Law Times

Law Times • February 22, 2010 FOCUS PAGE 13 European court toughens competition rules ROUNDUP BY JULIUS MELNITZER For Law Times EUROPEAN COURT STIFFENS CARTEL RULES Th e European Court of Justice has ruled that a "concerted" anti- competitive practice can result from the exchange of a single piece of information at a meeting between competitors. Th e deci- sion has broad implications for any contact between competitors and for the exchange of informa- tion in trade associations, includ- ing international trade groups. In a recent decision in T-Mo- bile Netherlands BV e.a. v. Raad van Bestuur van de Nederlandse Mededingingsautoriteit, the court enunciated several corollary rules that lower the threshold for prov- ing an antitrust violation under European Union law. Th e court confi rmed, for example, that concerted actions could have an anti-competitive objective even if there is no eff ect on the market in the sense of a direct link with retail prices. Consequently, EU prosecu- tors will have no obligation to prove a causal link between the exchange of information and a restrictive eff ect on the market. Th e burden, then, is on the com- pany to prove both that the im- pugned conduct was not capable of aff ecting competitive conduct and that it didn't actually do so. Unfortunately, the decision leaves behind a legacy of practi- cal diffi culties and uncertainty in terms of the risk of any contact between competitors and espe- cially their participation in trade associations whose members share information. Legal commentators agree that it has now become critical for trade associations to adopt rules and practices to preclude direct or indirect contact between compet- itors that could infl uence market conduct. But many argue that it's virtually impossible to draft rules that could eliminate indirect con- duct that could somehow be con- strued as "capable" of distorting markets by reducing or removing competitive uncertainties. Nevertheless, what is clear is that any Canadian company with operations in Europe will have to be extremely careful when participating in any activ- ity that involves the exchange of information with competitors. GENERICS BEWARE Most of Canada's patent litiga- tion proceeds under the patent- ed medicine (notice of compli- ance) regulations, the statutory regime by which pharmaceutical companies challenge generics' at- tempts to bring their own drugs to market. In the United States, the Hatch-Waxman Act governs the proceedings in what is known as the Orange Book process. But while each country's legis- lation seeks to balance the inter- ests of innovators and generics, there are fundamental diff erences between the systems that present issues for generic manufacturers. "In Canada, the summary [regulatory] procedure is not fi - nally determinative of anyone's rights because the innovator can still sue the generic for pat- ent infringement," says Andrew Brodkin of Goodmans LLP in Toronto. "But in the U.S., Or- ange Book proceedings are done by way of a full-blown infringe- ment trial that fi nally determines rights, so there is only one level of action." In fact, Canadian regulatory proceedings have regularly come under judicial fi re. "Th e whole proceeding must be done in a hurry," wrote Fed- eral Court Justice Roger Hughes in his 2007 decision in Eli Lilly Canada Inc. v. Novopharm Ltd. "From start to fi nish, including a decision of the court, the mat- ter must be concluded within 24 months from institution of the proceedings in accordance with section 7(1) of the regulations, subject to appeal. As a practical matter, it takes some time for the parties to prepare and fi le their af- fi davits, to conduct cross-exami- nation, to attend to any matters arising from the evidence, and prepare and fi le written argu- ment. By the time oral argument is heard at trial, the court often has only a few weeks to prepare and deliver a reasoned decision. Usually that decision requires consideration of complex issues not only of law but of chemistry, pharmacy, and medicine upon which there usually is a mass of confl icting evidence. "Th e procedure is wholly unsatisfactory from almost any point of view." One of the reasons that the procedure is so unsatisfactory is that it has strayed from its original vision. "What was really intended as an administrative overlay designed to mirror the admin- istrative aspect of the Hatch- Waxman regime in the U.S. has become two full years of intense litigation. And at the end of the day, no matter what happens, the lack of fi nality can make the parties feel like they've been showering with no clothes on," says Andrew Shaughnessy of Torys LLP. NEW U.K. MERGER PROCESS Until recently, Britain had no process by which companies could engage in a true merger, which is to say the absorption as opposed to the acquisition of one company by another. Th e arrival of the companies (cross-border mergers) regula- tions in December 2007, how- ever, has made mergers possible in the cross-border context. Th e regulations implemented the European cross-border mergers directive of 2005, which allows companies incorporated in any European economic area coun- try to be merged with a compa- ny or companies incorporated elsewhere in that zone. But the uptake has been slow, with nary a single transaction uti- lizing the new procedure during the year after it came into force. On the other hand, the trend is upward, likely because the merg- er process has a number of advan- tages over traditional acquisition or transfer proceedings. Using the regulations involves Ontario Lawyer's Phone Book 2010 Your most complete directory of Ontario lawyers, law firms, judges and courts With more than 1,400 pages of essential legal references, Ontario Lawyer's Phone Book is your best connection to legal services in Ontario. Subscribers can depend on the credibility, accuracy and currency of this directory year after year. More detail and a wider scope of legal contact information for Ontario than any other source: • More than 26,000 lawyers • More than 9,300 law firms and corporate offices • Fax and telephone numbers, e-mail addresses, office locations and postal codes and more Perfectbound • December 2009 • On subscription $64 P/C 0514140999 • One time purchase $67•P/C 0514010999 ISSN 0845-4832 • For a 30-day, no-risk evaluation call: 1.800.565.6967 Canada Law Book is a Division of The Cartwright Group Ltd. Prices subject to change without notice, to applicable taxes and shipping & handling. OLPB_2010 (LT 1-8x2).indd 1 1/20/10 9:47:14 AM a court process that occurs con- currently in the jurisdictions of the transferee (the absorbing en- tity) and the transferor (the en- tity being absorbed). Each of the merging companies must obtain a "pre-merger certifi cate" from the appropriate court or tribunal in its country of incorporation. Th e U.K. procedure requires the British company to present a merger report containing the draft terms of the deal; a direc- tors' report citing the eff ect on shareholders, creditors, and employees; and an indepen- dent expert's report confi rm- ing that the valuation methods and share-exchange ratios are reasonable. Th e expert's report, however, can be waived when the share- holders unanimously agree to do so, where the merger is an absorption of a wholly owned subsidiary or when the trans- feree already holds at least 90 per cent of the transferor's se- curities. Seventy-fi ve per cent of share- holders, by value, of each share- holder class must approve the merger. Creditors can also ask the court for a creditor approv- al vote, in which case the same majorities are required. 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