelde (213-229-7186, evandevelde@gibsondunn.com) San FranciscoRachel S. Brass (415-393-8293, rbrass@gibsondunn.com) Trey Nicoud (415-393-8308, tnicoud@gibsondunn.com) DallasM. Sean Royall (214-698-3256, sroyall@gibsondunn.com)Veronica S. Lewis (214-698-3320, vlewis@gibsondunn.com)Brian Robison (214-698-3370, brobison@gibsondunn.com)Robert C. Walters (214-698-3114, rwalters@gibsondunn.com) DenverRichard H. Cunningham (303-298-5752, rhcunningham@gibsondunn.com) Ryan T. Bergsieker (303-298-5774, rbergsieker@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 6, 2017 |
Bidders Beware …? Recent Developments in the UK Public Takeover Market

The last 12 months have seen various strides towards increased protectionism at a national level in the UK and other European member states and also at a European level. In the same period, we have also seen high-profile UK takeovers being derailed, others seemingly close to being derailed through the use of manipulative devices and onerous bidder "post-offer undertakings" being provided. In this alert, we summarise some of these recent developments and get behind the headlines to distil the real implications for bidders considering launching a bid in the UK. In summary, whilst the political mood has been shifting towards shoring up the regulatory weaponry to defend "important" UK companies from foreign takeovers, through a combination of superior competing priorities for the incumbent government and the sheer complexity of this exercise, it is unlikely that we will be seeing any real change in the takeover landscape in the near future. The voluntary grant of "post-offer undertakings" by bidders looking to secure a UK takeover target very much remains the exception rather than the norm and is not a route that the Panel is pushing bidders towards. Finally, bidders looking to secure 100% control of a UK target company can take comfort from the robustness of the English judiciary – as seen from the Dee Valley case, the UK courts have demonstrated that they will, if necessary, deploy stretched jurisprudential analysis to ensure that the framework within which schemes of arrangement operates are not utilised manipulatively against the interests of the wider shareholder body. UK Protectionism: Changing Gears – Which Way Is This Heading? Defence against foreign takeovers: On 11 July 2016, in her campaign speech to become leader of the Conservative Party and Prime Minister of the United Kingdom, Theresa May set the stage for "radical" action to put "people back in control". With plentiful rhetoric and gusto, she outlined the basis for a new industrial strategy which would be capable of defending important sectors from foreign takeovers. ARM Holdings Takeover Welcomed … with Qualifications: One week later, Japan’s Softbank Group Corp (Softbank) announced a $32bn bid for Cambridge-based tech company ARM Holdings plc (ARM). Ostensibly in a volte face move, May and her Chancellor Philip Hammond publicly welcomed the transaction describing it as a "vote of confidence in Britain" and the latter said that it would "turn this great British company into a global phenomenon". A Downing Street spokesperson however explained that future deals would be examined "on a case-by-case basis to ensure they are in the national interest". It was also stressed that the newly appointed PM had spoken personally to the head of Softbank who gave her certain assurances about its plans for the British chip designer (see Post Offer Undertakings below),  affirming the new interventionist approach. A few months later in mid-September, the newly recast Department for Business, Enterprise & Industrial Strategy stated that the government was looking to reform its approach to the ownership and control of critical infrastructure "in line with other major economies" and this initiative would include a review of the public interest regime under the UK’s Enterprise Act 2002. Intervention Off the Agenda?: Two key opportunities to build upon this interventionist approach followed – first, at the Conservative Party conference in October 2016 and again in January 2017, when the Green Paper setting out May’s new Industrial Strategy[1] was published. Both opportunities were eerily silent on this policy. In her October 2016 party conference speech, when describing Britain after Brexit, May once again referenced the Japanese purchase of ARM as the "biggest-ever Asian investment in Britain". The Green Paper outlined various proposals to encourage trade and investment and to unblocking remaining barriers to trade. No reference was made to "public interest tests" or defending "important" sectors. Election Manifesto Plans for Takeover Reform: For those who had breathed a sigh of relief at these developments at the end of last year and early this year, this proved to be a short reprieve. On 17 May 2017, the UK election campaign saw the publication of a Conservative party manifesto with various specific "promises" on takeover strategy and controls. "We will update the rules that govern mergers and takeovers. This will require careful deliberation but we can state now that we will require bidders to be clear about their intentions from the outset of the bid process; that all promises and undertakings made in the course of takeover bids can be legally enforced afterwards; and that the government can require a bid to be paused to allow greater scrutiny.  ….. We shall also take action to protect our critical national infrastructure. We will ensure that foreign ownership of companies controlling important infrastructure does not undermine British security or essential services. We have already strengthened ministerial scrutiny and control in respect of civil nuclear power and will take a similarly robust approach across a limited range of other sectors, such as telecoms, defence and energy.[2]" Analysis: The manifesto promises summarised above raise a number of questions and indeed resulted in a few raised eyebrows. UK takeover rules as set out in the Code on Takeovers and Mergers (Code) (which is promulgated by the Code Committee of the Panel on Takeovers and Mergers (Panel)) already requires bidders to disclose their intentions with regard to the business, employees, strategy and other target company related matters. It is not clear what further clarity from bidders is being sought. With respect to enforcement of promises and undertakings, in 2015, the Panel introduced a dual regime to govern promises and commitments during a bid about post-bid matters, comprising "post-offer intention statements" and "post-offer undertakings", each with their own monitoring and enforcement regime. Again, it is not clear what further changes are proposed and indeed how the Government would seek to implement them given that the rules governing takeovers are set out in the Code as promulgated by the Panel under its statutory powers. More worrying is the impact to the orderly conduct of a bid in line with the timetable set under the Code if a "pausing power" was introduced. One of the key characteristics of the UK system of takeovers is the certainty and speed of regulation enabling parties to know where they stand under the Code and the market to be able to evaluate and assess a bid (or possible bid). Finally, the specific protectionist proposals with respect to critical infrastructure and new scrutiny and "controls" over certain new sectors, has raised further questions. Much of the anxiety around these proposals has abated following the election results. The Government’s ability to push through reform in this area is constrained and its focus/priorities have altered – a new interventionist policy does not seem to be top on the agenda … at least for now. It is our expectation however, supported by the general wave of sentiment across Europe (see European Protectionism below) and expectations of deterioration in the UK economy following withdrawal from the EU, that the calls for intervention will in due course resurface and grow louder. By way of note, the UK’s Enterprise Act 2002 allows for intervention by the Secretary of State in mergers which give rise to specified public interest concerns – national security, media quality plurality and standards, and financial stability. In 2014, the then Business Secretary, Vince Cable called for the introduction of a new public interest test, the parameters around which have proved notoriously difficult to agree and define. The challenges with this approach have caused many to predict that the more likely development in the UK might be the establishment of the UK version of the US agency, CFIUS (Committee on Foreign Investment in the US) which within its national security remit, has taken jurisdiction over and scrutinised a broad range of international transactions from public health to  telecommunications and computers to lighting. The brief here is ‘watch and wait’. European Protectionism – New Blocking Powers? May is not alone amongst European leaders in pushing for greater powers to block foreign takeovers. Earlier this year, Germany, France and Italy called on the European Commission to review whether the bloc should be allowed to intervene in state-backed takeovers of companies in strategic sectors. It was proposed that the EU be given powers to scrutinise "investments in the EU of strategic importance both from an economic and security perspective". Germany had been pushing the protectionist agenda after a spate of Chinese takeovers and France’s president has also been a keen supporter of a new European mechanism to restrict bids on the grounds of national security or strategic importance. The challenge is however with defining the scope or parameters of any such right; other issues also arise including what if any residual powers would be left at national or member state level. Some member states, including The Netherlands (who recently proposed new rules on takeovers controls at a national level[3]), however were not supportive of the EU level proposals. With the technical and political complexities involved in taking forward such a proposal, it was no real surprise that the European Commission’s recommendation in May in a paper on globalisation recommended only further discussion on the topic but no firm action. Most recently, in meetings of the Council of the European Union held in the last two weeks of June, the proposals did not feature on the agenda rather an affirmation of the bloc’s commitment to free trade was specifically called out. With this backdrop, we are unlikely to see any moves to introduce new protectionist powers at an EU level in the medium term. Post-Offer Undertakings – The First … and More … of Its Kind? Following the possible offer for AstraZeneca plc in summer 2014, the Code Committee of the Panel undertook a review of its rules on statements of intention and commitments made by bidders (and target companies) during the course of a bid and the effect of these, in particular whether parties would be held to such statements and related enforcement issues. In January 2015, a new regime was introduced under the Code which draws the distinction between voluntary commitments made by parties to a bid and statements of intention made by such parties relating to actions which they may take or not take following an offer. Under the Code and as noted above, a bidder is required to disclose its intentions with respect to various aspects including but not limited to the target’s business, places of operation and employment matters. The Code does not however require a party to make any formal commitment or undertaking as to what actions it will take or not take following an offer. The new Code rules created a new framework to distinguish between "post-offer undertakings" (i.e. statements relating to any particular course of action that a party to an offer commits to take, or not take, after the end of the offer period and with which it will be required to comply for the period of time specified in the undertaking, unless a qualification or condition set out in the undertaking applies) and "post-offer intention statements" (i.e. statements relating to any particular course of action that a party to an offer intends to take, or not take, after the end of the offer period, which will be required to be accurate statements of the party’s intentions at the time that they are made and based on reasonable grounds). Due to the particularly onerous nature of a post-offer undertaking and the weight and seriousness with which some commitments will be treated by stakeholders and the market, the Panel requires parties wishing to make a "post-offer undertaking" to consult it in advance, to explicitly flag and disclose such commitment as a post-offer undertaking, to specify the time period for which the undertaking is to apply and to set out explicitly any qualifications or conditions to which the undertaking is subject (which in turn are limited under the Code).  In addition, the Panel will monitor compliance with the undertakings which may involve (at its discretion) the appointment of a supervisor (at the cost of the party providing the undertaking). The first major takeover in which the regime has been put to the test has been in the case of Softbank’s bid for ARM  in 2016.  Softbank  made  five distinct post-offer undertakings relating to: (i) different employee groups in ARM[4] (stated to be fulfilled within five years); (ii) the location of the global headquarters of the combined group post-offer; and (iii)  a commitment to procure that the target, ARM also made unqualified post-offer undertakings with respect to employee groups in the same terms as made by Softbank. Do the Softbank undertakings mark the trail for other foreign bidders of UK target companies going forward? We do not believe so. Given the onerous framework which post-offer undertakings would impose upon the giver of such voluntary commitments, the general expectation is that a party will only choose to make a post-offer undertaking in the most exceptional of cases; in most takeover situations parties would limit themselves to statements of intentions, a regime offering greater flexibility and accordingly bearing less onerous consequences in the event of a breach. The exceptional case might for example arise where the target or other party is in an extremely strong position from which to extract such a commitment and/or where other severe external pressures (e.g. political or governmental influence) might be brought to bear on a bidder. To date (almost 2 ½ years following introduction of the new regime), there has only been one major bid situation where a party has made a post-offer undertaking. Share-splitting Devices Used to Derail Schemes of Arrangements Popularity of Schemes of Arrangement & Key Requirements: Court approved schemes of arrangement continue to be the preferred route of effecting the takeover of a UK company[5], over and above the contractual takeover offer[6]. For a scheme of arrangement to be successful, it is first necessary for a majority in number representing at least 75% in value of the members of the company (or each relevant class of members) voting whether in person or by proxy, to vote in favour to approve the scheme at a special Court-convened meeting of shareholders of the Company. Once the two-fold voting thresholds have been achieved, in order to be finally effective, the Court is required to approve or sanction the scheme at a separate sanction hearing. Once these two limbs are satisfied, the bidder will obtain 100% control of the target company.[7] Background Facts: Given the popularity of schemes, practitioners have scrutinised the implications of the recent scheme of arrangement case involving the takeover of Dee Valley Group plc (Dee Valley). In November 2016, Severn Trent Plc (Severn Trent) made a recommended cash offer for Dee Valley to be effected by way of a scheme of arrangement. Seven individuals who were shareholders in Dee Valley opposed the Severn Trent scheme, as a the competing bidder. One of these individuals, after Severn Trent had made the offer, bought more  shares in Dee Valley. He then gifted these to 443 separate individuals, each of whom became the owner of one ordinary share in Dee Valley on 3 and 4 January 2017 (the New Shareholders). The takeover offer was close to being derailed through the actions of  the New Shareholders, who voted against the scheme of arrangement at the relevant members meeting. Through a statutory tool of enquiry and investigation, the majority of the New Shareholders explained in written responses to Dee Valley, that they were voting to protect their own or family’s jobs within Dee Valley. Issues Before the Court: On 12 January 2017, 466 out of the 828 shareholder members present (in person or by proxy) voted against the scheme. However, more than 75% in value supported the scheme. The Chairman of the meeting disallowed the votes of 434 shareholders opposing the scheme who were New Shareholders who had been gifted their shareholdings.  The case went before the High Court in the UK which was called upon to consider whether: (i) the votes of the New Shareholders were valid and what test should be applied to assess this validity; (ii) whether the Chairman was right to disallow the votes; and (iii) even if he was wrong, whether the Court nonetheless had the discretion to sanction the scheme. This is the first share-splitting case to have been heard by the UK courts. Decision & Findings: It is widely considered that the judge in the Dee Valley case reached the right decision albeit arguably through stretched analysis in order to fit the facts and also with a view to pre-empting future attempts by shareholders to utilise the two-fold voting test in schemes to achieve an objectionable outcome. The judge concluded that members voting at a class meeting directed by the court (which a members meeting to approve the scheme is) must exercise their power to vote for the purpose of benefiting the class as a whole, and not merely individual members only. He also concluded that the Chairman of the 12th January meeting had sufficient evidence to conclude that the votes of the new Shareholders were not being cast for the purpose benefiting the class as whole. The judge made it clear however that this was NOT on the basis of the motives of the members as revealed in the written responses received by Dee Valley (because at the relevant time that the Chairman disallowed the votes, he did not know what the individual responses said) but through what the judge considered to be a reasonable or justifiable conclusion from the actions of the New Shareholders in accepting a gift of a single share being "that they could have given no consideration to the interests of the class of members which they had joined" and "the only possible explanation for the conduct … was to further a share manipulation strategy to defeat the scheme by use of the majority in number jurisdictional requirement". Key Points & Implications: This case is a reminder that there are exceptions to the commonly held-perception that a vote in a general meeting of shareholders is an unconstrained right of property which allows the holder to vote free from motives of "what he considers his own individual interests". There are limitations on how members (or creditors) can vote where the meetings are court ordered or directed meetings and not the company’s own (general) meetings.  Whilst the judge was keen to point out that the evidence of motives from the written responses were not determinative in this case, it appears that it did weigh upon the approach taken. As the judge himself noted in his judgement – the "issues that this case raises are of some importance to schemes of arrangement in the future" and he was  keen to find "some mechanism by which the court could prevent legitimate schemes being defeated at the class meeting stage".  The judgement was not appealed – it would have been interesting to see how the higher courts would have approached the issues before the High Court. The facts of this case were unusual (the likelihood of obtaining written evidence of improper motives, particularly from sophisticated shareholders and/or with different motivations, is remote).There is no certainty that share-splitting and/or share acquisitions in small but numerous tranches shortly before a scheme vote cannot be used as an effective device to topple a scheme of arrangement.  Conclusion So, have buyers been put off by the UK and European markets as a result of these developments? The numbers of UK public bids in H1 2017 was up by 30% compared to H1 2016[8]. The UK is still very much "open for business" and indeed is pushing for inward investment and earnestly looking to friends further afield than Europe. According to data published by Thomson Reuters, the first six months of 2017 saw a 33% increase in European M&A, making Europe the second biggest destination globally, just behind the US but leaping past Asia-Pacific for the first time in three years. European deal-making volumes were in excess of $440bn – a surprise for many given the expectation of a sharp slowdown following Britain’s vote to leave Europe and uncertainties (now largely abided) of other political upheavals in the Eurozone. Notwithstanding the protectionist noises and other deal twists, the prospects for European M&A in H2 2017 are looking strong.    [1]   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/586626/building-our-industrial-strategy-green-paper.pdf    [2]   https://s3.eu-west-2.amazonaws.com/manifesto2017/Manifesto2017.pdf    [3]   NB: Under the proposed new rules, corporate boards would be given a one year grace period in which they could reject an unsolicited offer and be protected from attempts by shareholders to call meetings to change management or the board. The proposals were met with pushback by many global institutional shareholders and just two weeks ago, The Netherlands Economic Affairs Minister stated that the Ministry was looking again at the proposals    [4]   NB: Softbank’s undertakings related to double the number of UK employees, increase the number non-UK employees and to maintain a specific proportion of technical employees to non-technical employees    [5]   In 2016, over 60% of UK takeovers were effected by way of  a court-approved scheme of arrangement    [6]   In a contractual takeover offer, the bidder directly extends an offer to all target shareholders to acquire their shareholding in the target company which, if accepted (and the minimum acceptance conditions are reached), results in a binding contractual transaction for the sale of the shares    [7]   NB: By way of contrast, under a contractual takeover offer, whilst the minimum so-called acceptance condition is lower (i.e. 50% + 1 share), in order to obtain full or 100% control, a bidder will need to reach the much higher level of 90% acceptances in order to "squeeze-out" any remaining minorities and obtain full control.    [8]   NB: 26 firms offers were announced during H1 2017 compared to 20 firm offers in H1 2016   If you require further information or guidance on these developments, please contact the author of this note, Selina Sagayam (ssagayam@gibsondunn.com), the Gibson Dunn lawyer with whom you normally work, or the following partners in the firm’s London office.  We would be pleased to assist you.     Mergers and Acquisitions: Charlie Geffen (+44 (0)20 7071 4225, cgeffen@gibsondunn.com) Nigel Stacey (+44 (0)20 7071 4201, nstacey@gibsondunn.com) Jonathan Earle (+44 (0)20 7071 4211, earle@gibsondunn.com) Antitrust and Competition: Ali Nikpay (+44 (0)20 7071 4273, anikpay@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 28, 2017 |
Webcast: Resale Price Maintenance Ten Years After Leegin

​On the ten-year anniversary of the U.S. Supreme Court’s landmark decision addressing resale price maintenance, our experienced antitrust attorneys provide an overview of the current state of the law relating to resale price maintenance in the U.S. and Europe, discuss what has changed – and what has not changed – since Leegin was decided, and offer practical guidance for companies with international distribution operations. View Slides PANELISTS: Sébastien Evrard is a partner in the Hong Kong office of Gibson Dunn and a member of the firm’s global Antitrust and Competition Practice. He handles complex antitrust matters in Asia, including merger control, non-merger investigations, and litigation. His practice also focuses on the antitrust aspects of intellectual property rights. He is a co-author of Anti-Monopoly Law and Practice in China. Joshua Lipton, a partner in the Washington, DC office of Gibson Dunn, authored the briefs in Leegin. His practice covers a broad range of antitrust and competition issues, including civil litigation, mergers and acquisitions, cartel enforcement, and counseling, including providing distribution and pricing advice to clients in a range of industries. Jens-Olrik Murach is a partner in the Brussels and Frankfurt offices of Gibson Dunn and a member of the firm’s global Antitrust and Competition Practice. He advises on complex merger control matters and investigations both before the European Commission and the German Federal Cartel Office. Joshua H. Soven is a partner in the Washington, DC office of Gibson Dunn and a member of the firm’s global Antitrust and Competition Practice Group, focusing on government antitrust investigations, antitrust litigation, and counseling on a wide range of competition issues. Mr. Soven served in high-level positions in the Antitrust Division of the Department of Justice and at the Federal Trade Commission. MCLE CREDIT INFORMATION: This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement.  This course is approved for transitional/non-transitional credit only. Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast.  Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com  to request the MCLE form. Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour. California attorneys may claim “self-study” credit for viewing the archived version of this webcast.  No certificate of attendance is required for California “self-study” credit.

June 22, 2017 |
Lexology Navigator – Cartels

​San Francisco partners Trey Nicoud and Rachel Brass and Washington, D.C. partner Cynthia Richman contributed the USA section of "Lexology Navigator – Cartels," [PDF] published by Lexology on June 22, 2017.

June 20, 2017 |
E-Commerce Distribution Policies under EU Antitrust Scrutiny

This month, the European Commission ("Commission") has started the already expected initiative to open formal investigations into the e-commerce practices of companies active in the European Union. The Commission’s investigations inter alia focus on potentially illegal restrictions imposed by manufacturers of consumer goods on retailers regarding the online distribution of products to consumers or to retailers in other EU Member States, and whether wholesalers are illegally restricted from selling to retailers in other EU Member States. Another focus of the Commission’s investigations lies on the licensing and distribution of merchandising products, namely whether the licensors have restricted their licensees’ ability to sell licensed merchandise cross-border and online. 1.1     Policy Background These recent investigations are a direct follow-up from Commission’s e-commerce sector inquiry, which the authority launched in May 2015 as part of its Digital Market Strategy. In the inquiry, the EU competition watchdog analysed the market practices and potential competition barriers in e-commerce of consumer goods and digital content in the EU by gathering evidence from nearly 1,900 companies operating in e-commerce of consumer goods and digital content and analysed around 8,000 distribution and license contracts.[1] In the final report, the Commission particularly highlighted two market trends: Consumer Goods: Many manufacturers sell products through their own online retail shops, thereby competing increasingly with their distributors. There is also an increased use of selective distribution systems, where the products can only be sold by pre-selected authorised sellers, and an increased use of contractual restrictions to better control product distribution, such as pricing restrictions, marketplace (platform) bans, restrictions on the use of price comparison tools and exclusion of pure online players from distribution networks. Digital content: Almost 60% of digital content providers who participated in the inquiry have contractually agreed with right holders to "geo-block", which might constitute an unlawful vertical territory restriction. When the Commission published the final report on the inquiry on 10 May 2017, Commissioner Margrethe Vestager stated: "Certain practices by companies in e-commerce markets may restrict competition by unduly limiting how products are distributed throughout the EU. Our report confirms that. These restrictions could limit consumer choice and prevent lower prices online. At the same time, we find that there is a need to balance the interests of both online and "brick-and-mortar" retailers. All to the benefit of consumers. Our findings help us to target the enforcement of EU competition rules in e-commerce markets".[2] Given the growing importance of cross-border e-commerce and b2c or b2b digital platforms as well as the potential e-commerce has to disrupt traditional distribution, recently, Member State competition authorities had already made a push to scrutinise vertical market behaviour in e-commerce more closely. A few examples: Asics, regarding distribution on third party online platforms and engagement with price comparison websites (German Bundeskartellamt);[3] Ford, Opel, Peugeot Citroën, regarding limitation of online sales via car portals (German Bundeskartellamt);[4] BMW, regarding restriction of online sales via car portals (UK Competition and Markets Authority);[5] HRS, regarding best price clauses on hotel portals (German Bundeskartellamt);[6] Now, the Commission has opened its own investigations: A formal antitrust investigation into the distribution agreements and practices of a fashion clothing manufacturer and retailer as to whether it illegally restricts retailers from selling cross-border to consumers within the EU Single Market;[7] A formal antitrust investigation against a sports equipment manufacturer, a film studio and a manufacturer of gifts/design company into whether they, in their role as licensors of rights for merchandising products, may have breached EU competition rules by restricting their licensees’ ability to sell licensed merchandise cross-border and online.[8] 1.2     Legal Context Article 101(1) TFEU inter alia prohibits agreements between undertakings and concerted practices which affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market. This provision also catches anticompetitive vertical distribution agreements, such as vertical price fixing (resale price maintenance) or certain territorial or customer restrictions. In that context, it should be recalled the territory of the EU forms a common market, which is understood as a multinational integration process, aiming to remove all barriers to intra-Union trade with a view to the merger of national markets into a single market giving rise to conditions as close as possible to a genuine internal market.[9] A vertical restraint of competition (like a horizontal cartel) can be fined with up to 10% of the total worldwide group’s turnover. However, while in horizontal cartels, authorities usually seek to penalize past conduct, vertical cases may qualify for a decision whereby the company under investigation commits to change its commercial behaviour going forward. Unlike for horizontal cartels, there is no leniency programme available for vertical restraints of competition. Also, companies cannot notify their distribution practice to the Commission or Member State competition authorities for clearance. Moreover, they must self-assess whether their agreements or distribution systems violate Art. 101(1) TFEU or whether they fall under any of the many complex exemptions, e.g., under Vertical Block Exemption Regulation.[10] The results of the e-commerce sector investigation and the additional expertise the Commission and Member State competition authorities will gain from the most recent investigations will likely lead to a series of additional investigations into cross-border (online) distribution and licensing policies. [1]    Commission Press Release of 10 May 2017 (IP/17/1261): http://europa.eu/rapid/press-release_IP-17-1261_en.htm. [2]   Commission Press Release of 10 May 2017 (IP/17/1261): http://europa.eu/rapid/press-release_IP-17-1261_en.htm. The full report can be found at: http://ec.europa.eu/competition/antitrust/sector_inquiry_final_report_en.pdf. [3]   A case summary can be found here: http://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/Kartellverbot/2016/B2-98-11.pdf?__blob=publicationFile&v=2. [4]   A case summary can be found here: http://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/Kartellverbot/2015/B9-28-15.pdf?__blob=publicationFile&v=2. [5]   See press release here: https://www.gov.uk/government/news/bmw-changes-policy-on-car-comparison-sites-following-cma-action. [6]   A case summary can be found here: http://www.bundeskartellamt.de/SharedDocs/Entscheidung/EN/Fallberichte/Kartellverbot/2016/B9-121-13.pdf?__blob=publicationFile&v=2. [7]   See press release here: http://europa.eu/rapid/press-release_IP-17-1549_en.htm. [8]   Commission Press Release of 14 June 2017 (IP/17/1646): http://europa.eu/rapid/press-release_IP-17-1646_en.htm. [9]   Judgment of the Court of the EU of 5 May 1982, in case 15/81 – GASTON SCHUL DOUANE EXPEDITEUR BV, para. 33. [10]   Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices.   The following Gibson Dunn lawyers assisted in preparing this client update: Jens-Olrik Murach and Balthasar Strunz. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these issues.  Please contact the Gibson Dunn lawyer with whom you usually work, or any member of the firm’s Antitrust and Competition Practice Group: BrusselsDavid Wood (+32 2 554 72 10, dwood@gibsondunn.com)Peter Alexiadis (+32 2 554 72 00, palexiadis@gibsondunn.com)Andrés Font Galarza (+32 2 554 72 30, afontgalarza@gibsondunn.com)Jens-Olrik Murach (+32 2 554 72 40, jmurach@gibsondunn.com) London Ali Nikpay (+44 20 7071 4273, anikpay@gibsondunn.com) Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com) Charles Falconer (+44 20 7071 4270, cfalconer@gibsondunn.com) Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com) Deirdre Taylor (+44 20 7071 4274, dtaylor2@gibsondunn.com) Munich Michael Walther (+49 89 189 33-180, mwalther@gibsondunn.com) Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Hong Kong Sébastien Evrard (+852 2214 3798, sevrard@gibsondunn.com) Kelly Austin (+852 2214 3788, kaustin@gibsondunn.com)  Washington, D.C. Scott D. Hammond (+1 202-887-3684, shammond@gibsondunn.com) F. Joseph Warin (+1 202-887-3609, fwarin@gibsondunn.com) D. Jarrett Arp (+1 202-955-8678, jarp@gibsondunn.com) David P. Burns (+1 202-887-3786, dburns@gibsondunn.com) Cynthia Richman (+1 202-955-8234, crichman@gibsondunn.com) David Debold (+1 202-955-8551, ddebold@gibsondunn.com) New York Randy M. Mastro (+1 212-351-3825, rmastro@gibsondunn.com) Eric J. Stock (+1 212-351-2301, estock@gibsondunn.com) Peter Sullivan (+1 212-351-5370, psullivan@gibsondunn.com) Lawrence J. Zweifach (+1 212-351-2625, lzweifach@gibsondunn.com) Denver Robert C. Blume (+1 303-298-5758, rblume@gibsondunn.com) Dallas Veronica S. Lewis (+1 214-698-3320, vlewis@gibsondunn.com) Brian Robison (+1 214-698-3370, brobison@gibsondunn.com) Robert C. Walters (+1 214-698-3114, rwalters@gibsondunn.com) San Francisco Gary R. Spratling (+1 415-393-8222, gspratling@gibsondunn.com) Joel S. Sanders (+1 415-393-8268, jsanders@gibsondunn.com) Trey Nicoud (+1 415-393-8308, tnicoud@gibsondunn.com) Rachel S. Brass (+1 415-393-8293, rbrass@gibsondunn.com) Los Angeles Daniel G. Swanson (+1 213-229-7430, dswanson@gibsondunn.com) Samuel G. Liversidge (+1 213-229-7420, sliversidge@gibsondunn.com) Rod J. Stone (+1 213-229-7256, rstone@gibsondunn.com) Steven E. Sletten (+1 213-229-7505, ssletten@gibsondunn.com) Jay P. Srinivasan (+1 213-229-7296, jsrinivasan@gibsondunn.com) Sarretta C. McDonough (+1 213-229-7227, smcdonough@gibsondunn.com)   © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 9, 2017 |
What the UK Election Result Means for Brexit

Theresa May’s decision to call a snap[1] UK general election has backfired.  The Conservatives emerged as the biggest party in yesterday’s UK general election but lost their overall majority.  Theresa May’s authority and leadership have been greatly weakened, perhaps even fatally damaged, by the shock result.  The Conservatives won 319[2] (down from 331) seats in the House of Commons.  A governing party needs 326 seats out of 650 seats for a majority.   The Labour party gained 29 seats, enjoying their biggest increase in the share of the vote since 1945.  A so-called "progressive alliance" between them and such of the minority parties as have indicated a willingness to work in coalition with Labour would not be sufficient to command an outright majority in the House of Commons. As leader of the largest party in Parliament, Theresa May has been asked by Queen Elizabeth (as head of state) to form a government, relying on Northern Ireland’s Democratic Unionist Party (DUP) for support.  The DUP have won 10 of the 18 Westminster seats contested in Northern Ireland whilst the nationalist  Sinn Féin party have won seven.  Given that Sinn Féin MPs do not take their seats in the House of Commons, the Conservatives and the DUP should together have 326 out of 643 MPs, giving the two parties a combined majority of nine. Theresa May has vowed to offer a "period of stability" and has said she has no plans to resign.  Arlene Foster, leader of the DUP, has confirmed her party’s in principle support for a Conservative-led administration and has committed her party to preserving the Union and bringing stability to the UK.  Detailed discussions of the terms of the Conservative-DUP understanding will begin shortly. When Theresa May called the election on 18 April she had a majority of 17 MPs in the House of Commons and was 20 percentage points ahead of Labour in the polls.  She called the snap election in the hope of increasing her majority and strengthening her hand in Brexit talks with the EU.  But her position has been severely weakened.  Her wafer thin majority (taking DUP support into account) will make it even more difficult for her to make the awkward compromises that will be needed to reach a Brexit deal with the other EU member states. It is possible that her leadership position will be challenged by Conservative MPs once an administration has been formed and the new session of Parliament has been opened.  Many MPs feel that this was an unnecessary election which has drastically weakened the strength of the Conservative government, and they hold Mrs. May and her closest advisers directly responsible for that.  It is possible that a new Conservative Prime Minster could seek a fresh mandate through another general election or that the Conservative-DUP pact could break down such that no government can be formed and a second general election has to be held. Formal Brexit discussions between the UK and the EU are due to begin on 19 June 2017 (which is also the date for the opening of the next UK Parliament).  Delays in forming a new UK government, or even a second general election in 2017, could impede these Brexit talks, squeezing an already tight negotiation timetable.  The UK government triggered Article 50 (the official legal notification to the EU that the UK is going to leave the bloc) on 29 March 2017.  It means that, unless otherwise agreed with the EU member states, the UK will be out of the EU by the end of March 2019 – even if no withdrawal agreement is in place.  It is unclear whether Article 50 can be withdrawn once invoked. It is not clear if the UK will stick to the Brexit policy mapped out before the election when Theresa May said the UK would leave Europe’s single market and customs union.  There is a possibility that the hung parliament could result in the UK stepping back from the "hard Brexit" stance taken by Theresa May and/or in the EU imposing a softer Brexit on the UK by virtue of the UK’s weaker negotiating position.  The provisions in the UK Finance Bill which were deferred because of the election are likely to be enacted later this year. These include the corporate interest restriction rules, the shareholding exemption reforms and the reformed inheritance tax rules for non-UK domiciliaries with interests in UK residential property.    [1]   The Fixed-term Parliaments Act 2011 introduced fixed-term elections to the UK Parliament.  Under the Act, Parliamentary elections must be held every five years, beginning on the first Thursday in May 2015, then 2020 and so on.  However, the Act provides that a snap election can be called when the government loses a confidence motion or when a two-thirds majority of MPs vote in favour.    [2]   Subject to final confirmation following Kensington seat recount.   This client alert was prepared by London partners Stephen Gillespie, Charlie Geffen and Nicholas Aleksander and of counsel Anne MacPherson.   We have a working group in London (led by Stephen Gillespie, Nicholas Aleksander, Patrick Doris, Charlie Geffen, Ali Nikpay and Selina Sagayam) that has been considering these issues for many months.  Please feel free to contact any member of the working group or any of the other lawyers mentioned below. Ali Nikpay – AntitrustANikpay@gibsondunn.comTel: 020 7071 4273 Charlie Geffen – CorporateCGeffen@gibsondunn.comTel: 020 7071 4225 Stephen Gillespie – FinanceSGillespie@gibsondunn.com Tel: 020 7071 4230 Philip Rocher – LitigationPRocher@gibsondunn.com Tel: 020 7071 4202 Jeffrey M. Trinklein – TaxJTrinklein@gibsondunn.com Tel: 020 7071 4224 Nicholas Aleksander – TaxNAleksander@gibsondunn.com Tel: 020 7071 4232 Alan Samson – Real EstateASamson@gibsondunn.comTel:  020 7071 4222 Patrick Doris – Litigation; Data ProtectionPDoris@gibsondunn.comTel:  020 7071 4276 Penny Madden QC – ArbitrationPMadden@gibsondunn.comTel:  020 7071 4226 James A. Cox – Employment; Data ProtectionJCox@gibsondunn.com Tel: 020 7071 4250   Gregory A. Campbell – RestructuringGCampbell@gibsondunn.com Tel:  020 7071 4236 Selina Sagayam – Corporate SSagayam@gibsondunn.comTel:  020 7071 4263 © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

April 21, 2017 |
What the UK’s Snap General Election Means for Brexit

The UK prime minister Theresa May has called a surprise general election for 8 June 2017[1].  Earlier this week she won a House of Commons vote by 522 to 13 to override the standard five year fixed term between general elections. Theresa May is hoping the early election will convert her current working majority of 17 MPs in the House of Commons into a much bigger majority (with some predictions of a "landslide" victory).  The prime minister says this will strengthen her hand in Brexit negotiations and provide the "strong and stable leadership" the country needs. Brexit negotiations will begin in earnest after the elections in France (the first round takes place on 23 April 2017, with the top two candidates facing each other in a second run-off on 7 May 2017) and Germany (24 September 2017).  A Conservative victory will not mean more leverage over the EU.  But a strong majority may free Theresa May from unwanted interference during the talks, from both within and outside her party.  Theresa May became Prime Minister after David Cameron resigned following last June’s Brexit referendum and without winning an election.  If Theresa May can extend her party’s narrow majority in Parliament, she will have consolidated her party’s power and secured an electoral endorsement of her Brexit negotiating stance. The prime minister’s requirement for restrictions on free movement of people may make it difficult for the UK to remain in the EU single market and the customs union.  If Theresa May wins a bigger majority, she will claim a personal mandate for her "hard" Brexit; and pro-EU MPs, particularly in the Conservative party, may be increasingly reluctant to oppose her. The House of Lords will still have a "soft" Brexit majority but, without backing in the House of Commons, it will be much more difficult politically and constitutionally for the unelected second chamber to hold the government to account. A strong electoral win will also make it more difficult for MPs to oppose the concessions that Theresa May will inevitably have to make during the complex negotiations with the EU.  In particular, it should mean Theresa May is less reliant on those in her party demanding a clean break from the EU no matter the economic cost (the so-called "cliff edge" dreaded by banks and businesses). Unless otherwise agreed with the EU member states, the UK will be out of the EU by end March 2019.  A larger majority of Conservative MPs may more readily accept a transitional arrangement at that stage, allowing the UK more time to negotiate whilst accepting interim terms from the EU that are likely to be similar to existing arrangements. Theresa May’s decision to call a snap election means the next UK general election will be delayed from 2020 to 2022. This affords the Conservatives some breathing space.  The Conservatives did not want to be negotiating an exit deal with the EU whilst beginning to campaign for the next general election, with concerns that an impending election might put the prime minister "over a barrel" during the final negotiations.  Labour, the UK’s official opposition party, has said it will lay out its position on Brexit in its election manifesto.  However the party is perceived to be in disarray under Jeremy Corbyn’s leadership and it is widely expected to lose a number of seats to the Conservatives in the June election.  There is a  risk that the election increases support for independence in Scotland.  A majority of voters in Scotland wanted to remain in the EU and Scotland’s First Minister Nicola Sturgeon has said that she will "make Scotland’s voice heard".  Another strong Scottish National party performance in the general election will no doubt boost its demands for a second referendum on Scottish independence. That said, the Conservatives currently hold just one seat in Scotland.  If the Conservatives manage to gain more support in Scotland on a unionist platform, they will argue Nicola Sturgeon should rethink her independence plans. Theresa May’s leadership has until now been dominated by Brexit.  The election campaign will allow Theresa May to set out in full her vision for domestic policy.  David Cameron’s previous spending commitments on health, education and state pensions may be revised.  The election may also give the prime minister a mandate to roll-back some of the constitutional initiatives introduced in the Tony Blair administration, including the incorporation of the European Convention on Human Rights into UK domestic law and the introduction of the Freedom of Information Act in 2000.    [1]   UK Parliament – MPs approve an early general election This client alert was prepared by London partners Stephen Gillespie, Charlie Geffen and Nicholas Aleksander and of counsel Anne MacPherson.   We have a working group in London (led by Stephen Gillespie, Nicholas Aleksander, Patrick Doris, Charlie Geffen, Ali Nikpay and Selina Sagayam) that has been considering these issues for many months.  Please feel free to contact any member of the working group or any of the other lawyers mentioned below. Ali Nikpay – AntitrustANikpay@gibsondunn.comTel: 020 7071 4273 Charlie Geffen – CorporateCGeffen@gibsondunn.comTel: 020 7071 4225 Stephen Gillespie – FinanceSGillespie@gibsondunn.com Tel: 020 7071 4230 Philip Rocher – LitigationPRocher@gibsondunn.com Tel: 020 7071 4202 Jeffrey M. Trinklein – TaxJTrinklein@gibsondunn.com Tel: 020 7071 4224 Nicholas Aleksander – TaxNAleksander@gibsondunn.com Tel: 020 7071 4232 Alan Samson – Real EstateASamson@gibsondunn.comTel:  020 7071 4222 Patrick Doris – Litigation; Data ProtectionPDoris@gibsondunn.comTel:  020 7071 4276 Penny Madden QC – ArbitrationPMadden@gibsondunn.comTel:  020 7071 4226 James A. Cox – Employment; Data ProtectionJCox@gibsondunn.com Tel: 020 7071 4250   Gregory A. Campbell – RestructuringGCampbell@gibsondunn.com Tel:  020 7071 4236 Selina Sagayam – Corporate SSagayam@gibsondunn.comTel:  020 7071 4263 © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.