July 26, 2021

Volume XI, Number 207


July 26, 2021

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July 23, 2021

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Top 12 EU Legal Developments to Watch in 2017

We have created a list of major legal shifts that await General Counsel and Compliance Officers in the areas of competition, EU regulatory and trade in 2017. These challenges may have an impact on your corporate and commercial strategies.

Our predictions include:

Regulatory Surge and Assertive Application of EU Rules

  • Merger Control: Enforcement of Procedural Rules

  • Cartel Enforcement and the Need for Compliance

  • State Aid: Extension of the Notion of Aid, Tax and Energy

  • Competition Damages Claims: Implementation of the EU Directive

  • EU Regulatory Changes for a Wide Range of Products and Services

Disruptive Technologies and Productivity Growth. In Need of More Regulation?

  • Innovation: Increased Importance in Competition Investigations

  • Digital Single Market: Online Sales

  • Intellectual Property and Competition: From SEP and FRAND to Internet of Things Issues

  • Data Protection: Compliance With the New General Data Protection Regulation

The Future is Unchartered Terrain and is Uncertain. International Trade and the Reopening of Negotiations

  • Trade Agreements and Protectionism

  • Brexit: Quo Vadis?

  • S. Sanctions Regime

1.  Merger Control: Enforcement of Procedural Rules

Recent merger enforcement activity in the EU shows that there is increasing scrutiny of the conduct of merging parties during merger investigations. The European Commission is currently investigating a company for allegedly providing misleading or incorrect information in the context of a merger notification two years ago. The obligation to provide accurate information during merger investigations must be taken seriously and applies not only to the merging parties, but also to intervening third parties who are asked to provide information by the authorities.

Merging companies must also ensure that during the merger review process and before obtaining clearance, they conduct business as usual and avoid any conduct that could compromise the acquired company’s competitiveness. So- called “gun-jumping activities” are frequently scrutinized by the US competition authorities and European Commission. EU national competition authorities are now also demonstrating an increased willingness to impose significant fines if confronted with gun-jumping practices: the French competition authority recently imposed an €80 million gun-jumping fine on merging parties in the telecom sector for coordinating their activities prior to obtaining clearance.

2.  Cartel Enforcement and the Need for Compliance

2016 marked a record-breaking year for the European Commission issuing its largest ever cumulative fine totalling €3.726 billion. Substantial fines can continue to be expected in 2017 as a result of the Commission’s pending investigations. Member States continue to be aggressive in their domestic cartel enforcement. Germany in particular has been very active in imposing fines and opening significant investigations in a large variety of sectors. Bid-rigging in the construction sector is likely to be an area of focus in Central and Eastern Europe. Compliance therefore remains highly topical for companies wanting to avoid cartel investigations.

3.  State Aid: Extension of the Notion of Aid, Tax and Energy

The notion of State aid was extended once again, in very recent EU case law just before the end of 2016. The Court of Justice of the European Union has in particular construed the concept of ‘selective advantage’ in fiscal measures in the broadest manner. This decision stresses the importance of State aid control for tax measures, as exemplified by the European Commission’s wave of recent challenges to outlier tax rulings. Energy is also one of the European Commission’s top priorities in State aid control. New State aid investigations are expected regarding wide spread national support measures for renewable energy production and enhanced energy efficiency as well as capacity mechanisms in electricity markets.

4.  Competition Damages Claims: Implementation of the EU Directive

We have already seen an increase in antitrust litigation, which will accelerate in 2017 against the backdrop of the biggest piece of EU competition legislation in years: the new Damages Directive. The ramifications of the new Directive will be felt more strongly by those jurisdictions with a tradition of litigation, such as the UK, the Netherlands and Germany. Nevertheless, it will only be a matter of time before plaintiffs discover other, more beneficial jurisdictions. Brexit will be a blow to the UK courts, but the newly empowered Competition Appeal Tribunal will no doubt remain an attractive forum.

5.  EU Regulatory Changes for a Wide Range of Products and Services

From medical devices and e-cigarettes to construction products, 2017 will bring new harmonized rules for the marketing of several different products in the EU. These rules concern, for example, new risk classifications, changes to the approval process, and traceability requirements. Furthermore, cross-sector regulations have been revamped (e.g., electromagnetic compatibility and low voltage). Increased compliance responsibilities for each operator in the supply chain combined with heightened supervision by authorities for each of these product rules, may bring about increased allegations of non-compliance and liability for manufacturers, importers and distributors. As with goods, regulatory requirements for several services are also being updated. This is notably the case with the proposal for a new regulatory framework for digital markets and telecom services, covering, for example, broadband access & infrastructure investment, radio spectrum allocation and internet-based ‘over-the top’ (OTT) services such as voice and video calling, text messaging, video content delivery and social networking.

6.  Innovation: Increased Importance in Competition Investigations

Innovation has become a top priority for the European Commission, as stressed in recent speeches and policy briefs. We expect this trend to continue in 2017, with a particular focus on intellectual property-intensive and the technology industries. On the antitrust front, 2017 will reveal whether innovation considerations could become an alternative to traditional foreclosure analysis in ongoing abuse investigations in the sector. We can also expect innovation effects to feature prominently in merger review in technology, agrochemical and pharmaceutical industries. As a result of the increasing role of innovation, companies should be prepared to face more complicated and lengthy investigation procedures.

7.  Digital Single Market: Online Sales

The European Commission is expected to issue its final report on the outcome of its e-commerce sector inquiry in the first quarter of 2017, which will likely be followed by enforcement activity in the online distribution sector as well as by a revision of the current EU rules on distribution as they relate to online sales. The Commission is seeking to remove barriers to online sales in the EU and is monitoring bans on sales on online marketplaces and other limitations to cross- border online sales. Companies that engage in online sales will need to ensure their distribution arrangements are in line with the Commission’s new guidance and rules. In a parallel move, the Commission is looking to regulate parcel delivery rates by way of a price cap to encourage online sales.

8.  Intellectual Property and Competition: From SEP and FRAND to Internet of Things Issues

The enforcement of standard essential patents, related disputes concerning royalty obligations and licensing terms will remain hot topics, and 2017 will see national authorities and courts fleshing out the conditions for Standard Essential Patent (SEP) enforcement set out in EU case law. The Internet of Things will further increase the need for interoperability and access to related IPRs, and we are likely to see diverging views on both sides of the Atlantic with the EU taking a more interventionist approach in particular with regard to pricing. Patent settlement and other deals involving generic drugs manufacturers in the life sciences industry remain in the spotlight.

9.  Data Protection: Compliance With the New General Data Protection Regulation

The GDPR will transform data protection in the EU and will widen the gap with other regimes, in particular with the US. With the GDPR coming into application in May 2018, companies processing or monitoring data of EU consumers in the course of their business will use 2017 to overhaul their internal procedures and compliance policies, including in relation to personal data breaches. The compliance efforts will also address the increased risk of fines under the new regime. The GDPR will leave room for national differences across the EU which will make the exercise challenging. Data protection authorities, the European Commission and the Article 29 Working Party continue to issue guidance papers clarifying the numerous aspects of the GDPR calling for interpretation. Brexit will add a layer of uncertainty as the GDPR will no longer apply in the UK.

10.   Trade Agreements and Protectionism

The Trump campaign made a point of highlighting the incoming president’s dislike for NAFTA, TPP and TTIP, among other free trade agreements. Our experts are already anticipating the next administration’s possible stance with regard to free trade and analyzing possible recourse and actions that international businesses may opt for in the changing global trade landscape of 2017.

11.  Brexit: Quo Vadis?

Not a day goes by without Brexiteers and those opposing Brexit arguing their case. The UK Prime Minister confirmed the principle of a “hard” Brexit and the uncertainty for businesses continues to increase. 2017 will see Article 50 EU being triggered and the beginning of exit negotiations with the EU. The UK Government will start to define its roadmap, and it remains to be seen whether a credible opposition will be able to exert any influence in Parliament. Although the UK economy has been resilient thus far, companies will react promptly to an increased level of uncertainty and any suggestion that their business is suffering as a result of Brexit. Businesses are well advised to review their exposure and address the most relevant issues as they relate to employment, competition, data protection, litigation, supply arrangements, trade, etc. In addition, it remains to be seen whether Brexit will influence the upcoming Dutch, French and German elections, the outcome of which could significantly change the balance of power in Europe if the electorate decides to upset the status quo.

12.   U.S. Sanctions Regime

Russia, Iran, Cuba, and even China loom large on the horizon of U.S. politics. A new Trump administration has promised to change, if not upend, the course of current U.S. sanctions policy.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume VII, Number 23

About this Author

Jacques Derenne, Attorney, Sheppard Mullin Law Firm, European Union, Antitrust

Mr. Derenne has over 25 years of EU competition law experience across all areas, including mergers, cartels, abuses of dominance and State aid. He has developed a particular expertise in EU regulatory and related competition law issues in a number of highly regulated industries, including energy, the postal sector, aviation, railways, telecoms, satellites and tobacco products. Mr. Derenne regularly appears at competition hearings before the European Commission, and pleads cases before the General Court and the Court of Justice of the European Union, national competition...

322 -290 -7905
Curtis Dombek, Attorney, Lawyer, Governmental Contracts, Sheppard Mullin Law Firm

Curt Dombek is a partner in the Government Contracts, Investigations & International Trade Practice Group. Curt divides his time between the firm's Brussels and Los Angeles offices.

Areas of Practice

Mr. Dombek has practiced since 1983 in the field of international trade. He advises clients on the full range of international regulatory issues, including civilian and military export controls, trade sanctions and blocking orders, Customs matters, the Foreign Corrupt Practices Act, the USA Patriot Act, Free Trade Agreements, CFIUS reviews of foreign...

Oliver Heinisch, Sheppard Mullin, Antitrust Regulation Lawyer, Fair International Competition Attorney,

Oliver Heinisch is a partner in the Antitrust and Competition Practice Group in the firm's London office.

Mr. Heinisch advises on all areas of EU, UK and German competition law with a focus on international cartel and abuse of dominance procedures including related antitrust litigation matters as well as merger control law. He has substantial expertise in advising on the interface between intellectual property and competition law mainly in the context of complaint cases, investigations of competition authorities and intellectual property...

32 (0) 2 290 7904
Robert Klotz, Sheppard Mullin, European Commission lawyer, national authorities attorney

Robert Klotz is a partner in the Antitrust & Competition Practice Group in the firm's Brussels office.

Mr. Klotz concentrates on all aspects of EU and German competition and regulatory law and represents clients before the European Commission and national authorities, with a particular focus on network industries, such as energy, telecommunications, post and transport. 

Previously he served for almost a decade as an official with the European Commission in DG Competition, dealing with high level antitrust cases,...

Isabelle M. Rahman, Antitrust and Competition Attorney, Sheppard Mullin, Brussels Law Firm

Isabelle Rahman is a partner in the Antitrust and Competition Practice Group in the firm’s Brussels office.

Ms. Rahman has substantial experience in the application of the EU competition rules and represents clients active in  the airline, chemical, consumer products, food, life sciences and media industries, among others.

Ms. Rahman serves international clients in Brussels, providing strategic advice regarding merger control, cartel and abuse of dominance investigations, representing clients throughout the EU...

32 (0)2 290 7909