Global law firm White & Case LLP has successfully represented MOL Hungarian Oil and Gas plc (MOL) in obtaining regulatory clearance from the European Commission for its acquisition of ENI Hungaria Zrt. (ENI Hungaria) and ENI Slovenija druzba za trzenje z naftnimi derivati, d.o.o. (ENI Slovenija).

MOL, an integrated oil and gas company active across the entire crude oil and natural gas value chain, agreed in Autumn 2015 to buy from ENI S.p.A the companies ENI Hungaria and ENI Slovenija, which own 183 filing stations in Hungary and 17 stations in Slovenia (including dealer owned sites), operated under the Eni and Agip brands, as well as ex-refinery and non-retail operations of these companies in Hungary and Slovenia (ENI Hungaria's lubricants wholesale business was excluded from the transaction).

MOL filed the deal for merger review in Brussels on February 29, 2016 and the Commission cleared the deal on April 7, concluding that the acquisition would not raise competition concerns given the competitive conditions in the relevant markets.

The White & Case team in Brussels which advised on the transaction was led by partner Mark Powell with support from associate Strati Sakellariou.

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Anouk Clamens is an associate in the Competition, EU Law and Economic Regulation practice of White & Case in Paris. Anouk represents and assists clients in relation to anti-competitive practices, commercial litigation, merger control, distribution and consumer law.

Before joining White & Case in 2016, Anouk worked in the Paris office of a major French law firm.

In its "Best Law Firms" report for 2018, U.S. News & World Report named White & Case "Best Law Firm of the Year" in both International Arbitration-Commercial and Project Finance Law. Compiled by U.S. News & World Report and Best Lawyers, the annual report recognizes firms for "professional excellence with persistently impressive ratings from clients and peers," according to the magazine.

White & Case also was awarded 56 Tier 1 rankings in the report: 19 of the Tier 1 rankings were awarded in the "National" rankings section, while 37 were awarded in the "Regional" sections. The Firm earned eight additional rankings in National Tier 2 and 3 sections, and another 16 rankings in Tiers 2 and 3 in the Regional sections, for a total of 80 rankings in the report.

Here are White & Case's Tier 1 rankings for the "2018" report.

National Tier 1 Rankings

Antitrust Law 

Appellate Practice 

Banking and Finance Law 

Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law 

Commercial Litigation 

Corporate Law 

Environmental Law 

Equipment Finance Law 

Financial Services Regulation Law 

International Arbitration - Commercial 

International Arbitration - Governmental 

International Trade and Finance Law 

Leveraged Buyouts and Private Equity Law 

Litigation - Antitrust 

Litigation - Intellectual Property 

Litigation - Patent 

Mergers & Acquisitions Law 

Project Finance Law 

Trusts & Estates Law 
 

Regional Tier 1 Rankings

Los Angeles

Banking and Finance Law 

Commercial Litigation 

Equipment Finance Law 

Miami

Appellate Practice 

Banking and Finance Law 

Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law 

Commercial Litigation 

Environmental Law 

Insurance Law 

Litigation - Bankruptcy 

Litigation - Environmental 

Real Estate Law 

Securities / Capital Markets Law 

New York City

Antitrust Law 

Banking and Finance Law 

Commercial Litigation 

Corporate Law 

Equipment Finance Law 

Financial Services Regulation Law 

International Arbitration - Commercial 

International Arbitration - Governmental 

Leveraged Buyouts and Private Equity Law 

Litigation - Antitrust 

Litigation - Intellectual Property 

Litigation - Patent 

Mergers & Acquisitions Law 

Project Finance Law 

Tax Law 

Trusts & Estates Law 

Washington, DC

Antitrust Law 

Arbitration 

Commercial Litigation 

International Arbitration - Commercial 

International Arbitration - Governmental 

International Trade and Finance Law 

Litigation - Antitrust 

Project Finance Law 

A simple card game may have dealt prosecutors the Aces

The card game Punto Banco (a form of baccarat) is a straight game of chance. Or at least it should be, according to the UK Supreme Court, who found that Phil Ivey, a legend in the professional gambling world, cheated Crockfords Casino of £7.7m by using a technique known as "edge spotting". In deciding whether or not the concept of dishonesty was an integral element of cheating (it found it was not), the Supreme Court took the opportunity to amend the criminal law and remove a purely subjective element from its definition. In one simple hand, the Ghosh test, which has represented established law for the past thirty years, is gone.

Mayfair, August 2012

Phil Ivey is known as the "Tiger Woods" of the gambling world. In August 2012 he spent two days at Crockfords Casino in Mayfair playing Punto Banco, and during that time exploited a weakness in the manufacture of some of the playing cards that were being used in the game. The weakness lay in the printing of the back of the cards (the details on one of the longer sides were clearly different to the other long side). Without touching the cards, but through the use of an unwitting croupier, he engineered certain high value cards (7, 8 and 9) to be placed in the playing shoe with a particular side facing him (rather than all the others, which were facing away). He won £7.7m but the casino's investigators subsequently spotted the ruse and refused to pay up.

In the course of lengthy litigation that went all the way to the UK's Supreme Court, Ivey never denied that he had been "edge-spotting"– the term used to identify the high value cards. He maintained that it was not cheating but described it as legitimate gamesmanship (indeed the High Court judge, Mitting J, who heard live evidence from Mr Ivey found him to have given a factually frank and truthful account of what he had done). However, the question that mattered was not whether the Supreme Court thought it amounted to cheating, which (agreeing with the lower courts) it did.

What does this have to do with dishonesty in criminal cases?

As part of the appeal, the Supreme Court had to decide whether or not the concept of cheating (within the confines of the Gambling Act) involved an element of dishonesty. It found, rather controversially, that it did not (even though offences such as Cheating the Revenue do require the prosecution to prove dishonesty). The case in theory might have ended there. But the Supreme Court took the opportunity to examine the concept of dishonesty and the Ghosh test, which had been settled criminal law for over thirty years.

What was the Ghosh test?

The case of R v Ghosh was reported in 1982 when Mr Ghosh, a surgeon, made claims for payments for services he had not provided. Whilst his own appeal was dismissed, a two-stage test evolved which required the tribunal to assess:

(i) Whether in its judgment the conduct complained of was dishonest by the lay objective standards of ordinary reasonable and honest people; (if the answer to that was no, the defendant would be acquitted)

(ii) If the answer to (1) was "yes", the jury would then go on to consider whether the defendant must have realised that ordinary honest people would regard his behaviour as dishonest (he would be convicted only if the answer to question (2) was "yes".

The Supreme Court in Ivey felt that this created the unpalatable scenario whereby the more warped the defendant's standards of honesty, the less likely he was to be convicted. It also felt that the concept of dishonesty should be defined in the same way as in civil law (where there is no such subjective limb).

The Supreme Court judges therefore, unanimously, decided to abolish the second limb of the Ghosh test, effectively removing the purely subjective element. Instead, the wording they preferred was as follows:

"When dishonesty is in question, the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts….When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest."

So, subjectivity has not been entirely removed from the equation – the tribunal must consider the defendant's genuinely held belief or knowledge as to the facts, before going on to decide whether or not the ordinary man would consider the conduct dishonest. But it does remove the possibility that someone with no real moral compass might effectively be able to get a "jail out of free" card.

Where does this leave us now?

Defendants in criminal cases involving an element of dishonesty (for example conspiracy to defraud – the charge used in the LIBOR cases – theft, fraud by false representation) may have to re-think how they argue their defence. They may no longer have the same opportunity to convince the jury that they did not realise that ordinary people would have found their actions dishonest. The issue of whether certain conduct was dishonest goes to the very heart of the proceedings in many cases (such as the rate manipulation in LIBOR). The need to show dishonesty in connection with the criminal cartel offence under the Enterprise Act 2002 was removed in 2014; to be held criminally liable for cartel conduct no longer requires dishonesty. The boundaries for proving liability are being rolled back. In such cases the prosecutors now hold the aces.

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This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2017 White & Case LLP

Global law firm White & Case LLP has promoted 21 lawyers to counsel and 16 to local partner.

"These promotions span 21 offices and 12 global practices, reflecting the quality and achievement of our lawyers and the truly diverse and global nature of our Firm," said White & Case Chairman Hugh Verrier. "Taken as a whole, these lawyers demonstrate the Firm’s ability to advise our clients on their most complex, cross-border legal challenges, wherever they are."

In addition to the internal promotions, White & Case has hired 11 counsel and nine local partners during 2017.

At White & Case, counsel is a role for senior lawyers with significant experience in a particular practice area. The title is used across the Firm, in all offices, as an alternative career path to partnership but does not preclude consideration for promotion to partner.

The position of local partner is offered in select White & Case regions and locations where it is common market practice. At present this includes offices in Asia-Pacific, Central & Eastern Europe, Belgium, Germany, Mexico, Saudi Arabia and Turkey. The title of local partner is a recognized career step towards admission into Firm partnership.

The promotions are effective January 1, 2018 except where noted.

AMERICAS

Daniel González Estrada has been named a local partner in our Global Commercial Litigation Practice. Based in Mexico City, he advises clients on commercial litigation and arbitration, bankruptcy, amparo complaints and white collar matters, with an emphasis on commercial and civil law matters.

Poonam Gupta, Director of Immigration Services, has been named counsel. Based in New York, she advises White & Case and its clients on US immigration law concerning business-related immigrant and non-immigrant visas and proceedings before the US Departments of State, Homeland Security and Labor.

Pedro Morales has been named counsel in our Global Mergers & Acquisitions Practice. Based in Mexico City, he advises clients on environmental and climate change, as well as operational health and safety and sanitary law matters.

Jeremy Ostrander has been named counsel in our Global Antitrust Practice. Based in Silicon Valley, he advises clients on general commercial disputes, civil and criminal antitrust claims, intellectual property disputes and commercial arbitration.

Keith Schomig has been named counsel in our Global International Trade Practice. Based in Washington, DC, he advises clients on Exon-Florio reviews before CFIUS, and foreign ownership, control or influence mitigation matters before the US Departments of Defense and Energy.

Reuben J. Sequeira has been named counsel in our Global Antitrust Practice. Based in Washington, DC, he advises private companies, sovereigns and multilateral institutions on litigation, international disputes and government investigations, representing clients before various US courts, international arbitral tribunals and US government agencies.

Amit H. Thakore has been named counsel in our Global Intellectual Property Practice. Based in New York, he advises clients on patent litigation and on complex patent infringement litigations, as well as conducting due diligence investigations on patents.

Jason Xu has been named counsel in our Global Intellectual Property Practice. Based in Washington, DC, he advises clients on intellectual property litigation and post-grant review proceedings, as well as domestic and international intellectual property matters in the fintech, eCommerce, consumer electronics and medical device sectors.

EMEA

Charbel Abou Charaf has been named a local partner in our Global Mergers & Acquisitions Practice. Based in London and Doha, he advises clients on domestic and cross-border mergers and acquisitions, joint ventures, equity investments and divestitures across a range of industries.

Michael Bark-Jones has been named counsel in our Global Banking Practice. Based in Stockholm, he advises clients on debt and equity capital market products, primarily advising underwriters and issuers on Regulation S and Rule 144A offerings for entities in Central & Eastern Europe, the Nordics and emerging markets.

Meredith Campanale has been named counsel in our Global Project Finance Practice, effective January 30, 2017. Based in London, she advises lenders and sponsors on multi-sourced financings, including the involvement of export credit agencies, multilateral agencies and development finance institutions across various sectors.

Melanie Davies has been named counsel in our Global Capital Markets Practice. Based in London, she advises clients on a range of structured finance and other debt capital market transactions, with a primary focus on CLOs and securitizations.

Chris Duncan has been named counsel in our Global International Arbitration Practice. Based in London, he advises clients on non-contentious construction law, with an emphasis on large construction and infrastructure projects across a range of sectors including power, oil and gas, metals and mining, transport and infrastructure.

Britta Elsner-Gündel has been named counsel in our Global Banking Practice. Based in Frankfurt, she advises clients on acquisition and investment grade financing (secured and unsecured) as well as real estate financing, representing national and international banks, private equity investors and strategic investors on domestic and cross-border finance transactions as well as refinancings in the German and European markets.

Cristina Freudenberger has been named a local partner in our Global Capital Markets Practice. Based in Frankfurt, she advises clients on domestic and international public and private placements of equity-linked, hybrid, regulatory capital and straight bonds, including various EMTN, Structured Note and Commercial Paper Program establishments and updates, as well as issuances of highly structured and secured capital market products.

Sven Hentschel has been named a local partner in our Global Financial Restructuring and Insolvency Practice. Based in Hamburg, he advises clients on the continuation of insolvent businesses and restructurings by transfer, as well as advising creditors, companies and their directors on insolvency law in the preliminary stages of insolvency.

Felix Höpker has been named a local partner in our Global Financial Restructuring and Insolvency Practice. Based in Düsseldorf, Felix advises clients on all aspects of insolvency law as well as the administration and winding-up of companies from all economic sectors.

Estelle Jégou has been named counsel in our Global Antitrust Practice. Based in Paris, she advises clients across a range of sectors on anti-competitive practices, competition litigation, merger control, antitrust risk management and distribution.

Gero von Jhering has been named a local partner in our Global Commercial Litigation Practice. Based in Hamburg, he advises clients on litigation and arbitration in all areas of business and commercial law, with a focus on multijurisdictional litigation, trade law, contract law, insolvency law, competition law and corporate law.

Béla Knof has been named a local partner in our Global Financial Restructuring and Insolvency Practice. Based in Hamburg, he advises clients on out-of-court restructurings, as well as advising management, shareholders and creditors on insolvency law, company law and banking law.

Jean-Julien Lemonnier has been named counsel in our Global Antitrust Practice. Based in Paris, he advises clients across a range of sectors on investigations concerning alleged anti-competitive practices instigated by the French Competition Authority and/or the European Commission, and on distribution issues including distribution agreements, negotiations between suppliers and distributors, and delays in payment.

Sylvia Lorenz has been named a local partner in our Global Intellectual Property Practice. Based in Hamburg, she advises clients on intellectual property and information technology, in particular internet law issues including provider liability, consumer protection, international civil procedure and privacy law in relation to national and cross-border transactions.

Piero de Mattia has been named a local partner in our Global Capital Markets Practice. Based in Milan, he advises clients on Italian and international initial public offerings, private placements, rights and debt issuances including bonds, convertible notes and high yield, as well as cross-border mergers and acquisitions, general corporate law and securities compliance matters.

Jean Paszkudzki has been named counsel in our Global Mergers & Acquisitions Practice. Based in Paris, he advises clients such as French and foreign corporate clients and investors on corporate transactions, including mergers and acquisitions, disposals, joint ventures and corporate reorganizations.

Paddy Patrick has been named counsel in our Global Commercial Litigation Practice. Based in London, Paddy advises clients on contentious issues relating to a broad variety of commercial contracts, with experience in proceedings with multijurisdictional elements in the English courts, particularly the Commercial Court, the courts of the British Virgin Islands, international arbitration and mediation.

Anastasia Pitchouguina has been named counsel in our Global White Collar Practice. Based in Paris, Anastasia advises financial institutions, major corporations and individuals on domestic and international criminal fraud and contentious regulatory matters, including criminal banking litigation, fraud, money laundering and criminal aspects of public procurement and employment law.

Daria Plotnikova has been named counsel in our Global Mergers & Acquisitions Practice. Based in Moscow, she advises international and Russian developers on a broad range of real estate and construction projects, including major investment projects, real estate sales and purchase transactions, and complex infrastructure projects.

James Rimmer has been named counsel in our Global Mergers & Acquisitions Practice. Based in Riyadh, he advises vendors, purchasers, joint venture partners and financial advisers on complex, cross-border and domestic public and private mergers and acquisitions across a range of industries.

Jan Stejskal has been named a local partner in our Global Mergers & Acquisitions Practice. Based in Prague, he advises clients on private equity and private mergers and acquisitions, primarily cross-border transactions with Czech aspects.

Aneta Urban has been named a local partner in our Global Banking Practice. Based in Warsaw, she advises Polish and foreign banks, financial institutions, borrowers, sponsors, investment funds and private equity funds on Polish and cross-border financing transactions.

Sara Vanetta has been named a local partner in our Global Commercial Litigation Practice. Based in Berlin, she advises clients on dispute resolution with a particular focus on insurance law, including extensive experience advising insurance companies and policy holders on D&O insurance and corporate litigation.

Martin Weber has been named a local partner in our Global Banking Practice. Based in Berlin, he advises clients on public commercial law, with an emphasis on financial regulation, representing public institutions, banks and insurance companies on corporate and product-related issues in the financial services sector.

Anne Wicks has been named counsel in our Global Project Finance Practice. Based in Abu Dhabi, she advises government entities, sponsors and developers on the development of oil and gas and power projects, particularly in the Middle East.

ASIA-PACIFIC

Tess Fang has been named a local partner in our Global Mergers & Acquisitions Practice. Based in Hong Kong, she advises clients on cross-border mergers and acquisitions and divestitures, private equity transactions and joint ventures.

Keisuke Imon has been named a local partner in our Global Asset Finance Practice. Based in Tokyo, he advises clients on a range of financing matters, with a particular focus on asset finance.

Kazuo Kasai has been named counsel in our Global Mergers & Acquisitions Practice. Based in Tokyo, he advises clients on all aspects of real estate transactions, including complex financings and renewable energy transactions, particularly solar and wind.

Gee Hou Tng has been named a local partner in our Global Banking Practice. Based in Beijing, he advises clients on regional and domestic syndicated loans, and structured and acquisition financings.

During 2017, 11 counsel and nine local partners have joined the Firm.

AMERICAS

• Mauricio Gonzalez, counsel, Global Commercial Litigation Practice, Los Angeles
• Danli Guo, counsel, Global Mergers & Acquisitions Practice, Silicon Valley
• Juan Federico Ruenes Rosales, counsel, Global Project Finance Practice, Mexico City

EMEA

• Jose Blanco, local partner, Global Mergers & Acquisitions Practice, Madrid
• Thilo Diehl, local partner, Global Capital Markets Practice, Frankfurt
• Christophe Goossens, local partner, Global Mergers & Acquisitions Practice, Brussels
• Andreas Horn, local partner, Global Mergers & Acquisitions Practice, Düsseldorf
• Charles Julien, counsel, Global International Trade Practice, Geneva
• Florian Kleinschmit, local partner, Global Banking Practice, Berlin
• Muzi Kubeka, local partner, Global Project Finance Practice, Johannesburg
• Peter Lu, counsel, Global Mergers & Acquisitions Practice, London
• Ziad Saad, counsel, Global Capital Markets Practice, Dubai
• Sebastian Schrag, local partner, Global Banking Practice, Frankfurt
• Francis Tierney, counsel, Global Intellectual Property Practice, London

ASIA-PACIFIC

• Andrew Bishop, local partner, Global Mergers & Acquisitions Practice, Hong Kong
• Fiona Curl, counsel, Global Project Finance Practice, Melbourne
• Nels Hansen, local partner, Global Mergers & Acquisitions Practice, Tokyo
• Mark Montag, counsel, Global Project Finance Practice, Melbourne
• Anna Margaret O'Reilly, counsel, Global Project Finance Practice, Melbourne
• Candice Ota, counsel, Global Project Finance Practice, Melbourne

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For more information please speak to your local media contact.

An upcoming Financial Conduct Authority (FCA) inquiry into the wholesale insurance-broking market – the FCA's newest initiative in a series of market studies since it gained competition powers – will examine more than 160 brokers. London-based White & Case partner Marc Israel said: "The FCA hasn't had its competition powers long but it is really ramping up. The advantage here is that the FCA warned that this was coming, and so firms can have given some thought about potential remedies." Click here to read more (paywall).

The European Court of Justice held in Coty¹ that a manufacturer operating a lawful selective distribution system for luxury goods is allowed to prohibit its authorised distributors from selling those goods on third-party Internet platforms.

The Court confirmed more generally that, under certain conditions, selective distribution systems designed primarily to preserve the luxury image of goods comply with Article 101(1) TFEU. In so doing, the Court clarified its judgment in Pierre Fabre² which had prompted some commentators to doubt altogether the legality of selective distribution systems for luxury goods.

Manufacturers of luxury products will now be able to keep a tight grip over their selective distribution networks in the EU. The debate will move to national courts and competition authorities which will have to decide whether the judgment applies to luxury products only – and what exactly falls within the scope of "luxury" for such purposes – or to a broader category of products.

Background

Coty is a leading manufacturer of luxury cosmetics, which distributes its products through a selective distribution network of authorised retailers. Resellers can sell the products on the Internet through an "electronic shop window" on the condition that the products' luxury character is preserved. However, they are prohibited from selling on unauthorised third-party online resellers that are "discernible to the public to handle Internet sales" (e.g. eBay, Rakuten or Amazon). One reseller – Parfümerie Akzente, the defendant in this case – refused to adhere to this prohibition and began selling Coty's goods on amazon.de. Coty sought to enjoin the reseller from doing so, but the lower instance court refused to enforce the restriction, finding that it violated both EU and German competition law. ³ On appeal, the Frankfurt Higher Regional Court sought a preliminary ruling from the ECJ to determine essentially whether (a) selective distribution systems for luxury goods that aim at ensuring a “luxury image” are in general compatible with Article 101 TFEU and (b) whether the prohibition of sales on third-party online marketplaces is lawful.

The Coty case arose against the backdrop of contradictory decisions by German courts and the German Federal Cartel Office regarding access to third-party online marketplaces and price comparison portals.⁴ The matter is also quite contentious elsewhere in Europe, with national competition authorities and courts reaching conflicting decisions. The broader importance of the case is reflected in the number – and opposite views – of governments intervening in the case: while Germany and Luxembourg took the position that such restrictions are anti-competitive, France, Italy, Netherlands, Austria and Sweden favoured allowing restrictions on selling at online marketplaces. The European Commission, in its observations, also unequivocally endorsed the latter approach, which is consistent with its Vertical Guidelines and statements in the context of its recent E-commerce sector inquiry.

Legality of selective distribution systems for luxury goods confirmed

In Coty, the ECJ unequivocally reiterates that selective distribution systems comply with Article 101 TFEU under the following conditions:

• that the resellers are chosen on the basis of objective criteria of a qualitative nature;
• that these criteria are laid down uniformly for all potential resellers;
• that these criteria are applied in a non-discriminatory fashion;
• that the characteristics of the product in question necessitate such a network in order to preserve its quality and ensure its proper use; and
• that the criteria laid down do not go beyond what is necessary.

According to the Court, the allure and prestigious image of luxury goods enables consumers to distinguish them from similar goods. Impairing that aura is therefore likely to affect the actual quality of those goods.⁵ The condition that the luxury goods are displayed in sales outlets in a manner that enhances their value contributes to the reputation of the goods and contributes to sustaining their aura of luxury.⁶ Therefore, the characteristics and the nature of goods may justify the implementation of a selective distribution system to preserve the quality of those goods and ensures their proper use.⁷

The ECJ clarified the much-debated potential contradiction between its older case law and the Pierre Fabre judgment. First, the Court repeated a statement in Pierre Fabre that agreements constituting a selective distribution system "necessarily affect competition in the common [or internal] market". The Court, however, did not repeat the next sentence in the Pierre Fabre statement that "[s]uch agreements are to be considered, in the absence of objective justification, as 'restrictions by object'".⁸ This subtle but clear omission in Coty sends a signal that selective distribution agreements should not be seen as presumptively anti-competitive.

Second, the Court specified that paragraph 46 of Pierre Fabre,⁹ which was the focus of many debates, should not be misread to raise doubts about the general legality of selective distribution systems for luxury goods. The Court explained that its assertions in this paragraph of Pierre Fabre should have been read"in the light of the context of that judgment" and as "interpretative elements" necessary to enable the referring court in that case to rule on the underlying issue.

The Court then clearly distinguished Coty from Pierre Fabre, stressing that the context in Pierre Fabre was particular because the prohibition referred to all online sales by Pierre Fabre's distributors and the goods in question "were not luxury goods, but cosmetic and body hygiene goods".¹⁰ It is not clear, however, which of the two is the main distinguishing factor.

Prohibition of sales on online marketplaces allowed

As regards the contractual clause prohibiting sales on online marketplaces that Coty imposed on its resellers, the Court finds that such a clause, designed in the context of a selective distribution system, will be lawful under Article 101(1) as long as it meets the same criteria that the system itself is required to meet (see above).

Normally, it is the referring court that applies the ECJ's ruling to the facts of the case, but the ECJ here provides a detailed reasoning as to why the above criteria are met in this case, thus essentially giving the final result "on the plate". This usually happens when the Court feels strongly about a case and has all the elements in its possession to give a powerful indication to the national court as to how to decide it.

It was common ground that the objective of the clause in question was to preserve the image of luxury and prestige of the goods at issue. The clause was also clearly objective and applied uniformly and without discrimination to all distributors across the board. The Court therefore only found it necessary to examine whether the clause was "proportionate in light of the objective pursued".¹¹

First, the Court finds that the clause was appropriate to preserve the luxury image of the goods, because it provided the supplier with a guarantee that those goods will be exclusively associated with the authorised distributors and that they will be sold online in an environment that corresponds to the qualitative conditions that brand owners are permitted to impose on their authorised distributors. Allowing the goods to be sold via unauthorised resellers would carry the risk of deterioration of the goods' presentation and could harm their luxury image. The Court also notes that online platforms sell "goods of all kinds", which could harm the luxury image of the goods in question.

Second, the Court finds that the prohibition did not go beyond what was necessary for the attainment of the objective pursued. The clause did not contain an absolute prohibition to sell the goods online, but permitted the distributors to sell the goods on their own websites or via third-party platforms"when the use of such platforms [was] not discernible to the consumer". Moreover, the Court notes that the Commission's E-commerce investigation showed that third-party online platforms remain relatively marginal and that the main online distribution channel remains the distributors’ own online shops.¹² Then, the absence of any contractual relationship between the supplier and third-party platforms means that the former cannot be sure that the latter will comply with any pre-defined quality conditions.

Finally, in response to a question from the referring court, the Court also examines whether, in case the clause was found to breach Article 101(1), it could be block-exempted by Regulation 330/2010¹³ on vertical agreements (VBER).¹⁴ That would be the case if there was no "hardcore restriction". The Court confirms that the prohibition of online sales via third-party platforms should not be treated as a "hardcore restriction" within the meaning of the VBER: first, the prohibition could be considered neither as a restriction on the customers to which a distributor could resell¹⁵ nor as a restriction of passive sales,¹⁶ because customers can still reach the online offer of authorised distributors either via advertisement on third-party platforms or by using various search engines. The Court thus discredits the idea that all Internet sales are to be considered passive sales.

Outcome and consequences

It is now clear that restrictions imposed on selective distributors of luxury products to sell on third-party online platforms are presumptively compliant with EU competition law, if they are imposed in the context of a lawful selective distribution system. The judgment thus brings legal clarity on a question that had led to heated discussions and conflicting judicial and administrative outcomes.

Reactions to the judgment were quick: the Commission praised the judgment (which is in line with the Commission’s public stance on the matter), while the President of the German Federal Cartel Office emphasised that its scope was narrow and limited to luxury products only. Stakeholders have been warned: the terms of the debate may have changed, but it has not disappeared. We are now likely to see further enforcement and litigation focusing on the issue of whether products other than luxury products may benefit from the presumptive lawfulness.

On this issue, it is clear that, contrary to AG Wahl's opinion,¹⁷ which seemed to accept the legality of the clause in question beyond luxury goods, the Court in Coty says little about products other than luxury products. The proponents of a narrow interpretation of the Court’s ruling will no doubt stress the fact that the word "luxury" appears 54 times in 69 paragraphs. Those advocating a more expansive reading of the ruling will note that the judgment in para. 24 uses as starting point of its analysis para. 41 of Pierre Fabre, which itself refers to Metro I, a judgment concerning"high quality and technically advanced consumer durables". Furthermore, it is interesting to note that the judgment at times refers to the"luxury and prestige" of the goods in question¹⁸, yet the actual answer to the German's court's question does not mention prestige, only "luxury". There may therefore be debate as to whether goods in any particular scenario are "prestige".

Another point of contention will be the question how to treat clauses restricting selective distributors' sales on on-line platforms for non-luxury goods. Should these be treated as an "object" or an "effect" restriction of Article 101(1)? The ECJ’s reasoning in paras 65-67 as to why the clauses in question contain no "hardcore restriction" under the VBER is not premised on the "luxury" identity of the goods. This would seem to imply that a hypothetical clause restricting selective distributors’ sales on on-line platforms for non-luxury goods would probably have to be analysed as a by "effect" and not as a by "object" restriction of competition. This, however, may call for another preliminary reference to the ECJ in the future.

While the controversy will no doubt continue to rage, the ECJ does seem to provide grounds for optimism for those arguing in favour of sales restrictions in relation to third-party platforms under the VBER, regardless of the products’ luxury or prestige. Such restrictions could, arguably, be block-exempted as long as the seller’s and retailer’s market shares, respectively, do not exceed 30%. One thing is sure however: this is unlikely to be the final word.

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¹ Case C-230/16 Coty Germany; judgment of 6 December 2017.
² See ECJ Judgment of 13 October 2011 in case C-439/09 Pierre Fabre Dermo-Cosmétique.
³ The lower court relied on Case C-439/09 Pierre Fabre Dermo-Cosmétique SAS.
⁴ For example, the Düsseldorf Higher Regional Court ruled that ASICS’s general prohibition preventing its dealers from using price comparison portals violated competition law, because it was not necessary to ensure consistent product quality and preserve the brand image. Conversely, the Frankfurt Higher Regional Court held that retailers of Deuter backpacks were legitimately prohibited from distributing the products on Amazon and on price comparison portals, because this ensured the product quality and a qualified product advice.
⁵Coty, para. 25.
⁶Ibid, para. 27.
⁷Ibid, para. 26.
⁸ Pierre Fabre, para. 39.
⁹ "The aim of maintaining a prestigious image is not a legitimate aim for restricting competition…".
¹⁰ Coty, paras 32 and 33.
¹¹ See Coty, para. 43.
¹² Interestingly, the Commission's investigation revealed that the use of third-party online platforms is particularly prominent in Germany, where the Coty case originated from.
¹³ Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the TFEU to categories of vertical agreements and concerted practices (OJ L 103).
¹⁴ In the case at hand the market share thresholds provided for in Article 3 VBER were not exceeded.
¹⁵ Within the meaning of Article 4(b) VBER.
¹⁶ Within the meaning of Article 4(c) VBER.
¹⁷ Opinion of Advocate General Wahl in Coty of 26 July 2017; see our summary of the opinion here.
¹⁸Coty, paras 38 and 42.

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© 2017 White & Case LLP

Martin Jahn, an associate of the Prague office, is a member of the Disputes Practice Group focusing on competition law, regulatory matters and dispute resolution. He joined White & Case during his studies in 2016 as a legal intern.

Martin earned his master's degree in law at the Law School of Charles University in Prague, and spent two semesters at the University of Sussex in England, where he focused mainly on European Competition Law.

Martin previously worked as a legal intern in a Czech law firm where he gained general legal practice experience, particularly in the field of civil and commercial law.

Martin provides legal services primarily in the areas of competition law, litigation and personal data protection.

Global law firm White & Case has advised Nestlé Italiana, the Italian subsidiary of Nestlé, on its sale of a business unit dedicated to the production of stuffed pasta and sauces operating under the Buitoni brand and located in Italy (Cuneo) to Pastificio Rana S.p.A.

Nestlé is the world's largest food and beverage company, with more than 2000 brands ranging from global icons to local favourites, and located in 191 countries around the world.

In the context of the sale of the business unit, Nestlé Italiana and Pastificio Rana have also reached a commercial agreement based on which Pastificio Rana will produce and distribute Buitoni's chilled pasta and sauces for Nestlé Italiana throughout Europe, Middle East & North Africa, with the exception of Italy and Spain, where those products will continue to be distributed directly by Nestlé Italiana.

The White & Case team which advised on the transaction was led by partners Leonardo Graffi and Ferigo Foscari together with associates Sara Scapin and Mariasole Maschio (all Milan). White & Case also advised both Nestlé Italiana and Pastificio Rana as joint antitrust counsel with a team led by partner Veronica Pinotti and associate Martino Sforza (all Milan).

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The rapidly changing retail landscape entails risks as well as opportunities.

As the European competition law authorities crack down on manufacturers and suppliers and restrict retailers' sales activities, companies in the retail sector need to be proactive about competition law compliance.

Join our lawyers and top experts from the industry as they offer practical guidance and insights on the recent case law as well as other key challenges and legislation affecting both online and brick and mortar retailers.

Thursday, 18 January 2017
Registration and breakfast: 8:00 a.m. CET
Seminar / Webinar: 8:30 a.m. – 10:00 a.m. CET

White & Case, 19 place Vendôme, 75001 Paris

Speakers:

• Didier Gautier, Directeur du Service National des Enquêtes (SNE) de la DGCCRF
• Giuseppina Divono, Legal Counsel, Huawei Technologies Italia
• Viktoria Petzold, Legal Counsel, tesa SE
• Justus Herrlinger, Partner, White & Case (Hamburg)
• Veronica Pinotti, Partner, White & Case (Milan)
• Yann Utzschneider, Partner, White & Case (Paris)

Follow this link to request an invitation. If you have any questions please contact Jerome Harber.

Global law firm White & Case LLP has advised the Group Les Mousquetaires on a significant victory against the French Ministry of Economy.

In October 2009, the Secretary of State for Trade announced the launch of proceedings against various brands, including the Group Les Mousquetaires. Based on the provisions of Article L.442-6 of the Commercial Code resulting from the Modernization of the Economy Act dated August 4, 2008, the Minister of Economy alleged that the examined trade conventions contained clauses which were excessively unbalanced. The Commercial Court of Evry initially dismissed the Minister's action against the Group Les Mousquetaires.

In its judgment dated December 20, 2017, the Paris Court of Appeal dismissed in turn the Minister's claims against the distributor's central purchasing agency (termination of practices and a fine of €2 million). The Paris Court of Appeal upheld the arguments that no evidence was provided by the Minister of a submission (or attempted submission) of its suppliers by Les Mousquetaires.

The decision is important for the rights of the companies pursued in that the Paris Court of Appeal expressly recognizes that the actions of the Minister must comply with the fundamental rights guaranteed in criminal matters by the European Convention on Human Rights, including the presumption of innocence.

The White & Case team in Paris which advised on the dispute was led by partner Yann Utzschneider and counsel Mickaël Rivollier.

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Global law firm White & Case LLP has advised Duke Street, a private equity firm focused on leveraged buyout and growth capital investments in European middle market companies, on the acquisition of A-ROSA Flussschiff GmbH (A-ROSA).

The seller is Waterland, an independent private equity investment company, and the parties have agreed not to disclose the purchase price. The transaction, Duke Street's second investment in Germany, is subject to approval by the relevant antitrust authorities.

A-ROSA, based in Rostock in northern Germany and in Chur in Switzerland, is the market leader in the premium segment for river cruises on Europe's Danube, Rhine/Main/Mosel, Rhône/Saône and Seine rivers. The company was founded in 2001 as a subsidiary of P&O Princess Cruises and employs around 600 people. More than 85,000 passengers travelled on board A-ROSA cruises during 2017.

During 2016, a team led by White & Case partner Stefan Koch advised Duke Street on its first transaction in Germany, the takeover of Medi-Globe Corporation.

The White & Case team which advised on the transaction was led by partner Stefan Koch (Frankfurt) and included partners Florian Degenhardt (Hamburg), Norbert Wimmer (Berlin) and Justus Herrlinger (Hamburg), local partners Florian Ziegler (Frankfurt) and Veit Sahlfeld (Hamburg), counsel Christoph Arhold (Berlin) and associates Tomislav Vrabec, Hugo Schwarz Leite, Marco Stephan (all Frankfurt), Kathrin Ahting (Berlin), Daniel Valdini, Julia Cornelius (both Hamburg) and Andreas Kössel (Frankfurt). Lawyers from the White & Case office in Paris office also advised on the transaction.

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Global law firm White & Case LLP has advised WernerCo, a Triton IV fund company, on its acquisition of ZARGES Group (ZARGES).

The seller is a consortium consisting of funds managed by Baird Capital and Granville, VR Equitypartner and the management team ZARGES. The acquisition enhances WernerCo's position as a market leader for industrial climbing products and storage and transport containers in Europe. The parties have agreed not to disclose the purchase price.

WernerCo is an international manufacturer and distributor of access products, fall protection equipment, secure storage systems and light duty construction equipment. It has manufacturing, warehousing, sales, distribution and office facilities in the US, Australia, Canada, China, France, Hungary, Mexico, Philippines, Vietnam and the UK.

ZARGES, based in Weilheim in Germany, has three production sites in Europe and around 800 employees. It is a leading company in major business sectors such as professional access, packaging/transportation/storage and special construction. ZARGES products are sold into various markets including Germany, France, Sweden, the UK, Denmark, Norway and the Netherlands.

During 2017, White & Case team led by Frankfurt partner Gernot Wagner advised private equity investor Triton on its acquisition of WernerCo.

The White & Case team which advised on the transaction was co-led by partners Hendrik Roehricht and Gernot Wagner (both Frankfurt) and included partners Bodo Bender (Frankfurt), Justus Herrlinger (Hamburg), Vanessa Schuermann (Frankfurt), Justin Wagstaff and Marc Israel (both London), local partners Sebastian Schrag, Ingrid Wijnmalen (both Frankfurt), Lars Petersen (Hamburg) and Katarzyna Czapracka (Warsaw), counsel Andreas Klein (Frankfurt) and associates Simon Rommelfanger, Jan Ole Eichstaedt, Anne-Sophie von Koester (all Frankfurt), Daniel Valdini (Hamburg), Andreas Koessel, Irina Schultheiss (both Frankfurt), Giuditta Caldini (Brussels), Veronika Merjava (Prague) and Claire Jordan (New York).

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On January 19, 2018, the federal government failed to enact appropriations to fund federal operations, resulting in a government shutdown. Both the Department of Justice (DOJ) and Federal Trade Commission (FTC) have issued plans for how this shutdown will impact antitrust merger enforcement.

Key Takeaways

• Hart-Scott-Rodino (HSR) filings will be accepted by the agencies during the government shutdown.
• Early Termination of the HSR waiting period will not be granted during the shutdown.
• Due to its limited staff, the Premerger Notification Office of the FTC will not answer email or telephone inquiries regarding HSR rules or filing procedures.
• HSR waiting periods will continue to run during a government shutdown and DOJ and FTC staff will continue to review premerger filings and conduct investigations to determine whether to challenge reported transactions under the antitrust laws.
• Second Requests will continue to be issued.
• If engaged in merger litigation, FTC and DOJ attorneys will notify opposing parties and the courts of the government shutdown and attempt to negotiate timing extensions and suspensions. If such relief is not available, they will continue to litigate the matter.
• The FTC and DOJ websites will be available during a shutdown but will not be regularly updated.

Analysis

The DOJ and FTC have developed a shutdown plan in the event of a government shutdown. Each plan designates which employees are furloughed during a shutdown and which employees are excepted from the furlough requirement.

The DOJ and the FTC both issued contingency plans indicating that certain employees connected to antitrust enforcement within the Antitrust Division of the DOJ and the Bureau of Competition at the FTC will be excepted from the furlough and would continue to conduct antitrust enforcement activities.

During the government shutdown, the FTC and DOJ will accept HSR filings and certain staff from the Commission’s Premerger Notification Office will be excepted from furlough to accept filings and organize them for review; however, they will not issue early terminations of the HSR waiting period. HSR waiting periods will run their normal course during the shutdown, and both agencies will keep sufficient staff on hand to investigate mergers that could raise competitive issues. For litigated matters, both agencies have indicated that when possible, they will attempt to secure a continuance or otherwise request suspensions of dates for trials, hearings and filings, or similar relief to preserve the government’s claim. If such relief is not available, both agencies will continue to litigate the matter.

In the current DOJ Contingency Plan, of the 680 Antitrust Division employees, a total of 277 (41%) are excepted from furlough in the case of a government shutdown. In the current FTC Contingency Plan, of the 306 total Bureau of Competition employees, a total of 132 (43%) are excepted from the furlough. Moreover, within the Bureau of Economics, of the 105 employees, 10 (9%) are excepted from the furlough.

It is difficult to anticipate whether the FTC or DOJ would be more likely to request that merging parties refile their HSR forms (starting a new waiting period), or whether they would be more likely to issue a Second Request because of more limited staffing. It will likely depend on how long a shutdown lasts and how substantial the merger review workload is during a shutdown.

Links to the current DOJ and FTC Contingency Plans can be found here:

• DOJ: https://www.justice.gov/jmd/file/778206/download
• FTC: https://www.ftc.gov/system/files/attachments/office-executive-director/ftc_shutdown_plan_08-15-17.pdf

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2018 White & Case LLP

On January 26, 2018, the Federal Trade Commission (FTC) announced the annual changes to the Hart-Scott-Rodino (HSR) Act notification thresholds.

The FTC is required by law to revise the jurisdictional thresholds annually, based on the change in gross national product. Accordingly, the 2018 Hart-Scott-Rodino reporting thresholds will increase by approximately 4.5% over 2017. These changes are expected to be published in the Federal Register on January 29, 2018 and will become effective 30 days after publication. The application of these HSR filing thresholds, particularly to cross-border transactions, is not straightforward and requires a thorough understanding of the statute and the voluminous and complex implementing regulations.

The HSR size-of-transaction threshold will increase to US$84.4 million from US$80.8 million. Transactions in which the acquirer will hold voting securities, non-corporate interests or assets valued above that amount (as calculated under the Act) may be reportable if the size-of-parties test is also satisfied and no exemptions are available.

The HSR size-of-parties threshold will also increase. It generally will require that one party have sales or assets of at least US$168.8 million and the other party have sales or assets of at least US$16.9 million. (Currently these thresholds are US$161.5 million and US$16.2 million, respectively.) Transactions valued at more than US$337.6 million will be subject to pre-merger notification without regard to the sales or assets of the parties. (Currently, this threshold is US$323.0 million.)

Certain dollar thresholds relevant to HSR exemptions, including those for acquisitions of non-US assets and voting securities, will also increase. The notification thresholds (which determine the filing fee payable) have increased as well, although the filing fees have not changed.

To summarize, the new HSR thresholds are as follows:

Size-of-transaction threshold:
US$ 80.8 million will become US$ 84.4 million 

Size-of-parties thresholds:
US$ 16.2 million will become US$ 16.9 million
US$ 161.5 million will become US$ 168.8 million 

Size-of-parties valuation "cap":
US$ 323.0 million will become US$ 337.6 million 

Notification thresholds:
US$ 80.8 million will become US$ 84.4 million
US$ 161.5 million will become US$ 168.8 million
US$ 807.5 million will become US$ 843.9 million 

Civil Penalty:
On January 23, 2018, the FTC separately announced that the maximum civil penalty amount for violations of the HSR Act will increase from $40,654 to $41,484 per day, effective upon publication in the Federal Register. The new penalty levels apply to civil penalties assessed after the effective date of the adjustment, including civil penalties whose associated violation predated the effective date. 

Filing fees:
No changes

Noncompliance with the HSR act will carry serious penalties; parties should consult with their counsel before acting.

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2018 White & Case LLP

The highest EU court has held that an agreement to disseminate misleading information about the safety of a medicine being used off-label may restrict competition by object.

On 23 January 2018, the Grand Chamber of the Court of Justice ("ECJ") delivered its judgment on preliminary reference from the Italian State Council in the Roche case, which concerns the off-label use of Avastin for the treatment of ophthalmological pathology in Italy (Case C-179/16). The judgment is noteworthy for its implications for market definition and on the qualification of certain practices as restriction by object in the pharmaceutical sector. Here are the main takeaways:

• medicinal products sold or manufactured unlawfully should not be regarded as part of the same relevant market as lawfully authorized products;
• medicinal products can be used off-label only under strict conditions, and it is for regulatory bodies, not competition authorities, to decide on the lawfulness of the off-label use of a medicinal product (but competition authorities must take this conclusion into account when defining markets);
• medicinal products which are lawfully used off-label can be found to be in the same relevant market as lawfully authorized products, if both products are regarded as therapeutically substitutable;
• an agreement between two firms to disseminate misleading information regarding a medicinal product used off-label, with the view of reducing the competitive pressure from such product, can constitute a by-object restriction within the meaning of Article 101 TFEU (subject to three-prong test set out by the ECJ).

Background

Genentech developed two medicines from related active substances (Avastin and Lucentis). Lucentis was authorized by the European Commission and the European Medicines Agency ("EMA") for the treatment of eye diseases, while Avastin was authorized for oncological applications (colorectal cancer). A licence for the exploitation of Lucentis was granted to Novartis, while the right to exploit Avastin was licensed to Roche.

Before Lucentis was placed on the market, Italian doctors started to prescribe Avastin for the treatment of eye diseases, and this off-label use spread widely in Italy. Once Lucentis was placed on the market, the practice continued because of Avastin’s perceived lower price (essentially due to substantial re-compounding of single vials into multiple injection doses).

In 2014, the Italian Competition Authority fined Roche and Novartis approximately EUR 90 million each, alleging that they had entered into a market-sharing agreement, colluding to create an artificial differentiation between Avastin and Lucentis to discourage the off-label use of Avastin. Based on its (contested) factual finding that the two products were equivalent for the treatment of eye diseases, the Italian Competition Authority concluded that the agreement had intended to cause a shift in demand in favour of Lucentis by disseminating information aimed at raising concerns regarding the safety of the off-label use of Avastin for ophthalmological purposes.

The two companies appealed the decision before the Regional Administrative Court of Lazio, which dismissed their action, and then lodged an appeal before the Council of State, which stayed the proceedings and referred a series of questions to the ECJ, which covered:

• market definition in the context of authorized and non-authorized medicinal products;
• the possible classification of the conduct in question as an ancillary restriction to the licence agreement; and
• whether such conduct, if proved, could amount to a restriction of competition by object.

Licensed products are not in the same market as illegal off-label products, but it is the regulatory authority that decides this

In its judgment, the ECJ started by stressing that products manufactured and sold illegally could not, as a matter of principle, be viewed as substitutable or interchangeable with lawfully authorized products, in particular because of the risks involved for public health (§52).

The ECJ then confirmed that, although the off-label use of an authorized medicinal product or its repackaging (or, presumably, re-compounding) for such a purpose is not directly prohibited by EU rules, it is subject to strict conditions (§§57-58). The ECJ referred inter alia to its Commission v Poland judgment, in which it found that one of the conditions for off-label use to be authorized was the lack of an equivalent, authorized product on the market.¹ Yet this aspect is not discussed further in the Court's judgment despite the fact that, once Lucentis was approved, there was an equivalent, authorized product on the market.

Notably, the ECJ also stated that national courts and pharmaceutical authorities are the bodies responsible for the analysis of off-label conditions, not the competition authority. Therefore, in assessing whether off-label and authorized products are part of the same relevant market, a competition authority first has to refer to their conclusions (§61). If they have decided that the necessary conditions were not respected, it can reasonably be inferred from this judgment that the competition authority would have to conclude that the two products do not belong to the same relevant market.

If medicines are legally being used off-label, then market definition is based on therapeutic substitution

In the present case, however, the ECJ said that the uncertainty as to the legality of the off-label use of Avastin was not enough to preclude it from being in the same market as Lucentis (§64). This means that where the conditions for off-label use are met, or where no unlawful off-label use has been established by the competent bodies, there seems to be no bar from considering authorized and off-label drugs to be part of the same market, provided of course they are effectively used for the same therapeutic indication.

In this regard, the Court underlined that, given the attributes of the pharmaceutical sector, the relevant market is "in principle, capable of comprising medicinal products that may be used for the same therapeutic indications, since the prescribing doctors are primarily guided by considerations of therapeutic appropriateness and the efficacy of medicines" (§65), confirming in passing the importance of therapeutic substitution when defining markets in the pharmaceutical sector.

The ECJ's judgment will avoid competition authorities having to make complex assessments as to the lawfulness of the off-label use of a particular drug, which they are not well-equipped to make. The judgment clearly says, however, that competition authorities must take into account the decisions of the regulatory bodies. The corollary must be that the relevant regulatory bodies must clearly be under a duty to react swiftly when alerted by pharmaceutical companies of the possible unlawful off-label use of a drug. This is all the more important as it follows from the ECJ judgment that their decision (or lack thereof) on such issue bears consequences for the definition of the relevant market.

A restriction aimed at limiting the commercial autonomy of third parties is not ancillary

In line with its analysis in the MasterCard judgment,² the ECJ found that the conduct in question could not qualify as an ancillary restraint to the licensing agreement concluded between Novartis and Roche, escaping the prohibition of Article 101 TFEU. The ECJ underscored that the objective of the conduct, entered into several years after the licence, was to influence the behaviour of third parties such as healthcare professionals, rather than to restrict the commercial autonomy of the licensing parties themselves (§§72-73).

Communicating misleading information about the safety of a pharmaceutical product can be qualified as restriction by object

In the last part of the judgment, the ECJ goes on to answer the following question: does an agreement between two pharmaceutical companies which concerns the dissemination, in a context of scientific uncertainty, of information relating to adverse reactions resulting from the use of one medicinal product for indications not covered by its market authorization ("MA"), with a view to reducing the competitive pressure resulting from that use on another medicinal product covered by an MA covering those indications, constitute a restriction of competition "by object" for the purposes of that provision (§77).

As an aside, it is interesting to note that the ECJ significantly reformulated the question originally asked by the Council of State (compare §77 and §36(5)). This may not facilitate the Council of State's resolution of the case.

To answer the question, the ECJ first reaffirmed that the concept of restriction of competition by object should be interpreted restrictively, and that the key criterion is whether the degree of harm displayed by the agreement is sufficient to obviate the need to look at its actual effects (§78).

The ECJ also confirmed that, in the pharmaceutical sector, the assessment must take into account the impact of EU rules on pharmaceutical products (§§79-80). Amongst these rules is pharmacovigilance, which must be respected by MA holders, under the control of the EMA, coordinating with the competent national agencies. In short, pharmacovigilance imposes an obligation to supply the EMA, the Commission, and the Member States with any new information relevant for the issuance of an MA and any other new information which might have an impact on the benefits and risks of the product.³

The ECJ then essentially assessed whether, through the conduct in question, the parties merely satisfied their pharmacovigilance obligations.

It first observed that pharmacovigilance obligations normally weigh on the MA holder, and not on the company marketing a competing product, so the involvement of a competitor could indicate that the conduct had a different purpose (§91).

Second, the ECJ ruled that the information Roche and Novartis had communicated to the public and to the various authorities could, if it did not satisfy the regulatory requirements laid down in Regulation 658/2007 (namely, being complete and accurate) (first condition of the test), be regarded as misleading if the purpose of that information (second condition of the test) was:

• to mislead the EMA and the Commission, in order to obtain the inclusion of the adverse reactions to Avastin in the summary of product characteristics, so as to enable the MA holder to launch a communication campaign aimed at healthcare professionals, patients and other persons with a view to exaggerating that perception artificially; and
• to emphasise, in a context of scientific uncertainty, the public perception of the risks associated with the off-label use of Avastin, given, inter alia, the fact that the EMA and the Commission did not amend the summary of characteristics of that product in respect of its "adverse reactions" but merely issued "Special warnings and precautions for use" (§92).

Given the characteristics of the pharmaceutical market, the ECJ concluded that conduct found to pursue the objective of spreading such misleading information would lead to a reduction in demand and, consequently, of the competitive pressure exercised by the off-label product. It would therefore display a sufficient degree of harm to competition to constitute a restriction by object (§§93-95).

Three thoughts on the ECJ's ruling that on the by object test

There are three overarching points that one can make about the ECJ's conclusions on by object:

- First, it is clear that the ECJ meant to narrow down its finding on the existence of a restriction by object to an agreement to disseminate misleading information. Hence it does not reverse the key point established by the Cartes Bancaires judgment, namely that the concept of restriction by object should be narrowly interpreted and should be reserved for obvious cases or cases where there is experience of their negative effects.

- Second, the ECJ was clearly mindful to construe very narrowly the concept of misleading information, by reference to very specific factual circumstances. In this respect, it is worth noting the numerous references to the factual conclusions by the Italian Competition Authority’s decision that was being challenged – something that seems unusual for the ECJ. It is also unusual for the concept of "misleading" to appear in the judgment when it was not part of the referring court’s questions. As with any preliminary reference, it will be up to the Council of State to decide whether such factual circumstances are indeed met in this case, and whether the information can be seen as misleading as per the ECJ’s definition.

- Third, beyond the specific facts of the dispute, the judgment is significant in that it is the first time that the concept of restriction by object is applied to an agreement which (if the factual premises set out by the ECJ were subsequently to be confirmed by the national courts) aimed to disseminate allegedly misleading information about the safety of a medicinal product. While the judgment somehow echoes the decisional practice of the French Competition Authority, which has sanctioned a number of pharmaceutical companies for denigrating competing generic products,4 it is worth noting that the ECJ’s test for misleading in the present case appears to be more narrowly defined than the test in the French cases.

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¹ Judgment of 29 March 2012, Commission v Poland, C-185/10, EU:C:2012:181, para. 36.
² Judgment of 11 September 2014, MasterCard and Others v Commission, C382/12 P, paras 8-90.
³ Article 16(2) of Regulation No. 726/2004.

Jean-Baptiste Douchy, a legal trainee at White & Case, assisted in the development of this publication.

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2018 White & Case LLP

Alan Coadou is an associate in the Competition, EU Law and Economic Regulation practice of White & Case in Paris. He joined White & Case in July 2017 having previously worked as an intern in the competition law teams of several high profile law firms in Paris.

Alan deals with antitrust cases (cartels, abuses of dominance), merger control, commercial and administrative litigation, as well as distribution and consumer law.

Solène Eder is an associate in the Competition, EU Law and Economic Regulation practice of White & Case in Paris.

Solène represents and assists clients in relation to anti-competitive practices, merger control and distribution.

Before joining White & Case in July 2017, Solène was a trainee in the Luxembourg and Paris offices of several major law firms.

The United Parcel Service (UPS) attempted to merge with Dutch delivery company TNT Express NV a few years ago, but the European Commission blocked the merger. An EU court later overturned the block in January 2013, but UPS withdrew from the deal, allowing rival company FedEx to merge with TNT instead. Years later, UPS is now suing the Commission for US$2.15 billion plus interest. At the middle of the lawsuit lies a discussion regarding the capability of EU courts to overturn Commission decisions.

Brussels-based White & Case partner Assimakis Komninos offered his perspective, saying, "There is a feeling among the companies and competition practitioners that the courts have been rather lenient to the commission and therefore, it's either better to settle or to forget about appealing. There have been a couple of cases, which shows a bit [of] movement on the side of the court, but look at where we are coming from." Click here to read more.

Global law firm White & Case LLP advised PFH on its acquisition of Uni Gasket Group.

PFH is an independent investment holding company which has been operating in Italy for more than 30 years. Uni Gasket is an Italian company active in the production of PTFE, rubber and silicone pipes and gaskets.

The transaction has been partially financed through a term and revolving facility agreement provided by Unione di Banche Italiane S.p.A. and Banco BPM S.p.A., which were also advised by White & Case.

The White & Case team in Milan which advised PFH on the transaction comprised partners Leonardo Graffi and Veronica Pinotti, associates Alessandro Seganfreddo and Fabrizia Faggiano and lawyer Luca Silviani. The team which advised the banks comprised partner Iacopo Canino and associate Adriana Tisi.

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