Sep 24, 2008

Cleary Gottlieb is advising The Dow Chemical Company on worldwide antitrust matters in connection with its acquisition of Rohm and Haas Company.  As announced on July 10, Dow will acquire Rohm and Haas for $18.8 billion, including $3.5 billion in assumed debt.  The transaction is subject to regulatory clearances in the United States, the EU, and other jurisdictions.  Cleary Gottlieb is responsible for the regulatory filings in the United States and EU, and for coordinating the necessary filings in other jurisdictions.

Dow is a diversified chemical company with $54 billion in sales annually, supplying about 160 countries with numerous products and services, including food, pharmaceuticals, paints, packaging and personal care products.  With approximately $9 billion in sales annually, Rohm and Haas supplies specialty chemicals and materials to many industries, including building and construction, electronics and electronic devices, household goods and personal care, packaging and paper, transportation, pharmaceutical and medical, water, and food.

Jul 10, 2008

On July 10, 2008, the European Court of Justice set aside the judgment of the Court of First Instance concerning the formation of the SONY BMG recorded music joint venture. In 2006, the Court of First Instance had annulled the European Commission’s 2004 decision to clear the formation of SONY BMG, following an appeal by Impala, a group representing independent record companies.

In its judgment of July 10, 2008, the European Court of Justice found that in annulling the 2004 clearance decision the Court of First Instance had committed a number of errors of law. In particular, the Court of First Instance erred by (i) relying on the Commission's statement of objections for the purpose of its judicial review; (ii) applying an excessive standard to evidence submitted by the merging parties; (iii) taking into account non-disclosed confidential documents submitted by complainants; and (iv) applying an inappropriate standard of reasoning.

The judgment of the European Court of Justice is a landmark decision that clarifies several important legal questions relating to the standards that should be applied in the judicial review of merger clearance decisions. As such, it represents a significant precedent for future merger cases.

The Court of First Instance will now have to reasses Impala's appeal in the light of the judgment of the European Court of Justice. Following the Court of First Instance's 2006 ruling, the merging parties renotified their merger and, in October 2007, the European Commission confirmed its clearance under EU merger control in a second decision. An appeal against that second decision is currently also pending before the Court of First Instance.

Cleary Gottlieb represented Sony Corporation of America and SONY BMG Music Entertainment.

Jan 09, 2008

On January 9 2008, the European Commission announced the closure of a three-year antitrust investigation into Apple's online music download agreements with the four major record companies (EMI, SONY BMG, Universal and Warner Music). Closure of the investigation was facilitated by Apple's public announcement that it will within the next six months lower the prices it charges for music on its UK iTunes® Store to match the already standardized pricing on iTunes across Europe. The Commission found that the agreements between Apple and the majors did not violate EU competition rules, and no concessions were made by the record companies. Cleary Gottlieb represented SONY BMG, which is a 50-50 joint venture between Sony Corporation of America and Bertelsmann.

In 2004, the UK consumer organization "Which?" complained with UK and EU competition authorities that Apple's iTunes online music service charged more for music downloads in the UK than in the rest of Europe, and that UK consumers were prevented from downloading music through lower-priced iTunes online storefronts directed at Continental European countries. In March 2007, the EU Commission brought charges against Apple and each of the four major record companies, alleging that the online music download agreements between Apple and the majors contained restrictions on "cross-border" sales within Europe.

The case clarified an important issue of principle, i.e., that it is legitimate for record companies (and other content providers) to limit a license for online content to the territory of individual EU countries and to provide for staggered release of such content across Europe. Restrictions on UK consumer' ability to download music through iTunes online storefronts directed at other countries did not reflect an agreement between Apple and the record companies, but reflected each record company's freedom to determine when and what music content to license for online sale to UK consumers (as well as Apple's unilateral decision not to allow "cross-border" access to iTunes online storefronts). In announcing the closure of its investigation, the Commission explained, "the fact that the same content is not available in all EU countries is not the result of restricted business practices between Apple and the record companies, but of the restricting copyright legislation".

Sep 18, 2007

On September 17, the European Court of First Instance rendered judgment in the long-awaited and controversial Microsoft case. Cleary Gottlieb represented RealNetworks, and was co-counsel to the European Committee on Interoperable Systems (ECIS) and the Software and Information Industry Association (SIIA). The firm also advised a variety of clients in the United States and European Union interested in the implications of the case. The case involved two broad issues:

The Court upheld the European Commission's finding of illegal tying of Windows Media Player to Windows, which the Commission had found excluded competition in streaming media players and contributed to the maintenance of Microsoft's desktop software platform monopoly.

The Court also upheld the European Commission's finding of illegal refusal to supply interoperability information that third-party server manufacturers needed to enable their workgroup servers to communicate fully with Microsoft Windows clients and server networks. This resulted in monopolization of server markets, and contributed further to monopoly maintenance of the desktop software platform monopoly.

European antitrust rules, like Section 2 of the U.S. Sherman Act, forbid companies from abusing their dominant position in an industry to the detriment of consumers and the structure of competition. The Microsoft ruling represents a landmark interpretation of that ban. The decision also supports the stance of EU regulator, which has been more inclined than the U.S. Department of Justice to find aggressive behavior by dominant companies as abusive. At the same time, the analysis in the judgment is close to the rule of reason analysis applied by the DC Court of Appeals in Microsoft II.

Apr 03, 2008

Cleary Gottlieb represented Henkel KGaA in its recent acquisition of the adhesives and electronic materials businesses of the National Starch division of Imperial Chemical Industries Limited, a newly acquired subsidiary of Akzo Nobel N.V.

The ₤2.7 billion back-to-back transaction was agreed to by Henkel and Akzo in August 2007, prior to Akzo’s acquisition of ICI. At the time of the agreement, neither Henkel nor Akzo knew the organization details of National Starch and its adhesives and electronic materials businesses. Nonetheless, the initial agreement between Henkel and Akzo contemplated the closing of the on-sale within three months of the completion of Akzo’s acquisition of ICI. When Akzo completed its acquisition on January 2, 2008, and it became clear that the on-sale would require carving out the adhesives and electronic materials businesses from National Starch in more than 40 countries around the world, a closing within three months seemed impossible. Undaunted by the challenge, the Henkel and Akzo/ICI teams worked feverishly and, through a variety of asset transfers and share transfers around the world, the deal closed on April 3, 2008 – just one day after the three month goal.

The Cleary Gottlieb team working on the transaction included lawyers from 11 of the firm’s offices. In addition to corporate aspects of the deal, the firm handled the global antitrust/competition aspects of the transaction and advised on the €2.6 billion senior debt financing.

Cleary Gottlieb has represented Henkel KGaA for more than 30 years on numerous M&A matters, most notably in connection with Henkel's cash-rich split-off transaction with Clorox and in its $2.9 billion acquisition of The Dial Corporation.

May 14, 2007

Cleary Gottlieb won the dismissal of antitrust claims brought by the Federal Trade Commission against Equitable Resources, Inc. relating to Equitable’s proposed acquisition of The Peoples Natural Gas Company. Arthur Schwab of the United States District Court for the Western District of Pennsylvania granted the motion to dismiss on May 14.

Judge Schwab accepted the defendant’s argument that the proposed transaction is immune from antitrust scrutiny under the state action immunity doctrine because the Pennsylvania Public Utility Commission closely regulates the parties and the proposed transaction.

Aug 23, 2007

Acting as U.S. antitrust counsel for Hanson PLC, Cleary Gottlieb recently secured Federal Trade Commission clearance for Lehigh UK Limited's acquisition of Hanson, a transaction valued at approximately $16 billion.

Hanson and HeidelbergCement AG, the parent of Lehigh, are major suppliers of building materials in the U.S. and worldwide, with combined 2006 revenues in excess of $20 billion. On a worldwide basis, together they will become the largest producer of aggregates, the second largest producer of ready-mixed concrete, and the fourth largest producer of cement.

Jun 03, 2008

Cleary Gottlieb won an important victory for Ajinomoto Foods Europe ("AFE") when the European Commission decided on June 3 to impose anti-dumping duties ranging from 33% to 39% on imports of monosodium glutamate (“MSG”) originating in China.

MSG is a food additive mainly used as a flavor enhancer. AFE is the sole European MSG producer, with facilities based in Nesle, France, some 100 km north of Paris.

The Commission found that Chinese MSG had been sold at unfairly low prices on the European market (the average dumping margin was found to have been 39%) and, as a consequence, Chinese imports had soared by 600% in only two years. This dumping led to significant material injury for the AFE. The Commission found that no Chinese producer could be considered as fulfilling the conditions for market economy treatment (MET), in particular because they were still subject to significant State interference and distortions carried over from the non-market economy system or because they failed to present accounts in line with International Accounting Standards (IAS).

Importantly, the Commission also found that the imposition of measures was in the Community interest. In particular, the measures will have no material effect on importers or users of MSG, and will actually be beneficial to competition. MSG users will still be able to source from AFE as well as from other non-Chinese producers (located in Indonesia, Vietnam, Brazil, etc.), which are not subject to the duties and which had been virtually eliminated from the European market by the dumped Chinese exports. The provisional measures are in place for 6 months, after which the Council will have to decide on whether to convert the provisional measures into definitive measures valid for up to five years.

Sep 25, 2007

Cleary Gottlieb represented Axel Springer AG in its successful challenge in the German Federal Court of Justice, Germany's highest appellate court for civil and criminal cases, of an earlier decision of the Düsseldorf Court of Appeal. On September 29, 2006, the Court of Appeal rejected as inadmissible an appeal brought by Axel Springer against a decision of the Federal Cartel Office prohibiting Axel Springer's planned merger with ProSiebenSat.1, finding that the appeal had become moot following the parties' decision to abandon the transaction. Nonetheless, the Court of Appeal allowed a further appeal to the Federal Court of Justice on points of law.

On September 25, 2007, following a two-hour hearing, the Federal Court of Justice granted Axel Springer's appeal, annulled the Court of Appeal's decision and remanded the case. Axel Springer argued that its appeal was admissible because the FCO's prohibition decision would stand in the way of any fresh attempt to acquire ProSiebenSat.1 and preclude Axel Springer from re-negotiating any such deal, arguments the Federal Court of Justice followed. The previous case law left insufficient room for judicial review, and the European Courts allow appeals in comparable cases.

The Court of Appeal will now review the matter on the merits to decide whether the FCO's prohibition was justified, in particular whether the concentration resulting from the proposed merger would have reinforced existing dominant positions on the market for TV advertising and on newspaper markets. Axel Springer is convinced that the FCO erred in prohibiting the merger, which involved no horizontal or vertical issues, notably because it made an insufficient analysis of conglomerate effects.

Jul 26, 2007

Cleary Gottlieb represented two copper tube manufacturers that won dismissal of a direct purchaser class action on July 26. Cleary Gottlieb represented Europa Metalli and Tréfimétaux while co-counsel represented other defendants, including Outokumpu, Mueller Industries, and Wieland Metals. Basing its allegations on the European Commission’s finding that the companies participated in an air conditioning and refrigeration (ACR) systems cartel affecting Europe, the complaint alleged that defendants colluded to raise the price of ACR copper tubes in the United States. Judge Bernice Donald, United States district court for the Western District of Tennessee, dismissed the claims for lack of subject matter jurisdiction and for failure to state a claim.

Judge Donald found the claims "hollow," "wholly insubstantial," and too speculative to proceed, stating that "[p]laintiffs seem to have relied entirely on facts from the EC decisions peppered with language from the Sherman and Clayton acts and conclusory statements about a price-fixing conspiracy in the U.S." She added: "In so doing, Plaintiffs have crafted a complaint with only the appearance of legitimacy. … Plaintiffs have simply ‘cut-and-pasted’ into their complaint the collusive activities found by the EC to have taken place in Europe and tacked on ‘in the United States and elsewhere.’" Thus, Judge Donald stated "Plaintiffs’ complaint is essentially a work of fiction" and allowing the case to continue "would be unjust and a gross abuse of the judicial system."

May 06, 2008

Cleary Gottlieb successfully appealed three separate decisions by the Italian Communications Authority (“AgCom”) on behalf of Telecom Italia S.p.A. The first decision, adopted on February 19, 2007, established a regulatory framework for Telecom’s promotional offerings on telephone access services and the other two decisions, adopted respectively on September 25 and November 13, 2007, fined Telecom for not complying with the new rules.

The first decision required Telecom to match each promotional offering at the retail level on wholesale access prices, as well as to give both AgCom and the competitors a 60-day prior notice. Without conducting an economic analysis of Telecom’s retail promotional offerings nor inquiring on the savings which made them possible, AgCom maintained as a matter of general principle that competitors could not compete with Telecom’s retail promotions, unless wholesale access prices were automatically adjusted as required. The new rules were also applied to extensions of previous promotional offers authorized by AgCom.

The Latium Regional Administrative Court agreed with Cleary Gottlieb’s arguments that the remedy imposed on Telecom was vexatious and disproportionate in light of the limited impact of promotional offerings on competition. The fines were also annulled on other grounds, i.e. because AgCom should have distinguished new offers from the mere extension of previous offers and had wrongfully accused Telecom of committing repeated infringements.