EU Courts extend the doctrine of “undertaking” to private claims for damages

Introduction

The wide understanding of the notion of “undertaking” affords the European Commission (“Commission”) broad discretion when identifying the entities liable for competition law infringements, enabling it to attribute liability to all companies that constitute a single economic unit, such that a parent company can be liable for the wrongdoings of its subsidiary. The Commission also relies on the principle of economic continuity to establish liability when corporate groups are reconstructed.

With the increase of private competition law enforcement, the question arises whether individuals may rely on these concepts when establishing liability in private lawsuits. The recent Sumal and Skanska  cases confirm that EU Courts are in favour of extending the doctrine of “undertaking” to private damages claims. In his opinion of 15 April 2021 in Sumal, Advocate General (“AG”) Pitruzzella  proposes that a national court can order a subsidiary to pay compensation for the harm caused by anticompetitive conduct of its parent company. In March, the CJEU decided, in Skanska, that the principle of economic continuity applies in the context of follow-on damages claims.

Sumal

The case concerned Sumal’s claim against Mercedes Benz Trucks España SL (“MBTE”), part of the Daimler AG Group (“Daimler”), for damages of EUR 22,204.35 arising from an infringement of Article 101 TFEU. The damages claim was a follow on to the Commission’s decision establishing that MAN, Volvo/Renault, Daimler, Iveco, and DAF participated in a cartel for medium and heavy trucks, colluding on truck pricing and passing on the costs of compliance with stricter emission rules required by the Euro III to Euro VI environmental standards.

Sumal’s claim was not against Daimler, which was found liable by the Commission for the violation, but against its Spanish subsidiary, MBTE, which marketed Daimler trucks in Spain.  Sumal claimed that MBTE constituted a single undertaking with Daimler, such that it was jointly and severally liable for Daimler’s violation of EU competition law, and the lawsuit could be pursued in Spain. It was unclear to the Barcelona Provincial Court whether the doctrine of “undertaking” applies in the context of private claims or whether a subsidiary could be liable for infringement by its parent company.

In the context of the Barcelona Provincial Court’s request for a preliminary ruling, AG Pitruzzella’s opinion stated that claims for damages are an integral part of effective enforcement of EU competition law. Consequently, the “undertaking” concept applies in both public and private enforcement. Once the boundaries of an undertaking are established, they apply consistently in the Commission’s decision and private claims. The more entities that are within the scope of a single economic unit, the easier it is for victims of anticompetitive conduct to pursue claims in their own jurisdiction and increase their chances of receiving compensation.

AG Pitruzzella proposed that a subsidiary can be held liable for harm caused by the anticompetitive conduct of its parent company (so-called “top-down” liability). He stated that two key elements are necessary to establish top-down liability. First is the requirement that the parent company exercise decisive influence over its subsidiary, such that the latter simply executes the instructions of the former. Second is the requirement that the two entities constitute a single economic unit and therefore act jointly on the market, irrespective of corporate law principles pertaining to separate legal personality.

Skanska

The CJEU’s reasoning concerning the principle of economic continuity in Skanska was very similar to that of AG Pitruzzella in Sumal. Skanska concerned a cartel in the asphalt market in Finland, in which, among others, Lemminkäinen Oyi, Sata-Asfaltti Oy, Interasfaltti Oy, Asfalttineliö Oy and Asfaltti-Tekra Oy (which later became Skanska) were found to have participated. Towards the end of the cartel period, significant market consolidation occurred, in which three of the asphalt cartel participants each acquired another cartel participant.

In 2009, following an investigation by the Finnish Competition and Consumer Authority (“FCCA”), the Finnish Supreme Administrative Court applied the principle of economic continuity and imposed fines totalling EUR 82.5 million on the three acquiring companies, fining Skanska EUR 4.5 million. Vantaa, one of the cartel victims, subsequently claimed compensation from Skanska. It sought to rely on the principle of economic continuity to hold Skanska liable for the harm caused by its dissolved subsidiary. Skanska’s position was that it could not be held liable for the alleged harm because the principle of economic continuity does not exist in Finnish law. The Finnish Supreme Court commenced a preliminary reference procedure.

The CJEU established that EU competition law requires the principle of economic continuity to be applied in private claims for damages, regardless of the position in national law. According to the CJEU,  “the concept of ‘undertaking’, within the meaning of Article 101 TFEU, […] cannot have a different scope with regard to the imposition of fines by the Commission under Article 23(2) of Regulation No 1/2003 as compared with actions for damages for infringement of EU competition rules.”.

The CJEU also stated that the right to claim damages is a fundamental aspect of EU competition law given its deterrent effect on companies engaging in such conduct. The importance of this principle would be significantly undermined if companies could escape liability simply by restructuring.

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Recent Developments Shed Further Light on Congressional Subpoena Authority

Throughout recent months, we have closely monitored important developments in the courts and on Capitol Hill related to Congress’s power to issue and enforce subpoenas for documents or witness testimony.  As members of the 117th Congress continue to develop legislative and oversight priorities, a number of recent events signal continued uncertainty in congressional subpoena authority and interest in Congress in clarifying and strengthening that authority.  As discussed below, these recent developments hold significant implications for Congress’s ability to compel cooperation with their investigations.

Back to Square One in the Courts

Historically, investigators on Capitol Hill have relied on civil enforcement proceedings to enforce their subpoenas and compel the production of sought-after documents or testimony.  As we detailed in November, however, the D.C. Circuit cast doubt on the ability of investigators in the House to pursue this common avenue for enforcing its subpoenas.

The case, Committee on the Judiciary v. McGahn, arose from the House Judiciary Committee’s effort to seek civil enforcement of a subpoena issued to former White House Counsel Don McGahn for testimony in the Committee’s impeachment inquiry of President Trump.  Last August, a three-judge panel of the D.C. Circuit concluded that federal law provides no cause of action for House committees seeking civil enforcement of subpoenas, even when authorized by a House resolution.  On its face, this ruling would strip the House—but presumably not the Senate, which has separate statutory subpoena enforcement authority—of its ability to obtain a court order to enforce its subpoenas.  This in turn could have significant implications for parties responding to House oversight requests.

In October, the D.C. Circuit agreed to rehear the case en banc. With that said, as we noted in the fall, the Court appeared to be laying the groundwork for disposing of the case without offering a definitive ruling on the scope of Congress’s subpoena enforcement authority.  Since then, the parties have repeatedly sought to delay oral argument in the case, while they continued to negotiate the conditions under which McGahn would testify.  Those negotiations culminated in McGahn appearing before the Committee in a closed-door transcribed interview earlier this month.  And, sure enough, the parties late last week jointly moved to dismiss the pending appeal and vacate the underlying panel decision.

Assuming the Court agrees, the decision will leave unresolved the question of whether House committees may seek enforcement of their subpoenas in federal court.  Nonetheless, though the panel decision would no longer be binding on lower courts, lingering uncertainty regarding the ability of the House to enforce its subpoenas will continue to be an important consideration for parties responding to congressional oversight investigations.

Frustration Mounting on the Hill

While the question of congressional subpoena authority is stymied in the courts, congressional investigators are actively considering legislative angles to strengthen the congressional subpoena power.  In particular, in the last week, two separate hearings highlighted growing frustration among congressional investigators on both sides of the aisle.

First, perhaps unsurprisingly, the topic of congressional subpoena authority arose repeatedly during the House Judiciary Committee’s closed-door interview of McGahn, which resolved the case above.  Although the resulting testimony largely focused on the substance of the Committee’s underlying investigation, the 241-page transcript reveals congressional investigators’ repeated frustration about their lack of subpoena enforcement authority.  For instance, the hearing began with Committee staff highlighting that they first issued a subpoena for McGahn’s testimony on April 22, 2019, then reissued its subpoena in January 11, 2021, and finally reached an agreement to compel testimony over two years after the initial subpoena.

Second, on June 8, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held a hearing about civil enforcement of congressional authorities.  The hearing focused on testimony from four witnesses who proposed ways to strengthen the congressional subpoena and impose penalties for both government officials and private parties who do not comply.  The bipartisan consensus of the witnesses and Subcommittee members was that the House’s subpoena power is largely toothless, but a number of proposals could change that reality.  Democrats and Republicans both cited examples of ignored subpoenas during the Trump and Obama administrations, with House Judiciary Committee Chairman Jerry Nadler (D-NY) expressly noting that addressing Congress’s interest in ensuring that its subpoenas are enforced “transcends partisanship.”

Space for Bipartisan Action?

As frustrations mount, congressional investigators are increasingly considering legislative options to strengthen Congress’s ability to enforce its subpoenas.  Regardless of the ultimate outcome, the McGahn case highlights the tenuous statutory authority underlying enforcement of congressional subpoenas.  With this in mind, rather than relying on case law and risk a potentially unfavorable ruling in the courts, there is increasing interest on the Hill to codify and strengthen Congress’s subpoena enforcement authority.

Last June, Representative Ted Lieu (D-CA) led a group of House Democrats in introducing a resolution that would amend the House rules to formalize and expand the chamber’s “inherent contempt” authority.  In particular, the resolution would create a process by which individuals who refuse to comply with subpoenas would be subject to a hearing to determine if they should be held in contempt of Congress.  A party found to be in contempt would have 20 days to comply with the subpoena, or else be subject to an initial fine of no more than $25,000.  The fine would then increase incrementally to a maximum of $100,000 if the party still continues to ignore the subpoena.

After it stalled in the House last Congress, Lieu reintroduced the resolution in April. Although it remains to be seen whether the proposal will draw additional support in the current Congress, there is some reason to believe that proposals to strengthen congressional subpoena authority could be an area of rare bipartisan agreement.  In particular, in October 2017, the Republican-led House passed a bill that would have formalized the civil enforcement process for congressional subpoenas.  During the recent House Judiciary Subcommittee hearing addressing civil enforcement of congressional authorities, all four witnesses cited the bill and called for legislation to authorize Congress to file civil actions in federal court to enforce subpoenas.

Largely, these proposals have arisen out of frustration with uncooperative executive branch officials and focused on separation-of-powers concerns in an era of aggrandized executive power.  Nonetheless, proposals to bolster congressional oversight authority also hold important implications for private parties who find themselves subject to congressional investigations.  For that reason, parties that are or may be subject to congressional investigations would do well to monitor these proposals and potential rule changes.

This post was written with research assistance from Summer Associate Josh Schenk.

Twelve Things to Know About the Upcoming EU Carbon Border Adjustment Mechanism

The European Commission is currently discussing a draft of a proposal for a Carbon Border Adjustment Mechanism (“CBAM”) Regulation that it is expected to present on July 14, 2021.  A CBAM was already announced in the European Commission’s Communication for a Green Deal  and is intended to protect the EU’s domestic industry that is at risk of carbon leakage—to create a level playing field—and to serve as a policy tool to encourage third countries to reduce their greenhouse gas (“GHG”) emissions.

The CBAM draft proposal is subject to intense negotiations among the different Directorates-General of the European Commission, and it is likely that it will be amended several times before the Commission finally presents it on July 14.  Nevertheless, the draft already suggests that the CBAM proposal will require importers of covered goods into the EU to purchase and surrender a number of CBAM certificates that reflect the goods’ embedded emissions.  In line with the European Parliament’s resolution, the CBAM would be linked to the EU Emissions Trading System (“EU ETS”) as the price of the CBAM certificates would reflect the average price of the ETS allowances.

The CBAM proposal is likely to have the following elements:

  1. Geographical Scope: The CBAM is expected to apply to a limited category of goods that are imported from all third non-EU countries except those of the EEA. The European Commission would be empowered to adopt delegated acts excluding particular countries from the CBAM if they are fully integrated into the EU ETS or they conclude an agreement with the EU linking the third country’s emissions cap-and-trade system to the EU ETS.
  1. Product Scope: Initially, the CBAM is expected to cover only imported goods of certain sectors that in the EU are among those determined to be at high risk of carbon leakage: cement, certain fertilizers, iron and steel, and aluminum. In addition, the CBAM would cover electricity. The Commission would have the power to increase or reduce the sectors covered.  For example, it could later include paper, glass, and chemicals, as the European Parliament requested in its resolution.

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The UK, EU and the Northern Ireland Protocol

The Good Friday Agreement

The Troubles, which began in 1968 and lasted until the Good Friday Agreement (GFA) in 1998, left more than 3,700 people dead. The GFA introduced a new power-sharing N Ireland Government structure; decommissioned paramilitary weapons; established a number of joint committees between the UK, N and S Ireland to oversee the implementation of the GFA and address any possible tensions between the N and S Ireland or between communities in the North; created the ‘all-Ireland economy’; and protected the Common Travel Area.  But perhaps the most totemic and visible sign of the GFA’s success was the removal of the physical border infrastructure between N and S Ireland.

N Ireland & Brexit

When the UK left the EU, so too did N Ireland. Once the UK was no longer in the EU, an international border between the EU and the UK was inevitable. The only shared land border is the N/S Ireland frontier. The tensions between preserving the UK’s territorial integrity; protecting the GFA; and preserving the EU’s Single Market create a circle which cannot be squared – putting the border back between N/S Ireland would please the Unionists/Loyalists, but breach the GFA; putting it between GB and N Ireland would please the Nationalists, but jeopardise the UK’s territorial integrity.  Theresa May sought to square this circle by means of the Backstop, which would have left the UK in the EU’s Customs Union.  This option was replaced by the NIP when Boris Johnson became the PM.

The Northern Ireland Protocol

The Northern Ireland Protocol (the NIP) was the answer to this Brexit conundrum.  Under the NIP, N Ireland remains in the EU Single Market for trading purposes, but remains in the UK for customs, legal and administrative purposes. To protect the GFA, the administrative border between the UK and the EU was placed ‘in’ the Irish Sea, meaning goods travelling from GB to N Ireland are inspected on arrival in N Ireland by N Irish inspectors who apply EU customs rules. No customs duties are payable on goods moved from GB to N Ireland, unless those goods are ‘at risk of making their way onwards into the EU.

Checks on Goods moving from GB to N Ireland

The NIP staggered the introduction of border checks to help companies adapt to the new trading arrangements. Some goods were subject to checks from 1 February 2021.  Others only after the expiry of a grace period at the end of March, designed hip.  A second grace period (which covers the import of chilled meats, including chicken nuggets, sausages and minced beef into the EU) expires at the end of June.  A third grace period expires in October.

Impact of the NIP on N Ireland

A Joint Committee, set up to oversee the implementation of the NIP, has made progress on some issues including the supply of medicines to Northern Ireland from GB; the movement of guide dogs between Great Britain and Northern Ireland; VAT on second-hand vehicles; the provision by the UK of provided interim; and long-term plans for the EU’s access to Britain’s customs IT systems and databases.

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The Week Ahead in the European Parliament – Friday, June 11, 2021


Next week will be a committee week in the European Parliament.  Members of the European Parliament (“MEPs”) will gather virtually and in person in Brussels.  Several interesting votes and debates are scheduled to take place.

On Monday, the Special Committee on Artificial Intelligence in a Digital Age (“AIDA”) will hold a public hearing together with the Committee on Agriculture and Rural Development (“AGRI”) on artificial intelligence in agriculture and food security.  The committees have invited a range of representatives from the agricultural industry, academia, and non-governmental organizations (“NGOs”).  The panel discussions will touch on how artificial intelligence can contribute to achieving food security and how future agriculture can be made more sustainable.  The hearing build on the reform proposals of the Common Agricultural Policy (“CAP”), which intends to increase the use of digital technology and uptake of more sustainable practices.  The program of the event is available here.

On the same day, the Committee on Foreign Affairs (“AFET”) will have an exchange of views on the decision of the Swiss Federal Council to terminate negotiations with the EU on the EU-Swiss Institutional Framework Agreement.  The draft agreement, which has been negotiated since 2014, intends to replace the numerous bilateral agreements, which currently regulate Swiss-EU relations.  However, the Swiss government has withdrawn support for the negotiated deal, citing the lack of agreement on state aid rules, salary protection, and the access of EU citizens to Swiss social security benefits as the main factors of concern.  The European Commission has stated that the modernization of the EU-Swiss relationship will not be possible without an overarching agreement.  Time is ticking, as eventually certain existing bilateral agreements will expire.  The Swiss government’s statement is available here (in German).  The European Commission’s statement here.

On Tuesday, MEPs of the Committee on Environment, Public Health and Food Safety (“ENVI”) will debate whether and how to repeal and replace the current Regulation on batteries and waste batteries.  Presented by the European Commission on December 10, 2020, the proposed Regulation aims to modernize the EU’s legislative framework for batteries.  The proposal takes into account the goals set out in the European Green Deal and intends to promote a circular economy for batteries; strengthen the internal market for them; and reduce their environmental impact.  The proposed Regulation also specifically deals with electric vehicles, in response to their anticipated increase over the next decade.  The proposed regulation is available here.

For the complete agenda and overview of the meetings, please see here.

China’s 14th Five-Year Plan (2021-2025): Spotlight on New Energy Vehicles (NEVs)

As discussed in our previous article on the topic, China’s new 14th Five-Year Plan is a vast document that outlines the country’s ambitious plans for the 2021-2025 period. Technology and the environment are two main themes of the plan, with several chapters dedicated to describing how China’s leaders hope to steer the country into an innovation-driven economy and pursue high-quality and sustainable development. New automobile technologies—new energy vehicles (“NEVs”) as well as intelligent connected vehicles (“ICVs”)—lie at the intersection of these two themes.

The next five years will be a critical period in policymaking and product adoption that will shape the trajectory of the world’s largest market for automobiles, so it is important that companies in or affected by Chinese policy for the new energy vehicle industry take note of the policy signals in the 14th Five-Year Plan along with those in the State Council’s important October 2020 blueprint for the development of the NEV industry through the year 2035. Further, with Chinese policy evolving quickly, it is critical to monitor local and sectoral policies and programs designed to implement the national plan. We have prepared this article to serve as a starting point for understanding these efforts. (See our piece focusing on semiconductor industry policies during the 14th Five-Year Plan period here.)

The new energy vehicle industry features prominently in multiple sections of the 14th Five-Year Plan. In one key section the plan includes NEVs on the list of “strategic emerging industries” and aims to increase the collective value-added of strategic emerging industries to more than 17% of GDP by 2025. Goals for strategic emerging industries include:

  • accelerating the innovation and application of key and core technologies;
  • enhancing government provision of factors of production;
  • developing strategic emerging industry clusters;
  • encouraging corporate mergers and reorganizations; and
  • financial support through industrial investment funds and financing guarantees.

Where the Action Is: Local and Sectoral Plans

Although the five-year plan’s targets and goals are high-level, ministries and local governments study it carefully when formulating their own plans and policies.   The way central and local officials implement these guidelines—e.g., via their own plans (some of them also called 14th five-year plans), policies, measures, and programs—will determine the actual opportunities and risks for foreign and domestic companies in the market. A small sampling of such efforts in the NEV area that stem from or coincide with the national 14th Five-Year Plan are listed below:

Central Government:

  • Stricter Quality Supervision and Higher Standards – According to the Xinhua News Agency, the Ministry of Industry and Information Technology (“MIIT”) plans to further strengthen the supervision of NEV quality; promote the integration of electric vehicle, intelligent networking, and other technologies; and raise industry standards according to market conditions, with a particular focus on user experience. On the ICV side, MIIT established an Intelligent Connected Vehicle Promotion Group (ICV-2035) to address major issues and accelerate industrial development.
  • MOST National Key R&D Program – In February 2021, the Ministry of Science and Technology (“MOST”) issued the Guidelines on Applying for Key Projects of New Energy Vehicles in 2021 (Draft for Comments). The Guidelines set out technologies of interest in the NEV space for participation in MOST’s National Key R&D Program . These technologies include, but are not limited to, all-solid-state lithium-metal battery technologies and all-climate battery technologies.

Sub-Central Governments:

  • Beijing 14th Five-Year Plan – Beijing’s plan for the 14th five-year period (2021-2025) includes efforts to promote electric and intelligent vehicles, optimize the layout of electric vehicle charging and battery swapping networks, and accelerate the planning and construction of hydrogen refueling stations. The goal is for Beijing to have 2 million NEVS on its streets by 2025. A separate document listing the Beijing government’s key tasks in 2021 (available here) mentions plans for a new energy intelligent vehicle industry cluster and production base to be established in Beijing’s Shunyi District, and states that NEVs will account for no less than 80% of newly added or replaced buses, taxis, delivery vehicles, and other public sector vehicles in 2021.
  • Shanghai 14th Five-Year Plan – Shanghai’s 14th-Five-Year Plan also aims to accelerate the development of the NEV industry, especially fuel cell vehicles, and form an industrial chain for key components. The plan requires that by 2025, NEV output value will account for 35% of Shanghai’s automobile manufacturing industry, and that all of the newly added or replaced buses, taxis, and other public sector vehicles will be NEVs. Jiading District, the traditional powerhouse of Shanghai’s automobile industry, has been designated as a home to new NEV and ICV industry clusters. Shanghai also aims to build an intelligent vehicle innovation development platform that will lead the nation in the ICV demonstration and pilot projects.
  • Guangdong Province Action Plan for the Development of the Automobile Industry for the 14th Five-Year Period – Guangdong Province, home to many automobile manufacturers, has announced a fairly comprehensive automobile industry development plan for the 2021-2025 period. In addition to general goals to develop the industry, the action plan sets out many numerical goals. For instance, it states that by 2025, automobile output in Guangdong should exceed 4.3 million per year, accounting for more than 16% of China’s overall automobile output, and including over 600,000 NEVs. The action plan also sets out key tasks and specific plans for this effort, and calls for strengthening organization and coordination, increasing policy support, improving financial support, promoting talent development and recruitment, and enhancing the role of industry associations.
  • Tianjin 14th Five-Year Plan – Tianjin’s plan for the 14th five-year period names several key sectors including NEVs and ICVs, and discusses ways of developing these key sectors by formulating a list of key technologies and carrying out research projects aimed at mastering them, especially those that currently require a high level of dependence on foreign countries. The plan designates the Binhai New Area to serve as a base for strategic emerging industry clusters.
  • Jiangsu Province 14th Five-Year Plan – Home to major cities such as Nanjing, Suzhou, and Wuxi, Jiangsu Province’s 14th Five-Year Plan focuses on cultivating industrial chains for 50 key industries and products, including AI, power batteries, NEV charging stations, and hydrogen fuel cell vehicles. The plan also states that Jiangsu will support cities like Wuxi in building national pilot areas for ICVs, installing electric vehicle charging infrastructure, and improving the arrangement of urban and intercity charging facility service networks.
  • Fujian Province 14th Five-Year Plan – Home to major cities such as Xiamen, Fuzhou, and Longyan, Fujian Province aims in its 14th Five-Year Plan to develop a full NEV industry chain and create well-known automobile brands. It also declares its intention to build the most competitive NEV industry base on the southeastern coast of China. Among other elements, the plan focuses on supporting the research and development of long-life and high-safety power batteries, promoting NEV purchases, and accelerating the construction of electric charging and hydrogen fueling infrastructure.
  • Shaanxi Province 14th Five-Year Plan – Shaanxi Province, home to the city of Xi’an, aims to build an NEV production base of national-level importance. Its strategy is to use key enterprises such as the Shaanxi Automobile Group Co., Ltd., BYD, and Shaanxi FAST to develop the province’s NEV ecosystem by attracting suppliers and manufacturers of batteries, motors, electric controls, sensors, and on-board operating systems. The plan also names the Xi’an Hi-tech Industries Development Zone, Xi’an Economic and Technological Development Zone, and Baoji Hi-tech Industries Development Zone as bases for the development of the NEV industry.

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Companies with business interests affected by Chinese NEV policies should carefully monitor local and sectoral developments to determine how best to navigate this rapidly evolving terrain. They should also consider engaging with Chinese policymakers where necessary to express their needs or share industry best practices.

Senate Passes Landmark Legislation on Innovation and Competition

The Senate voted 68 to 32 to pass one of the most expansive bills on U.S. economic competitiveness in decades.  The United States Innovation and Competition Act (“USICA”) is the culmination of three months of bipartisan negotiations after Majority Leader Chuck Schumer (D-NY) invited six Senate committees to propose bills to bolster U.S. leadership in research and development (“R&D”), technological advancement, and economic growth.  Before the vote, Leader Schumer remarked that “the ambitions of this legislation are large, but the premise is simple.  If we want American workers and American companies to keep leading the world, the federal government must invest in science, basic research, and innovation just as we did decades after the Second World War.”  He applauded the bill for “paving the way for the largest investment in science and technology in generations.”

The convincing bipartisan vote to authorize over $200 billion in federal funding reflects broad  support for investing in U.S. innovation and competition.  The heart of the bill is the Endless Frontier Act authorizing $81 billion to the National Science Foundation (“NSF”) and $17 billion to the Department of Energy (“DOE”) to support R&D across ten key technologies, including artificial intelligence, advanced communications technology, biotechnology, and semiconductors.  The bill also includes institutional support, including establishing a new technology and innovation arm at the NSF and hundreds of provisions recognizing the Federal Government’s role in innovation and competition, including support for science, technology, engineering, and mathematics (“STEM”) education; protecting research security and intellectual property rights; and competing globally, including against China.  Against the backdrop of a global chips shortage, the bill appropriates $52 billion in emergency funding to support semiconductor manufacturing and R&D and $1.5 billion to support open and interoperable interface radio access networks (“open-RAN”) enabling more secure deployment of 5G.

The bill’s provisions are organized across six divisions:

Division A funds two programs that were enacted as part of the National Defense Authorization Act last year.  First, the division appropriates $52 billion to fund programs authorized by the Creating Helpful Incentives to Produce Semiconductors for America Act (“CHIPS Act”), including financial assistance for companies to invest in facilities and equipment for semiconductor manufacturing and R&D, a Department of Defense public-private partnership to ensure a robust semiconductor supply chain, and a Department of Commerce (“DOC”) study on the capabilities of the U.S. industrial base to support semiconductor needs.   Second, the division appropriates $1.5 billion to a Public Wireless Supply Chain Innovation Fund, authorized by the Utilizing Strategic Allied Telecommunications Act (“USA Telecommunications Act”), to award grants for companies to research, develop, and deploy 5G and next-generation technology that uses open-RAN. Continue Reading

Emerging Trends in UK Competition Law Vlog Series – Part II: Enforcement and Litigation

Covington’s four-part video series offers snapshot briefings on key emerging trends in UK Competition Law. In part two, James Marshall and Sophie Albrighton focus on current trends in enforcement and litigation. They are joined by guest speaker Louise Freeman, co-chair of Covington’s Commercial Litigation and European Dispute Resolution Practice Groups, who has extensive experience representing parties in significant competition litigation proceedings, including a number of the leading cases in England.

Pressed for time? Click here to download this session’s key takeaways.

 
  

The Week Ahead in the European Parliament – Friday, June 4, 2021

Next week will be a plenary week in the European Parliament.  Members of the European Parliament (“MEPs”) will gather virtually and in person in Brussels.  Several interesting votes and debates are scheduled to take place.

On Tuesday, MEPs will have an exchange of views with the High Representative of the Union for Foreign Affairs and Security Policy Josep Borrell on the EU’s response to the forced landing of a Ryanair flight and arrest of journalist Raman Pratasevich by Belarusian authorities.  After the incident on May 23, 2021, the European Council quickly responded with calls for, among other measures, additional targeted economic sanctions and banning Belarusian airlines from access to EU airports.  This ban was formally adopted by the Council of the EU on June 4, 2021, and will enter into force the day after.  The MEPs are set to adopt a resolution on this matter on Thursday.  The Council Decision is available here.

On Wednesday, MEPs will debate the upcoming G7 and EU-U.S. summits that are scheduled for June 11-13 and June 15, 2021.  As the EU is a supranational organization and not a sovereign Member State, the EU is a “non-enumerated” member of the G7, but representatives of the European Commission do participate in its meetings.  MEPs will debate the priorities that the EU should represent at the summit, likely ranging from global (corporate) taxation to international cooperation on health matters and climate change.  The MEPs will also share their ideas about transatlantic cooperation ahead of the EU-U.S. summit.  Specific attention could be given to the ongoing trade disputes regarding Airbus-Boeing and the digital services tax.  On June 2, 2021, the United States Trade Representative (“USTR”) imposed 25% tariffs on over USD 2 billion worth of imports on, among others, three EU Member States after the USTR’s investigation concluded that their digital services taxes discriminated against U.S. tech companies.  However, the USTR simultaneously suspended the tariffs, pending international negotiations.

On Wednesday, the plenary will vote on whether to instruct the European Commission to ask the WTO to waive the intellectual property rights for COVID-19 vaccines.  Following a plenary debate on May 19, 2021, the Committee on International Trade (“INTA”) adopted the draft resolution, in which the European Parliament would call for a temporary TRIPS waiver for vaccines and health-related technologies.  This call clashes with the position of EU Member States representatives, such as German Chancellor Angela Merkel, who has stated that a TRIPS waiver would not solve the global vaccine shortages.  On June 4, 2021, the EU already submitted a proposal to the WTO for an action plan to expand vaccine production with the sharing of expertise, but not a (temporary) IP waiver.  What the European Commission will do with a potential resolution calling for an IP waiver from the European Parliament remains to be seen.  The draft report was adopted by INTA with a very comfortable majority.  The draft report is available here.

For the complete agenda and overview of the meetings, please see here.

FCC Set to Ease Rules that Have Limited Pre-Sales and Other Marketing of Some New Electronic Devices

Last Thursday, the Federal Communications Commission (“FCC”) announced that it will consider a Report and Order at its June 21, 2021 open meeting that would permit the importation and conditional sale of radiofrequency (RF) devices prior to obtaining equipment authorization in some circumstances.  The consumer electronics industry has advocated for this rule change, which will facilitate pre-sales and other marketing of new devices in the marketplace.If adopted, the Report and Order would afford manufacturers and developers of RF devices significant flexibility in conducting pre-sale activities and potentially reduce the time required to deliver devices to market.  These revisions represent a significant change to the FCC’s equipment and marketing rules and bring the FCC’s equipment marketing and pre-sales regime in line with many other industries.

Importation

Under the FCC’s current rules, it is unlawful for equipment to be imported until the equipment has been fully authorized under the FCC’s rules.  The Report and Order, if adopted, would modify the FCC’s equipment authorization rules to permit up to 12,000 devices with a single FCC ID to be imported prior to obtaining certification if certain conditions are met.  (That number was designed so that manufacturers or retailers could display sample devices in brick-and-mortar stores across the country to gauge, or promote, consumer interest in the devices.)  These conditions would include:

  • Completing compliance testing and submitting a certification application to the Telecommunications Certification Body;
  • Appropriately labeling the devices;
  • Retaining legal ownership of the devices with the manufacturer, developer, importer, or ultimate consignee or their designated customs broker; and
  • Maintaining a retrieval process for devices that are not ultimately authorized, with the burden falling on the manufacturer, developer, importer, or ultimate consignee or their designated customs broker.

The Report and Order would not permit devices to be imported prior to authorization if they are subject to the Suppliers Declaration of Conformity (SDoC) process, because the SDoC process provides manufacturers greater flexibility in determining whether a device complies with FCC requirements.

Conditional Sales

Under the FCC’s current rules, which have been in place for decades, it is unlawful for any person to offer for sale to consumers or generally to advertise a device until the device has been fully authorized by the FCC.  The Report and Order would revise the FCC’s rules to permit conditional sales and advertisement of FCC-regulated devices to consumers prior to obtaining equipment authorization, on several conditions, including:

  • Providing appropriate disclosures to buyers;
  • Retaining legal ownership of the initiating party (i.e., manufacturer or developer) over the devices;
  • Delaying delivery of devices until the equipment authorization process is successfully completed;
  • Affixing appropriate temporary labels on devices indicating that authorization has not yet been obtained; and
  • Maintaining required recordkeeping practices with respect to the devices.

In addition, the scope of permitted pre-sale activity would not include the display or demonstration of the device to consumers.

And in a further break from its decades of practice, the FCC will allow physical transfer of RF devices prior to authorization where devices are subject to certification (rather than the SDoC process) and transferred to contracting parties other than the ultimate user for qualified pre-sale activities, such as packaging and transferring devices to distribution centers or retailers.  Additionally, the Report and Order would adopt rules that ensure that consistent measures apply to devices regardless of their origin, whether imported or manufactured in the U.S.

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