Competition Law News & Updates

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May 14, 2014
NEWS
France

New Hamon law on consumer protection - review of provisions on commercial negotiations  - see our latest blog entry

March 28, 2014
COMPETITION UPDATE
European Union

21 March 2014. The Commission has revised the competition rules applicable to technology transfer agreements.

Technology transfer agreements, by which one party authorizes another party to use its technology (patent, know-how, software license) for the production of goods and services, are generally considered pro-competitive by the competition authorities, as the sharing of intellectual property constitutes a factor of economic growth and contributes to consumers’ well-being.

Technology transfer agreements are the subject of two complementary instruments which are due to expire on 30 April 2014:  Regulation No 772/2004 of 7 April 2004 by virtue of which bilateral license agreements between undertakings with limited market power are, under certain conditions, deemed to be unproblematic from a competition point of view, and Commission Guidelines 2004/C 101/02 of 27 April 2004, which govern multiparty technology transfer agreements and provide guidance on the application of the block exemption regulation (BER).

The revision is intended to facilitate the sharing of intellectual property whilst boosting research and innovation.

The new BER brings no major changes

•             Market share thresholds

In the new BER, the market share thresholds which determine the “safe harbor”, outside of which automatic exemption is no longer available and which require an individual assessment, are identical to the 2004 regulation, i.e. 20% for agreements between competitors and 30% for agreements between non-competitors.

•             Scope of application

Research and development agreements will only be covered by the new BER where the R&D and specialization agreements BERs are not applicable.

Likewise, agreements pertaining to the purchase of raw materials or equipment will fall under the scope of the new BER if they are directly related to the production or sale of the contract products which are produced with the licensed technology. The new BER no longer provides for an exception for passive sales restrictions included in technology transfer agreements between non-competitors: now, all passive sales restrictions between licensees will be excluded from the safe harbor except if they are objectively necessary for the licensee to penetrate a new market.

Further, the new BER excludes all exclusive grant-back obligations without distinction from the safe harbor of the regulation. This is also the case for clauses which allow the licensor to terminate the agreement if the other party challenges the validity of the licensed technology, and clauses that force a licensee to license any improvements it makes to the licensed technology to the licensor.

 

Conversely, the updated guidelines on settlement agreements and patent pools bring interesting clarifications

•             Settlement agreements prohibited by Article 101(1) TFEU

The guidelines now specify that certain clauses in license agreements in the context of settlement agreements may be anticompetitive, e.g. settlement agreements between competitors including a license for the technology and the market affected by the dispute, but leading to a delayed or limited ability for the licensee to launch the product on the markets, in exchange for remuneration ("pay-for-restriction"); settlement agreements whereby the parties cross-license each other and impose restrictions on the use of their technologies, and; non-challenge clauses containing obligations for the licensee not to challenge the validity of the licensor's intellectual property, with financial incentives or otherwise.

•             Clarified rules for patent pools

The Commission recalls that technology pools (patent pools) whereby two or more parties agree to pool their respective technologies and their licensing out as a package, cannot, as multiparty agreements, benefit from an automatic exemption under the regulation. The new guidelines set forth six conditions which must all be fulfilled for the creation and operation of a patent pool to fall outside the scope of the prohibition under Article 101(1) TFEU.

On the other hand, where pooled technologies contain non-essential technologies, the agreement will probably be deemed anticompetitive if the parties to the agreement are in a strong position on one of the relevant markets. Such agreements may however qualify for individual exemption under Article 101(3) if, for example, they fulfill the six abovementioned safe harbor criteria or if there are any pro-competitive reasons for including the non-essential technologies in the pool etc.

As for licenses in the context of patent pools, the Commission specifies the principles for the assessment of their effects on competition and the requirements for their grant. Lastly, the guidelines provide that non-challenge clauses and termination clauses in a technology transfer agreement between the pool and third parties are likely to fall within Article 101(1) of the Treaty.

See GCL, No. 1.24

March 14, 2014
COMPETITION UPDATE
Italy

10 March 2014. In Italy, merger notification thresholds are adjusted every year to take account of increases in the gross domestic product (GDP) deflator index. The resolution is published in the Competition Authority's Bulletin after the increase in the index has been officially announced. The 2014 thresholds were published on 10 March.

From that date, transactions are reportable where:

·         the parties’ combined domestic turnover exceeds EUR 489 million; and

·         the total domestic turnover of the target company exceeds EUR 49 million.

See GCL, No 16.22.

March 14, 2014
COMPETITION UPDATE
China (People’s Republic of)

11 February 2014. The Chinese Ministry of Commerce (MOFCOM) has released a temporary document setting the standards for the assessment of simple mergers. Pursuant to the new provisions, applicable from 12 February 2014, six types of transactions qualify for fast-track proceedings:

·         where the aggregate market share of the parties is lower than 15% of the same relevant market

·         where the parties to a vertical merger hold market shares of less than 25% of the upstream or downstream market

·         where the parties to a conglomerate merger hold market shares of less than 25% of each market concerned

·         where the transaction consists in the creation of a joint venture outside of China, with no intention of directing activities in China

·         where the transaction consists in the acquisition of equities or assets of a company established outside of China, with no activities in China

·         where one shareholder party acquires sole control of a joint venture, previously controlled by two or more operators.

The document also defines a series of transactions not eligible for simplified proceedings. Such is the case of: transactions where an operator goes from joint control to sole control of a joint venture that is its competitor in the same relevant market; transactions where the relevant market is difficult to define; transactions that can impede market entries or technological progress, have adverse effects on consumers or other economic operators or on the development of the Chinese economy, or other transactions that MOFCOM may deem harmful to competition.

Futher, MOFCOM may revoke its decision to conduct simplified proceedings where it appears that the parties have provided incomplete, incorrect or misleading information; a third party brings evidence that the transaction may eliminate competition in the market; significant changes are brought to the transaction or on competition in the relevant market.  

Now that the scope of application of the simplified proceedings has been fixed, MOFCOM must next enact the procedural rules applicable. 

See GCL, No 35.24.

March 14, 2014
COMPETITION UPDATE
The Netherlands

11 February 2014. The Dutch Authority for Consumers and Markets (ACM) has released two sets of guidelines on competition investigations, one relating to the collection of digital data (ACM Werkwijze digitaal onderzoek 2014), the other to client/attorney legal privilege (ACM Werkwijze geheimhoudingsprivilege advocaat 2014), effective 12 February 2014.

As regards digital data, the new guidelines provide that inspections will no longer be carried out on-site but that the data will be collected in the premises of the undertaking and reviewed in the premises of the ACM without the presence of the undertaking or its attorneys. Beforehand, the ACM officers will however have to inform the undertaking of the object and scope of the raid. After the data is secured and before leaving the premises, the officers must also make an inventory of all files taken. The guidelines also set time-limits on the detention of undertakings’ digital data, providing that after a reasonable period, such data be destroyed.

As regards client/attorney legal privilege, the 2014 guidelines specify that the ACM may not review digital data until the undertakings have had the opportunity to declare some of the collected data to be covered by legal privilege. If this faculty is used, such data will be sealed and the claim will be assessed by an independent ACM officer. Communications with both external and in-house lawyers fall under the scope of legal privilege, as long as the individuals in question are members of the bar association. On this particular issue, Dutch law differs from EU practice, which affords no protection to correspondence between undertakings and in-house counsel.

See GCL No 21.09.

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