Cadwalader, Wickersham & Taft LLP www.cadwalader.com

New EU Competition Commissioner:

Webinar

Alec Burnside, Charles F. (Rick) Rule, Rocky Lee

15 September 2014 Panelists

Alec J. Burnside Charles F. (Rick) Rule Rocky T. Lee

Partner – Brussels Partner – Washington, D.C. Partner – Beijing, Hong Kong +32 (0)2 891 81 81 +1 202 862 2420 +86 (10) 6599 7288 (China) [email protected] [email protected] +852 2946 1188 (Hong Kong) [email protected]

Cadwalader, Wickersham & Taft LLP 2 The EU institutions

Source: University of Portsmouth

Cadwalader, Wickersham & Taft LLP 3 Key appointments

Jean-Claude Juncker President of the (Luxembourg)

Donald Tusk President of the European Council ()

Martin Schulz President of the (Germany)

Federica Mogherini High Representative for Foreign Affairs Vice-President of the Commission (Italy)

Cadwalader, Wickersham & Taft LLP 4 The European Commission: College of Commissioners 2014-2019

Source: European Commission

Cadwalader, Wickersham & Taft LLP 5 Vice-Presidents

Frans Timmermans Better Regulation, Inter-Institutional Relations, Budget & Human Resources the Rule of Law and the () Charter of Fundamental Rights (Netherlands)

Alenka Bratušek Energy Union Euro & Social Dialogue (Slovenia) ()

Jyrki Katainen Jobs, Growth, Investment Digital Single Market and Competitiveness () (Finland)

Cadwalader, Wickersham & Taft LLP 6 Key Commissioners

Margrethe Vestager Cecilia Malmström Competition Trade () (Sweden)

Jonathan Hill Elżbieta Bieńkowska Financial Stability, Internal Market, Industry, Financial Services and Entrepreneurship and SMEs Capital Markets Union (Poland) (United Kingdom)

Pierre Moscovici Günther Oettinger Economic and Financial Affairs, Digital Economy & Society Taxation and Customs (Germany) (France)

Cadwalader, Wickersham & Taft LLP 7 New Competition Commissioner – Margrethe Vestager

• Until nomination, Denmark’s Deputy Prime Minister & Minister for Economic and Interior Affairs (2011-14)

• Born 13 April 1968; married with three children

• Education

 Masters in from the University of (1993)

• Career at the

 Stagiaire in the European Parliament, Social (1991)

 Headed Ecofin Council during Denmark’s presidency (2012); Brokered deal on bank losses and capital requirements

• Political career in Denmark .com/margrethevestager  Minister of Education and Ecclesiastic Affairs (1998-2001) @vestager  Member of the Danish Social Liberal Party Chairwoman (2007-2011) and Party Leader (2011-14)

• No prior involvement in the competition field

 Business exposure: Board of ID Sparinvest (1996-1998) and Royal (2004-2007)

 Head of Agency for Financial Management and Administrative Affairs

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Vestager’s Chef de Cabinet (Chief of Staff) – Ditte Juul Jørgensen

• Previously at DG Trade, Head of Unit for Trade and Sustainable Development (2007-2014)

• 13 years of trade policy experience

 Worked on WTO issues (1995-2002)

 EC Delegation to the , head of the economic section (2002-2006)

• Education

 Graduate in law from the

 Post-graduate law degree from the College of Europe

Cadwalader, Wickersham & Taft LLP 9 Juncker’s mission letter to Vestager

• The Competition Commissioner shall closely liaise with and contribute to the work of three Vice-Presidents:

 Jobs, Growth, Investment & Competitiveness

 Digital Single Market

 Energy Union

• Juncker would like Vestager to focus on:

 using competition policy tools to contribute to areas such as “the digital single market, energy policy, financial services, industrial policy and the fight against tax evasion”

 “developing an economic as well as a legal approach to the assessment of competition issues”

 “pursuing an effective enforcement” in all areas of competition law

 “maintaining and strengthening the Commission’s reputation world-wide and promoting international cooperation”

Source: European Commission

Cadwalader, Wickersham & Taft LLP 10 Role of the Vice-Presidents

• Vice-Presidents will have the power to block any legislative proposals by Commissioners working under them.

• Competition Commissioner decides many cases under the power of “habilitation” without the need to refer to other Commissioners.

• So what will be the Vice-Presidents’ role in individual competition cases?

Cadwalader, Wickersham & Taft LLP 11 Project team: A new boost for jobs, growth and investment

Source: European Commission

Cadwalader, Wickersham & Taft LLP 12 Project team: A connected digital single market

Source: European Commission

Cadwalader, Wickersham & Taft LLP 13 Project team: A resilient energy union with a forward- looking climate change policy

Source: European Commission

Cadwalader, Wickersham & Taft LLP 14 Joaquín Almunia and Alexander Italianer remain pro tem

Joaquín Almunia

o Outgoing Competition Commissioner remains in his role until new Commissioner is in place.

Alexander Italianer – Director-General, DG Competition

Is due to move jobs under mandatory rotation rule, but timing and successor unknown.

Cadwalader, Wickersham & Taft LLP 15 DG Competition

Cadwalader, Wickersham & Taft LLP 16 Source: European Commission Almunia’s legacy

• Antitrust

 Continuing vigorous cartel enforcement resulted in 3 of the top 4 highest cartel fines levied on Philips, LG Electronics and Deutsche Bank AG

 Initiated the and investigations but did not close them

 Secured the adoption of the Antitrust Damages Directive

 Adopted the Visa decision and the MasterCard prohibition of the application of multilateral interchange fees

 Action on Standard Essential Patents (SEPs) – Samsung and Motorola

• Mergers

 30 (3 pending) Phase II merger cases

 3 prohibition decisions: Ryanair/Aer Lingus, UPS/TNT Express and Deutsche Börse/NYSE Euronext

• State Aid

 Undertook the modernisation of the entire state aid rulebook

 Redesigned DG Comp’s state aid control instruments to help the rescue and restructuring of financial institutions in light of the financial crisis

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Vestager’s in-tray

• Google: abuse of dominance in Search, Android and others

• Gazprom investigation into abusive terms of supply – on hold pending international crisis

• Cartels, especially in financial services (Libor, Forex, CDS), and autoparts

• Reforms to merger control, especially minority shareholdings

• Unfair tax competition

• National protectionism

• International dimension, especially relations with MOFCOM

Cadwalader, Wickersham & Taft LLP 18 A sample of Vestager’s politics

On economic matters

• “There are clear signs the euro area and the EU economy as a whole is growing. It’s not flashy in any way but the economy is nonetheless slowly expanding out of the crisis.”

Source: Bloomberg, Denmark Meets Fiscal Limits in Bet on Elusive European Recovery (29 August 2014)

• “We can’t just stimulate our way out of structural problems. We shouldn’t engage in stop-go policies; they only create uncertainty.”

Source: Bloomberg, Denmark Criticizes Stimulus Addiction Missing Structural Fix (15 August 2013)

• “Basically what we are doing discussing capital requirement is to make sure that the financial sector is sound and solid both in order to avoid crisis but of course also in order to enable the financial sector to provide guarantees, loans, whatever for businesses in order to make them create jobs.”

Source: Euractiv, Ecofin highlights EU divisions on bank capital rules (2 May 2012)

Cadwalader, Wickersham & Taft LLP 19

Talk around town…

• “She has been criticized for coming across as being too forceful. But keeping in mind that the last commission was often and rightfully criticised for lack of action on a number of key issues, I am confident that she can turn this into strength as well.”

Source: (MEP), in MLex’s Vestager brings economic nous, political resolve to EU competition post (10 September 2014)

• “She is a very bright and strong politician. In Denmark, many saw her as the real leader of the government.”

Source: (MEP), Mlex (as above) (10 September 2014)

• “She is thus extremely well qualified for the role of competition commissioner. It’s a good appointment though the Danish government will be worse for her departure.”

Source: Christian Karhula Lauridsen, in GCR’s Denmark’s Vestager given competition job in reorganised commission (10 September 2014)

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Juncker promises greater focus on digital agenda

• Juncker has called for a greater focus and a new direction in markets related to technology, telecoms, and digital media.

• With “500 million potential customers for new digital products and services,” Juncker sees the benefits of a strong ICT sector and need for reform.

• “To make better use of the opportunities offered by digital technologies, national silos in telecoms regulation, in copyright and data protection legislation, in the management of radio waves and in the application of competition law need to be broken down.”

Source: European Commission Memo Questions and Answers: The (10 September 2014)

Cadwalader, Wickersham & Taft LLP 21 Key challenge – managing the rise of national protectionism

• Pfizer/AstraZeneca and the “public interest test” (UK)

 “One of our options as the government would be to consider using our public interest test powers. This would be a serious step and not one that would be taken lightly but I'm open-minded about it.”

Source: Vince Cable, in ’ Britain could intervene in Pfizer bid for AstraZeneca (6 May 2014)

 Compatible with exclusivity of EU review?

• “Decret ” (France)

 Adds to list of strategic sectors for which foreign investments require government approval

 Used as leverage in Alstom/GE/ to secure French interests

 “The rules have to change after this story, because we need to make champions.”

Source: Arnaud Montebourg, on EU competition rules, in GCR’s The European champions league (25 July 2014)

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How much does the identity of the Commissioner matter?

Continuity vs. the cult of personality:

• Continuity – 50 years of precedent

• The lure of the free market: differing backgrounds, similar approaches

 Leon Brittan, British conservative

 Karel Van Miert, the ‘Flemish socialist’

 Mario Monti, the Professor

, the ‘businesswomen’

 Joaquín Almunia, socialist

• Media coverage of Antitrust: the FT test

• Commissioner’s role vis-à-vis DG Comp

• Commissioner’s role within College of Commissioners

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China – Rocky Lee

• Rise in Chinese competition enforcement

 Recent raids

 Alleged targeting of non-Chinese companies (ex. US Chamber of Commerce report)

• Extraterritorial enforcement / departure from positions taken in the EU and US

 P3 Alliance, foreign-to-foreign network cleared in the EU and US, blocked by MOFCOM

• Call for fairness / due process in Chinese competition proceedings

• State of collaboration between EU and Chinese competition regulators

Cadwalader, Wickersham & Taft LLP 24 China (Cont.)

Foreign Luxury Automakers

• Under the current dealer-franchise agreements, auto makers in China can dictate the prices that their dealers pay for branded replacement parts and the prices at which those parts are sold to consumers.

• China’s state media have accused automakers of earning exorbitant profits by overcharging consumers and controlling the sale of auto parts.

• Under China’s antimonopoly law, companies could face fines of as much as 10% of their sales from the preceding year.

 Recently, China’s NDRC levied a record $200M combined fine against 10 Japanese auto-parts and bearings makers for antitrust activities.

 Denso Corp., Aisan Industry Co., Mitsubishi Electric Corp., Mitsuba Corp., Yazaki Corp., Furukawa Electric Co., Sumitomo Electric Industries Ltd., NSK Ltd., JTEKT Corp. and NTN Corp. were fined equivalent to between 4% and 8% of their last year's revenue from China.

 Chrysler (China) Automobile Sales Co. and several dealers in Shanghai were fined by the Shanghai Municipal Price Bureau the equivalent of $5.5 million for anti-competitive conduct.

• In response to antitrust probes by NDRC, price cuts on spare parts

 BMW: cut by 20% on average on parts including car bodies, compressors, electric generators, storage batteries and brakes

 Chrysler: cut by 20% the price of 145 spare parts including headlights, mirrors and starters

 Volkswagen AG’s Audi brand, Tata Motors Co.’s Jaguar Land Rover PLC, Daimler’s Mercedes-Benz, Toyota, and Honda are also among the automakers that cut prices.

Cadwalader, Wickersham & Taft LLP 25 China (Cont.)

• Recently, Microsoft was given 20 days by China’s State Administration for Industry and Commerce to explain compatibility and bundling issues between its Windows operating system and its Office productivity software.

• has been under investigation by NDRC since last November over how it calculates patent-licensing and royalty rates in China.

• Baby-formula producers, including Mead Johnson, Danone, Abbott Laboratories, Royal FrieslandCampina, Fonterra, and Biostime International were fined by NDRC a combined RMB 669M for fixing minimum resale prices.

• Drug-maker GlaxoSmithKline was subject to probe into its price-fixing practices, in addition to anti-corruption investigation.

• An operational alliance named P3 Network by three global shipping firms, Maersk Line, Mediterranean Shipping Company, and CMA-CGM, was rejected by MOFCOM for antitrust concerns.

• TFT-LCD producers Samsung, LG, Chimei Innolux, and AU Optronics were fined RMB 353M by NDRC for price-fixing practices.

• and Apple have also been accused of charging higher prices in China than in other markets and, along with Caterpillar, Inc., are rumored to be the next targets for anti-monopoly probes.

Cadwalader, Wickersham & Taft LLP 26 China (Cont.)

• While some complain about the Chinese government’s targeting of foreign corporations, there are also instances of enforcement actions against domestic companies.

 State-owned giants China Telecom and China Unicom have been subject to anti-trust probes by NDRC over internet access pricing practices.

 Alcohol makers Kweichow Moutai and Wuliangye were each fined more than RMB 200M for monopolistic practices.

 Shanghai Gold & Jewelry Trade Association was fined by NDRC the maximum penalty at RMB 500,000 for fixing prices of precious metals, and five jewelry shops were fined 1% of their annual sales at RMB 10M.

 Three Jilin cement companies were fined RMB 114M by the NDRC for price fixing.

Cadwalader, Wickersham & Taft LLP 27 United States – Charles F. (Rick) Rule

• Well established cooperation and strong convergence of US and EU law

 Quite a while since GE/Honeywell

 Coordination a regular feature of merger review and cartel cases

• US-EU coordination (plus other jurisdictions) on Asian cartel cases

• US and EU joint initiative to developing antitrust regimes world-wide through the International Competition Network (ICN)

Cadwalader, Wickersham & Taft LLP 28 United States (Cont.)

• US (FTC/DOJ) versus EU institutions

 Similarities

 Differences

• The transatlantic antitrust machine

 The past 5 years – Almunia’s legacy through American eyes

 The next 5 years – prospects (competition law; TTIP)

Cadwalader, Wickersham & Taft LLP 29 Questions?

Cadwalader, Wickersham & Taft LLP 30