Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in International Highlights

On May 28, 2014, the Financial Times (“FT”) reported that junior employees and sale staff of GlaxoSmithKline (“GSK”) China is suing their management over unreimbursed “bribes” paid, at the management’s behest, to hospitals and doctors.

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

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

On April 29, 2014, the European Commission (“EC”) announced that it has reached a legally-binding agreement with Samsung on standard essential patent (“SEP”) injunctions. According to the terms of the agreement, Samsung “will not seek injunctions” in the EU on the basis of its SEPs for smartphones and tablets against licensees who sign up to a specified licensing framework.

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

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

Last week, the newly-established UK Competition and Markets Authority (“CMA”), its main anti-trust and consumer protection agency, announced an advisory process to provide guidance to businesses on the application of competition law to potential horizontal and vertical agreements raising novel or unresolved issues has been put into practice.

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

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

On April 8, 2014, China’s Insurance Regulatory Commission (“CIRC”) announced that it is relaxing merger and acquisition (M&A) rules in the insurance industry. Specifically, CIRC scrapped the rule that would previously limit insurers from buying more than one peer that competes in the same market segment. This move has been welcomed by both domestic and foreign players in the highly-fragmented $288 billion market that is nevertheless dominated by a few state-owned insurers.

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

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

On March 20, 2014, the Chinese Ministry of Commerce (MOFCOM) issued a statement on violations of rules on reporting mergers. The statement announced that starting on May 1, 2014, MOFCOM will publish on its website a list of all offenders who fail to report mergers in violation of the Anti-Monopoly Law, on top of existing penalties of a fine of 500,000 yuan (~$80,000) and nullification of the merger. MOFCOM also set up a dedicated fax line for all whistleblowers. These developments come at the heels of recent MOFCOM announcements that it will step up its enforcement efforts of the country’s antitrust rules.

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

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

On March 17, 2014, the Chinese Ministry of Commerce (MOFCOM) sought comments from antitrust lawyers on draft rules for its long-awaited simplified merger review procedure in a meeting behind close doors.

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

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

On February 27, China’s Ministry of Commerce (“MOFCOM”) announced that it cleared 207 merger review cases in the administrative year of 2013, an increase of 26% over the numbers in 2012.

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

Four of the proposals were conditionally cleared last year:

On February 26, the Director of the Anti-Monopoly Bureau at the Chinese Ministry of Commerce (“MOFCOM”), Ming Shang, said in a press release that MOFCOM will focus on anti-monopoly legislation this year.

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

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

On February 26, 2014, the Korea Fair Trade Commission (KFTC) cleared Samsung with no penalty of an accusation made by rival Apple that it has abused its dominance, according a commission press release.

Apple had alleged that Samsung’s prolific litigation against Apple over patents constituted an abuse of dominance. But the KFTC said Samsung’s lawsuits did not interrupt Apple’s business, because Apple had begun filing lawsuits during negotiations between the two companies. It also said Apple did not appear to be as committed as it should have been to making the negotiations a success but that Samsung had shown its intention to negotiate by initiating different types of royalty payments.

Also, the KFTC said it appeared that Apple did not intend to pay any royalties until the lawsuits were settled.

On February 19,2014, the Federal Commercial Court of Moscow upheld the fine given by the Federal Antimonopoly Service (FAS) on the Velikolysk meat plant for its part in a cartel of large meat packers that colluded to raise prices on a government acquisition of meat products. The FAS, in a press release, have also confirmed the rejection of Velikolysk’s complaint.

The court has already confirmed the fines against many of Velikolysk’s co-conspirators, namely IKMA, Kamyshin Sansages Soloviev, and Dubki.

Twenty companies participated in this cartel. They were active in auctions held in July 2009, when Russia’s Ministry of Defense, Ministry of Internal Affairs and other security bodies spent 149.3m rubles (USD 5m) on meat products.