Boundary Issues

documents that are not necessarily merger specific are The US example highlights the collaboration between the often the subject of these requests. There have been cases DOJ's civil and criminal sections. The fines in the European in which documents submitted pursuant to a request issued cases serve to remind companies that the exchange of in the context of a merger investigation have triggered commercially sensitive information may be forbidden by competition law concerns unrelated to the merger. competition rules. Similarly, the examples from the rest of the For example, when various franchise agreements were world emphasise the growing risks and implications following requested as part of a merger investigation,the Competition the submission of documents to antitrust authorities. Commission expressed concerns with exclusivity provisions Companies need to be increasingly aware of the risks contained in the agreements, claiming that they would ordinary course documents present, and implement proper have a restrictive effect on competition. The Competition document management procedures, as well as compliance Tribunal, the adjudicative body deliberating upon the programmes to ensure compliance with the relevant merger, noted that non-merger specific antitrust issues competition laws. Whilst easy to state, ongoing compliance cannot be investigated through the "back door of merger with competition law is the most straightforward way to control" but invited the Competition Commission to ensure that documents submitted for a merger review tell investigate its concerns separately. the story the merging parties want to be told. In a case involving a merger investigation of property funds, lease exclusivity provisions were raised by the Pou! Johnson is of counsel, Craig Lee is a partner, and Creighton Competition Commission as a concerning feature ofthe way Macy is a partner at Baker McKenzie in Brussels and Washington DC. in which business is done.Similarly, the Competition Tribunal With additional information and analysis from Bethan Lukey remarked that while the impugned clauses in the lease (Baker McKenzie, Brussels), Stephen Crosswell and Tom Jenkins agreements existed pre-merger and the implementation (Baker McKenzie, Hong Kong), Zhi Bao (Baker McKenzie, FenXun of the merger would not alter that situation, "enforcement ee~ing), Lerisha Naidu (Baker McKenzie, South Africa), Raymundo through the prohibited practices regime is the more effective Enriquez and Gerardo Calderon-Villegas(Baker McKenzie, Mexico), tool." Following this, the Competition Commission initiated and Adriana Giannini and Isabella Giorgi (Trench Rossi Watanabe a market inquiry with a specific focus on lease exclusivity Advogados,Sao Paulo in cooperation with Baker McKenzie). provisions in contracts. What is clear from these examples is that documents Endnotes submitted within the context of a merger investigation 1. China's MOFCOM handled 395 notifications in 2016. In the run the risk of unearthing unrelated antitrust issues. These Philippines, a new competition regime came into force in issues carry administrative, civil and criminal consequences 2015,with more than 70 mergers reviewed as of31 December if the respondent firm is ultimately found to be liable. 2016. Singapore, Japan, Australia, Korea and Taiwan all have well-established merger control regimes. New regimes are in Key lessons the process of being implemented in Thailand and Myanmar, which include merger control provisions. Merger review does not exist in a vacuum. Documents 2. The Administrative Council for Economic Defence (CADE). always tell a story, and attorneys need to be sure that 3. It should be noted that CADE only has jurisdiction over the documents that have to be submitted as part of investigations of anti-competitive conducts, but can work the merger review process tell a story that supports the alongside the Public Prosecutor's Office if the investigation relates to certain anti-competitive practices (essentially proposed deal and do not result in other investigations cartels) that could also be considered criminal offences. being launched. Once documents are submitted to a In fact, these authorities currently hold a series of co- competition enforcer or regulator, parties can expect operation agreements, through which both offices can that they will be closely reviewed, not only with respect work together sharing documents and evidence to support each other's investigation, increasing the of to the transaction at hand, but also with an eye toward exposure those involved in the investigations. both civil and criminal actions. Boundary issues Recent developments at the interface of IP and competition law by Pat Treacy, Edwin Bond and focusing on two main areas: (i) recent cases examining Sivaloganathan Kumaran factors that need to be taken into account when assessing There are often tensions at the crossover between whether royalties charged by copyright collecting societies intellectual property (IP) and competition law. This article are excessive or discriminatory under Article 102 TFEU; and explores some recent developments at this interface, (ii) recent debates on what constitutes fair reasonable and Foltow us on competitionlawinsight.com 17 I mil non-discriminatory ("FRAND") behaviour in the context of • All relevant circumstances must be examined to standard essential patent ("SEP") licensing.[1] determine whether the discrimination produces, or is capable of producing, a competitive disadvantage; Charging appropriate royalties • Proof of actual, quantifiable deterioration of a particular AKKA (excessive royalties) customer's competitive position is not required for a In September 2017 the UEU handed down a relatively finding of competitive disadvantage; and rare judgment on the criteria applicable when assessing • The mere presence of an immediate disadvantage excessive or unfair pricing by a dominant firm in the context affecting operators who are charged more does not of copyright licensing.[2] The Latvian Competition Council mean that competition is distorted or capable of being had found that AKKA, a collecting society with the exclusive distorted. right to issue licences for the playing of music in commercial generally, in premises in Latvia, had abused its dominant position by More emphasising thatdiscriminatory pricing only where charging excessively high licence fees. Following a series is abusive it "tends to distort competition", of appeals, the Latvian Supreme Court referred several the CJEU's ruling is the latest in a line of recent cases questions to the CJEU. taking an effects-based approach to applying Article 102. The ruling also The first three questions related to the issue of how to has potential implications for in the make appropriate comparisons when assessing whether disputes FRAND arena. Price discrimination between a price is excessive under Article 102. Endorsing the two- licensees has received relatively littlejudicial or egulator stage test in United erands,[3] the CJEU acknowledged r attention to date (although the comments of Mr that a number of different methodologies can be used to Justice Birss in Unwired Planet v Huawei (English High are determine the "benchmark price". The Court confirmed Court) discussed below). This issue is likely to become increasingly that (at least) in the context of copyright licensing, one significant as the Internet of Things results in new market entrants appropriate method is to compare the prices charged requiring SEP licences. by the collecting society in its home country with those charged in other Member States, provided that the FRAND developments reference Member States are selected using "objective, EU Commission Communication on SEPs appropriate and verifiable criteria". The UEU also held In November 2017 the European Commission published an that when making cross-country comparisons, the eagerly anticipated Communication, "Setting out the EU purchasing power parity (PPP) index must be used to approach to Standard Essential Patents".[5] Although not take into account differences in economic conditions legally binding, the Communication is intended to address between countries. some of remaining uncertainties in SEP licensing after the The UEU then considered what standard should CJEU's 2015 ruling in Huawei v ZTE, and to drive progress be required for a dominant firm's price to be deemed towards EU-wide adoption of 5G. It sets out several key excessive. In its view, whilst there is "no minimum principles, including: threshold", a difference between the dominant firm's price and the benchmark price should give rise to concerns • FRAND is not a "one size fits all" concept, and may differ only if it is both "significant and persistent on the facts". from sector to sector and over time; The Court emphasised that even if there appears to be a • The current SEP declaration system needs modernising significant and persistent price difference, it is still open to to ensure greater transparency about ownership and the dominant firm to justify the difference on the basis of essentiality of SEPs; "objective factors" (in AKKA's case by reference to factors • "In principle", a FRAND royalty should not include any having an impact on "management expenses or the value attributable to the inclusion of the technology remuneration of rights holders"). In the authors' view, the in the standard; and it should also take into account a CJEU's call for caution reduces the significant risks of false reasonable aggregate royalty

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