Category: Antitrust & Trade Regulation

Certain Goods and Services Now Eligible for Importation into the United States from Cuba

The U.S. Department of State published its Section 515.582 List that outlines which goods and services produced by independent Cuban entrepreneurs are eligible for importation into the United States.

In accordance with the Cuban policy changes announced by U.S. President Barack Obama on December 17, 2014, the Office of Foreign Assets Control (OFAC) issued implementing regulations on January 16, 2015. A new Section 515.582 of the Cuban Assets Control Regulations (31 C.F.R. Part 515—the CACR) authorized the importation into the United States of certain goods and services produced by independent Cuban entrepreneurs as determined by the U.S. Department of State. However, Section 515.582 as issued on January 16 did not state what those goods and services actually are. Section 515.582 states the following:

Persons subject to U.S. jurisdiction are authorized to engage in all transactions, including payments, necessary to import certain goods and services produced by independent Cuban entrepreneurs as determined by the State Department as set forth on the State Department’s Section 515.582 List, located here.

Note 1 to §515.582: As of the date of publication in theFederal Register of the final rule including this provision, January 16, 2015, the State Department’s Section 515.582 List has not yet been published on its Web site. The State Department’s Section 515.582 list also will be published in the Federal Register, as will any changes to the list.

Note 2 to §515.582: Imports authorized by this section are not subject to the limitations set forth in §515.560(c).

On February 13, 2015, the Department of State issued its Section 515.582 List, as follows below.

Goods

The goods whose import is authorized by Section 515.582 “are goods produced by independent Cuban entrepreneurs, as demonstrated by documentary evidence” that are “imported into the United States directly from Cuba,” except for goods specified in the following sections/chapters of the Harmonized Tariff Schedule of the United States (HTS):

  • Section I: Live Animals; Animal Products (all chapters)

  • Section II: Vegetable Products (all chapters)

  • Section III: Animal or Vegetable Fats and Oils and Their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes (all chapters)

  • Section IV: Prepared Foodstuffs; Beverages, Spirits, and Vinegar; Tobacco and Manufactured Tobacco Substitutes (all chapters)

  • Section V: Mineral Products (all chapters)

  • Section VI: Products of the Chemical or Allied Industries (chapters 28–32; 35–36, and 38)

  • Section XI: Textile and Textile Articles (chapters 51–52)

  • Section XV: Base Metals and Articles of Base Metal (chapters 72–81)

  • Section XVI: Machinery and Mechanical Appliances; Electrical Equipment; Parts Thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and Accessories of Such Articles (all chapters)

  • Section XVII: Vehicles, Aircraft, Vessels, and Associated Transportation Equipment (all chapters)

  • Section XIX: Arms and Ammunition; Parts and Accessories Thereof (all chapters)

Accordingly, any goods produced by independent Cuban entrepreneurs that do not fall under one of the above-enumerated HTS categories are now eligible for importation. Persons subject to U.S. jurisdiction who engage in import transactions involving goods produced by an independent Cuban entrepreneur pursuant to Section 515.582 must obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed that was issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity not owned or controlled by the Cuban government.

“Persons subject to U.S. jurisdiction” means the following for purposes of the CACR:

  • (a) Any individual, wherever located, who is a citizen or resident of the United States;

  • (b) Any person within the United States;

  • (c) Any corporation, partnership, association, or other organization organized under U.S. laws or the laws of any state, territory, possession, or district of the United States; and

  • (d) Any corporation, partnership, association, or other organization, wherever organized or doing business, that is owned or controlled by persons specified in items (a) or (c).

This Section 515.582 List does not supersede or excuse compliance with any additional requirements in U.S. law or regulation, including the relevant import duties as set forth on the HTS.

The Department of State stated that the $400 monetary limit set forth in Section 515.560(c)(3) of the CACR for travelers who bring back goods from Cuba as accompanied baggage would not apply for any goods now authorized for import under Section 515.582.

Services

The authorized services pursuant to 31 C.F.R. §515.582 are services supplied by an independent Cuban entrepreneur in Cuba, as demonstrated by documentary evidence. Persons subject to U.S. jurisdiction who engage in import transactions involving services supplied by an independent Cuban entrepreneur pursuant to Section 515.582 are required to obtain documentary evidence that demonstrates the entrepreneur’s independent status, such as a copy of a license to be self-employed that was issued by the Cuban government or, in the case of an entity, evidence that demonstrates that the entrepreneur is a private entity not owned or controlled by the Cuban government.

Payments

All payment transactions necessary to import goods and services authorized by Section 515.582 are also authorized. We recommend that payment documentation reference Section 515.582 to avoid payment rejection.

The Department of State, in consultation with other federal agencies, reserves the right to update the list periodically. Any subsequent updates will take effect when published on the Web page of the Bureau of Economic and Business Affairs’ Office of Economic Sanctions Policy and Implementation. Updates will also be published in the Federal Register.

BY
Louis Rothberg
Margaret M. Gatti

OF

Morgan, Lewis & Bockius LLP

Hospital Antitrust Skirmish Over Economist

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Antitrust law is designed to help the Davids of the world maintain a level playing field with the Goliaths. That objective was realized when Boise, Idaho-based hospital operator St. Alphonsus Health System, Inc. (“St. Al’s”) sued rival St. Luke’s Health System, Ltd. (“St. Luke’s”), to block St. Luke’s acquisition of the Saltzer Medical Group (“Saltzer”), one of Idaho’s largest and oldest independent medical groups.

St. Al’s argued that St. Luke’s acquisition of Saltzer would give St. Luke’s such a dominant market share of the adult primary care market in Nampa, Idaho that it could raise prices and block referrals to St. Al’s by having Saltzer steer patients to St. Luke’s. St. Al’s fears certainly seemed well-founded: Saltzer accounted for 43% of the adult primary care physicians, and about 90% of the pediatric physicians in the Nampa market. Since St. Luke’s accounted for about 24% of the primary care physicians in Nampa, the combined entity would have about 67% of the adult primary care physicians in Nampa.

The Federal Trade Commission (FTC) and Idaho Attorney General (AG) launched their own investigations and ultimately joined St. Al’s lawsuit. Things didn’t go well initially for St. Al’s as the judge refused to preliminarily enjoin the acquisition, concluding that St. Al’s was unlikely to suffer irreparable harm before a trial could be held in the case. St. Luke’s proceeded to complete the transaction.

However, in January 2014, after a bench trial, the judge concluded that the deal would have anti-competitive effects in terms of raising health care costs due to the increased negotiating leverage of the combined entity. The judge directed St. Luke’s to unwind the transaction, and divest itself of Saltzer’s assets. St. Luke’s has appealed to the Ninth Circuit. At oral argument, St. Luke’s contended that the trial court had failed to adequately consider the deal’s benefits.

Along the way, the trial court had an opportunity to decide a motion by the FTC and Idaho AG to exclude the testimony of St. Luke’s economist, Dr. Alain Enthoven, concerning the quality-related benefits of the acquisition. Saint Alphonsus Med. Ctr. – Nampa, Inc. v. St. Luke’s Health Sys., Ltd., No. 1:12-CV-00560-BLW, 2013 WL 5637743 (D. Idaho Oct. 15, 2013). A major thrust of the objection was that Dr. Enthoven had not read any of St. Luke’s physician service agreements (“PSA’s”), and therefore could not credibly testify as to “whether the acquisition creates the requisite integration to achieve the purportedly greatest benefits of integrated patient care.”

The Court denied the motion. After reviewing the facts shared in the decision, the argument seems like a stretch and we feel the Court reached the right result. As the Court observed, despite not having read the PSA’s, Dr. Enthoven interviewed six top executives from St. Luke’s and Saltzer, and reviewed thirty depositions. The Court believed this effort enabled Dr. Enthoven to testify credibly concerning the quality-enhancing benefits of moving away from the fee-for-service model of compensation and toward the quality-based model of compensation.

The judge also rejected the FTC’s contention that Dr. Enthoven was unqualified to testify regarding how the use of health information technology, such as electronic medical records, promotes higher quality care in light of Dr. Enthoven’s admission at his deposition that he was not a “healthcare IT expert.” Observing that Dr. Enthoven was testifying as an economist, not a programmer, the judge ruled that Dr. Enthoven was qualified to explain how various healthcare IT tools promoted higher  quality care even if he didn’t understand the mechanics of how those tools worked. This conclusion also seems correct, and not really a close call at all.

Do you agree with our conclusion that the Court made the right call in denying the motion to exclude Dr. Enthoven’s expert testimony?

ARTICLE BY

Joshua Fruchter, Esq.
OF
IMS ExpertServices

Havana Hold Your Hand: Reaching Out to Cuban Entrepreneurs

Sheppard Mullin Law Firm

New regulations on Cuba enter into force today, only 29 days after President Obama promised them. The liberalized provisions focus on support for private sector actors in Cuba.

As we described here, the President announced on December 17, 2014 that his administration would release regulations liberalizing the rules on travel, financial services, remittances, and other areas. Today those provisions are a reality. Both the U.S. Departments of Commerce and Treasury issued regulations today. The Commerce Federal Register notice is available here; OFAC’s notice is available here.

CubaAs a result, the United States is now “one step closer to replacing out-of-date policies” on Cuba, said Treasury Secretary Jacob Lew. Specifically, the new regulations include these provisions:

  • New general license for exports of goods to entrepreneurs. The newly created License Exception SCP (for “Support for the Cuban People”) includes specific authorization to export to Cuba the following items so long as the items are designated as EAR99 or are controlled on the U.S. Commerce Control List for antiterrorism reasons only:

(1) Building materials, equipment, and tools for use by the private sector;

(2) Tools and equipment for private sector agricultural activity; or

(3) Tools, equipment, supplies, and instruments for use by private sector entrepreneurs.

  • General license for telecommunication equipment. License Exception SCP also permits export of items for telecommunications, including access to the Internet, use of Internet services, infrastructure creation and upgrades.

  • Financial transactions. Accepting payment for authorized exports is permitted. Under existing OFAC regulation, all transactions ordinarily incident to lawful exports are authorized.

  • Travel to Cuba: Transactions incident to travel within 12 categories are permitted, including travel for educational activities (including people-to-people travel), journalistic and religious activities, professional meetings, and humanitarian projects. The travel must fulfill all the explicit provisions of the general licenses set forth in the regulations. Travel for tourist activities remains prohibited by statute, and will not be permitted under these general licenses.

  • Travel services: Travel agents and airlines may provide authorized travel and carrier services.

  • Credit and Debit Cards: U.S. credit and debit cards may be used in Cuba for travel-related and other transactions, and U.S. financial institutions are permitted to enroll merchants and process such transactions.

  • Per Diems: The per diem limitation on authorized travelers’ spending in Cuba has been eliminated.

  • Imports: Authorized travelers may import into the United States up to $400 worth of goods from Cuba (including up to a total of $100 in alcohol or tobacco products).

  • Microfinancing: Microfinancing projects for humanitarian purposes are permitted, so long as they do not violate the existing ban on certain loans involve Cuban-government confiscated property.

  • Family remittances:  Remittances of up to $2,000 in any consecutive three-month period are now permitted.  Authorized travelers to Cuba may carry up to $10,000 in total remittances. Additionally, banking institutions, including U.S.-registered brokers or dealers in securities and U.S.-registered money transmitters, are authorized to provide services in connection with the collection or forwarding of remittances to Cuba.

  • Correspondent Accounts: U.S. depository institutions are authorized to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions.

  • “Cash in Advance” Interpretation: The regulatory interpretation of “cash in advance” is revised from “cash before shipment” to “cash before transfer of title or control” to allow expanded financing options for authorized exports to Cuba.

  • Telecommunications: Transactions to provide commercial telecommunications services that link third countries to Cuba and within Cuba are generally authorized.

  • Transactions with Cuban Nationals Outside of Cuba: U.S.-owned or -controlled entities in third countries may provide, with some limitations, services (and goods) to Cuban nationals in third countries.  The accounts of Cuban nationals who have permanently relocated outside of Cuba are unblocked.

  • Insurance: A new interpretation permits the provision of health insurance, life insurance, and travel insurance and related services to authorized travelers.

Some critics in Congress have questioned the legality of the President’s actions, citing the myriad statutes that constitute the Cuban embargo (including things like the Trading with the Enemy Act, the LIBERTAD Act, and the Cuban Democracy Act). But all the new provisions published today appear carefully crafted to stay within the President’s powers, and not to fall afoul of those many statutory boundaries of the decades-old embargo. For more fundamental change, we must await legislative action.

ARTICLE BY

J. Scott Maberry
Fatema K. Merchant
OF
Sheppard, Mullin, Richter & Hampton LLP

A Primer on the Foreign Corrupt Practices Act

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The conduct of your employees can implicate statutes other than the familiar federal and state fair employment laws, and an unwary employer can find itself subject to stiff fines and unwelcomed publicity by ignoring its compliance obligations under those statutes. For example, does your company conduct business abroad, and, if so, are you familiar with the Foreign Corrupt Practices Act (“FCPA”)? If you are an entity traded on an American exchange, incorporated under the laws of the United States, or acting while in the territory of the United States, or you are an individual who is an officer, director, employee, agent, or shareholder of such a company, are a citizen of the United States, or are a person acting in the United States, you are subject to liability under the FCPA. The FCPA prohibits giving or attempting to give anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business. The phrase “anything of value” has a very broad definition and includes even charitable contributions or gifts to family members of foreign officials, and bribes come in all shapes and sizes, often making them difficult to detect.

In recent years, the Securities and Exchange Commission(“SEC”) and Department of Justice (“DOJ”) have increased their focus on FCPA compliance, including securing a record $772 million fine against one company last year. Those agencies have also been increasingly targeting (or, at least, stated their intentions to increasingly target) individual actors, in addition to the increased enforcement against companies. This means that you and your employees are at risk under the FCPA in the event of a suspected or actual violation.

A robust FCPA compliance program can be a strong defense or prevention against FCPA issues. Compliance programs should be individually and narrowly developed and tailored to a company’s needs and risks. While there is no guaranteed checklist for an effective compliance program given the unique nature of companies, some hallmarks of an effective FCPA compliance program are:

  • A commitment from senior management and a clearly articulated policy against corruption;

  • Well-established and -disseminated codes of conduct and compliance policies and procedures;

  • Sufficient oversight, autonomy, authority, and resources for the program;

  • Risk assessment, resource allocation, and due diligence proportional to the type of activity or business opportunity, the particular country and industry sector, potential business partners, level and amount of government involvement, governing regulation and oversight of the activity, and exposure to customs and immigration in conducting the business;

  • Training and continuing advice throughout the company that clearly communicates, in the local language where appropriate, the policies and procedures, case studies, and practical advice for real-life scenarios individuals will encounter in their specific roles;

  • Disciplinary measures that are well publicized and clearly applicable to all levels of the organization;

  • Effective due diligence, review, and monitoring of transactions and dealings with third parties and vendors, as they are among the most common means through which violations take place;

  • Mechanisms that facilitate and encourage confidential reporting, such as hotlines or ombudspersons, and that properly document and evaluate actual and possible FCPA issues; and

  • Periodic testing, review, audit, and analysis of the effectiveness of the program to ensure it is the best program in place for your organization.

However, as employers with strong anti-discrimination and anti-harassment policies know, even the best written and most well-intentioned policies cannot guarantee insulation from liability or from investigation by the government of suspected/potential violations. In the event a company discovers a violation by its employees, the DOJ and SEC encourage self-reporting and cooperation by entities and individuals, and cooperation can facilitate and expedite any potential investigation by government authorities and possibly result in non-prosecution agreements and reduced penalties.

Conversely, failing to disclose known violations can result in harsher penalties, thus providing incentive to identify and self-report violations. For its part, the government has created incentives to increase the chances that if a company will not report violations, its employees will. The Dodd-Frank Act established a whistleblower program that rewards whistleblowers between 10-30% of total recovery when the recovery exceeds $1 million, giving financial incentive for individual employees to come forward with reports of FCPA violations. Another important consideration when developing FCPA compliance measures and programs is to ensure that the compliance program is independent of and given due weight in relation to business decisions. All too often, FCPA issues are not timely discovered when compliance programs are not properly implemented because of a perceived business cost, and companies and employees face crippling fines and punishment as a result.

In any event, companies that are navigating these waters would be wise to consult with experienced legal counsel familiar with the FCPA and the government agencies charged with its enforcement, both when developing any compliance program and when dealing with a suspected violation.

ARTICLE BY

Radha Kulkarni
OF
Gonzalez Saggio & Harlan LLP

Oklahoma and Nebraska Challenge Colorado’s Amendment 64: Legalized Marijuana

In 2012, Colorado was the first state to legalize recreational marijuana with Amendment 64.  While this has made Pizza Franchisors happy and sent snack sales through the roof, it has also created controversy and unintended consequences.  The entire country has watched Colorado sort through these issues, curious to see how things will land, how much people really want to get high, and most of all, exactly how much money is there to be made?  Along with these practical issues and enforcement questions, several legal issues have come into play as marijuana legalization—and its conflict with federal law—has changed the landscape.  Perhaps most significantly are the legal challenges to Colorado’s statute in front of the Supreme Court.

Colorado’s Amendment 64 changed the State Constitution to allow for recreational use of marijuana. According to the law, Adults 21 or older can grow up to six cannabis plants, with 3 being mature at a time, and legally possess all the cannabis from those plants.  Adults may also travel with up to one ounce of marijuana while traveling, and gift up to one ounce to other adults 21 or over.  Consumption is regulated like alcohol.  The sale and growth of marijuana is regulated by the state, with licenses available for both growers and retail outlets.

The Attorney Generals’ of neighboring states Oklahoma and Nebraska, Scott Pruitt and Jon Bruning, respectively, have sued Colorado.  The complaint cites Colorado for creating a “scheme” that “frustrates the federal interest in eliminating commercial transactions in the interstate controlled-substances market, and is particularly burdensome for neighboring states [Oklahoma and Nebraska] . . . States where law enforcement agencies and the citizens have endured the substantial expansion of Colorado marijuana.”  Colorado’s Attorney General, John Suthers, was against marijuana legalization when it was being debated, but now he is tasked with defending the state’s controversial measure.

Oklahoma and Nebraska take issue with Colorado’s failure to take steps to prevent the drug from leaving the state.  In particular, the complaint takes issue with Colorado not requiring patrons to smoke or eat the marijuana where they purchase it, or tracking marijuana once it is sold, or requiring a background check on purchasers.  The law, in fact, only requires a driver’s license that says you are 21 to purchase the drug.  Colorado has no effective way, according to the complaint, to stop “criminal enterprises, gangs and cartels from acquiring marijuana inventory directly from retail marijuana stores.”

Concerns about a black market exist, and how the law might be creating gray areas in how pot is sold and cultivated.  A CNBC documentary “Marijuana Country: The Cannabis Boom” examines some of these issues.  Cameras follow two pot dealers as they show how loopholes in the law allow them to profit from their excess marijuana, grown legally, in a gray market heavy with craigslist postings and terminology—he is a caregiver, not a dealer, and he gifts the marijuana and receives gifts of cash in return.  It’s easy to see how this gray area doesn’t stop at the state line.

In fact, law enforcement officials from counties neighboring the Colorado border say they are seeing more Colorado marijuana, some of it still in the retail packaging, flow into their counties.  The strained jail budgets in these counties are a result of the increased enforcement costs—more impounded vehicles, more arrests and higher costs all around because of the pot coming down the highway.  Colorado AG John Suthers says 40 states have contacted his office regarding marijuana seized within their borders, and the Washington Post has gone so far as to call Colorado “the nation’s giant cannabis cookie jar.”

It is for these reasons that Oklahoma and Nebraska have filed their complaint.  Invoking the Constitutional provision that gives the Supreme Court original jurisdiction on disputes between the states, basing their complaint on the claim to the right to have federal laws prevail over contradictory state laws under the Supremacy Clause of Article VI of the Constitution.  Nebraska and Oklahoma v. Coloradohas not received permission to be filed by the court.   It should be interesting to see how the case develops.  But with over 130 metric tons of marijuana sold, legally, in Colorado last year, the demand is not going away.

The court documents and the complaint are here.

ARTICLE BY

Eilene Spear
OF
The National Law Review / The National Law Forum LLC

President Obama’s Announcement on U.S.-Cuban Relations Could Create Strategic Opportunities for American Companies

Neal Gerber

On December 17, 2014, the United States announced its intention to normalize diplomatic relations with Cuba. President Obama stated that, after nearly 54 years of economic and political isolation, his administration will be “taking steps to increase travel, commerce, and the flow of information to and from Cuba.”  He further remarked that “American businesses should not be put at a disadvantage….So we will facilitate authorized transactions between the United States and Cuba.”  This foreign policy directive could have significant effects on U.S. companies, particularly those in the hospitality and leisure sector, and their ability to conduct business with the Cuban government and Cuban nationals.

Before yesterday’s announcement, several laws and regulations have worked together to severely restrict commercial interaction between the United States and Cuba. In 1961, President Eisenhower severed diplomatic ties with Cuba under the Trading with the Enemy Act of 1917 (TWEA) and Congress passed the Foreign Assistance Act of 1961. Pursuant to the authority of these laws, President Kennedy issued a proclamation prohibiting all trade with Cuba on February 3, 1962. In 1992 and 1996, respectively, Congress passed two additional laws: the Cuban Democracy Act and Cuban Liberty and Democratic Solidarity (Libertad) Act. These laws contain additional restrictions on not only U.S. interactions with Cuba, butall nations’ contact with Cuba.

Today, the embargo is largely regulated by the Cuban Assets Control Regulations issued and enforced by the Treasury Department’s Office of Foreign Assets Control (OFAC). Under these rules, the circumstances in which a U.S. citizen or company may interact with Cuba or Cuban nationals are extremely limited. For example, the broad definitions of “interest,” “transfer,” and “transaction” under the Regulations prohibits a U.S. company from purchasing, or even conducting business with, any non-U.S. company that has, or has ever had, any commercial contact with a Cuban national. These restrictions have had a chilling effect on U.S. companies who wish to transact business with Canadian or Mexican companies who openly trade with Cuba despite the existence of U.S. laws that could result in sanctions for such activity. Further, many countries are unwilling to risk U.S. sanctions, leading to the embargo’s broad extraterritorial effects on both Cuba and these third-party nations.

Although it would take an act of Congress to completely overturn the embargo authorized by the Trading with the Enemy Act and subsequent legislation, President Obama’s recent remarks indicate that he intends to exercise executive authority to lessen the current impact of those laws by changes to existing regulations. Such changes could open the door for U.S. trade with both Cuban nationals and other non-U.S. companies with Cuban relationships.

This development has the potential to impact hospitality and leisure businesses, such as hotels, resorts and cruise lines, who may view this as an attractive opportunity to enter or re-enter a new market, given Cuba’s $64 billion economy. Neal Gerber Eisenberg’s newly launched Hospitality & Leisure group has worked with clients in the hospitality and leisure industry since the firm’s inception in 1986, including routinely advising clients on how to operate within the constraints of the current regulations.

Neal Gerber Eisenberg will continue to monitor these developments and update clients as to new laws and regulations that may impact commercial interaction with Cuba and Cuban nationals.

ARTICLE BY

Robert G. Gerber
Carrie E. Wilson
OF
Neal, Gerber & Eisenberg LLP

Analysis of the European Commission’s 2015 Work Programme

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The European Commission’s Work Programme for 2015 falls in line with Juncker’s political guidelines for his Presidency. The overall focus lies on the creation of jobs and economic growth, and the vision is to achieve this through a greener, more digital and more unified European economy. At the same time the Commission has restated its ambition to make regulation leaner and relieve markets from unnecessary administrative burden without compromising the high standards in social, environmental and consumer protection.

The Work Programme stands out from prior ones by its emphasis on discarding a total of 80 proposals that have either not progressed or that are not aligned with the objectives of the new Commission. Amongst the most prominent proposals to be withdrawn are the directive for the taxation of energy products and electricity, and the directive on the reduction of national emissions of certain atmospheric pollutants.

Combined with Juncker’s €315 billion investment plan, however, the Commission’s Work Programme is potentially very good news for companies seeking to invest in cutting-edge infrastructure and technologies, but also for those that simply seek to benefit from the single market. There is a renewed focus on a strong European industrial base and the Commission’s introductory note promises measures to improve its competitiveness.

The Commission also intends to work on further pooling sovereignty in economic governance, for example through a Common Consolidated Corporate Tax Base and a Financial Transaction Tax. The focus here is on providing more transparency and a level playing field, mainly in response to the Luxleaks affair. This might imply a revision of state aid rules as well as of the implementation of Juncker’s investment program.

From a broader perspective, the Commission’s Work Programme emphasizes the importance of trade, with the Transatlantic Trade and Investment Partnership Agreement (TTIP) at the very top of the priority list of bilateral agreements. The Work Programme also mentions the intention to promote stability at Europe’s borders, although it is likely that internal security matters, e.g. on cross-border crime, cybercrime, terrorism and radicalization, will trump any focus on external policies.

The links below open analysis pieces on topics and initiatives linked to particular sectors, focused on by the Commission:

  • Energy and transport, read the overview here
  • Life sciences, read the overview here
  • ICT and telecoms, read the overview here

The European Commission’s full Work Programme for 2015 can be found here.

ARTICLE BY

Sebastian F.A. Vos
OF
Covington & Burling LLP
© 2014 Covington & Burling LLP

DOJ Settlement Suggests Push to Expand ADA Coverage to All Websites and Apps

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The chance of future DOJ investigations justifies companies’ reviews of customer-oriented websites and apps for accessibility.

As consumers continue to use the Internet and their smartphones for their shopping in astonishing numbers, especially on this Cyber Monday, a recent Department of Justice (DOJ) settlement agreement raises questions and potential serious implications for any company with customer-oriented websites or mobile applications. The settlement agreement requires Ahold USA., Inc. and Peapod, LLC (Peapod) to make the www.peapod.com website and Peapod’s mobile applications accessible to the disabled, including persons with vision, hearing, and manual impairments. The settlement agreement demonstrates that the DOJ is reviewing and/or monitoring websites and mobile apps for accessibility and remains aggressive in its push to extend the requirements of Title III of the Americans with Disabilities Act (ADA) to all websites and mobile apps—even when the sites are unrelated to actual physical places of public accommodation. According to the settlement agreement, the DOJ concluded that www.peapod.com was inaccessible to the disabled after initiating a “compliance review” authorized by Title III and its implementing regulations.[1] Peapod, however, contested the DOJ’s conclusion that www.peapod.com and Peapod’s mobile apps were not ADA compliant.

The settlement agreement is particularly noteworthy because www.peapod.com is a purely online grocery delivery service, unrelated to a “brick and mortar” physical place of public accommodation. Most courts considering application of the ADA to websites require a website to have a “nexus” to a physical place.[2] In the past, the DOJ has required websites and mobile apps to be accessible—for example, in a March 2014 consent decree with H&R Block. However, unlike the H&R Block consent decree, which involved a website and mobile apps with a nexus to physical places, the Peapod settlement agreement requires that a website and apps with no nexus to a physical place be made accessible to the disabled. The Peapod settlement agreement therefore shows that the DOJ’s Notice of Proposed Rulemaking (NPRM), which is expected in March 2015, may require—in the words of the Abstract for the DOJ’s NPRM—the websites and apps of “private entities of all types,” even “[s]ocial networks and other online meeting places” to comply with the ADA.

The settlement agreement also indicates which standards the DOJ’s regulations eventually may require websites and mobile apps to meet. The settlement agreement requires www.peapod.com and Peapod’s mobile apps to comply with the Web Content Accessibility Guidelines 2.0, Level AA (WCAG 2.0 AA). The DOJ has required compliance with the WCAG 2.0 AA in the past, including in the H&R Block consent decree. The Peapod settlement agreement further requires Peapod to designate a Website Accessibility Coordinator to coordinate compliance with the agreement; adopt a Website and Mobile Application Accessibility Policy; post a notice on its home page on its accessibility policy, which would include a toll-free number for assistance and a solicitation for feedback; annually train website content personnel on conforming Web content and apps to the WCAG 2.0 AA; seek contractual commitments from its vendors to provide conforming content, or (for content not subject to a written contract) seek out content that conforms to the WCAG 2.0 AA; modify bug fix priority policies to include the elimination of bugs that create accessibility barriers; and conduct automated accessibility tests of the website and apps at least once every six months and transmit the results to the government. The settlement agreement, which stays in effect for three years, additionally provides that every 12 months, the Website Accessibility Coordinator must submit a report to the government that details Peapod’s compliance or noncompliance with the agreement. Peapod is not the only entity that will conduct testing under the settlement agreement. At least once annually, individuals with vision, hearing, and manual disabilities will test the usability of the Web pages. Notably, however, the settlement agreement does not impose damages or a civil penalty on Peapod.

There is a chance that the DOJ’s eventual regulations will differ from the standards to which the DOJ requires Peapod to conform. The settlement agreement accounts for that possibility. It states that if the DOJ promulgates final regulations on website accessibility technical standards during the term of the settlement agreement, the parties must meet and confer at either’s request to discuss whether the agreement must be modified to make it consistent with the regulations.

[1]. See 42 U.S.C. § 12188(b)(1)(A)(i) (“The Attorney General . . . shall undertake periodic reviews of compliance of covered entities under this subchapter.”); 28 C.F.R. § 36.502(c) (“Where the Attorney General has reason to believe that there may be a violation of this part, he or she may initiate a compliance review.”).

[2]. See, e.g., Nat’l Fed. of the Blind v. Target Corp., 452 F. Supp. 2d 946, 953–56 (N.D. Cal. 2011).

ARTICLE BY

Anne Marie Estevez
Beth S. Joseph
Christopher K. Ramsey
OF
Morgan, Lewis & Bockius LLP

Arizona Supreme Court Holds That The Uniform Trade Secrets Act Only Preempts Claims for Misappropriation of Trade Secrets, Not Other Confidential Information

In Orca Communications Unlimited, LLC v. Noder (Ariz. Nov. 19, 2014), the Arizona Supreme Court ruled that Arizona’s version of the Uniform Trade Secrets Act (the “AUTSA”) “does not displace common-law claims based on alleged misappropriation of confidential information that is not a trade secret.”  Orca, a public relations firm, filed suit against Ann Noder, its former president, for unfair competition after Noder left Orca to start a rival company.  Orca alleged that Noder had learned confidential and trade secrets information about “Orca’s business model, operation procedures, techniques, and strengths and weaknesses,” and that Noder intended to “steal” and “exploit” that information and Orca’s customers for her company’s own competitive advantage.  The trial court dismissed Orca’s complaint at the pleadings stage, concluding that the AUTSA preempts Orca’s “common law tort claims arising from the alleged misuse of confidential information,” even if such information is “not asserted to rise to the level of a trade secret.”  The court of appeals reversed in part, holding that the AUTSA preemption exists only to the extent that the unfair competition claim is based on misappropriation of a trade secret.

The Arizona Supreme Court considered the text of the 1990 AUTSA’s displacement provision, concluding that nothing in the language of the statute “suggests that the Legislature intended to displace any cause of action other than one for misappropriation of a trade secret.”  “If such broad displacement was intended, the legislature was required to express that intent clearly.”  The court assumed, but did not decide, that Arizona’s common law recognizes a claim for unfair competition.  Nor did it decide what aspects, if any, of the alleged confidential information in plaintiff’s unfair competition claim might fall within the AUTSA’s broad definition of a trade secret and therefore be displaced.  “That determination will not hinge on the claim’s label, but rather will depend on discovery and further litigation that has not yet occurred.

While the court acknowledged the split of authority among various states as to the preemptive effects of the Uniform Trade Secrets Act, it found that the “quest for uniformity is a fruitless endeavor and Arizona’s ruling one way or the other neither fosters nor hinders national uniformity.”  With its ruling, the Arizona Supreme Court joins courts in states such as Pennsylvania, Virginia and Wisconsin that have the narrowed the preemptive effects of the Uniform Trade Secrets Act.  Conversely, courts in other states including California, Indiana, Hawaii, New Hampshire, and Utah have held that Uniform Trade Secrets Act statutes should be read to broadly preempt all claims related to the misappropriation of information, regardless of whether the information falls within the definition of a trade secret.

ARTICLE BY

William B. Berndt
David L. De Bruin
Marcus D. Fruchter
Nicholas A. Gowen
Bradley P. Nelson
Steven A. Weiss
OF:
Schopf & Weiss LLP

FTC Denies AgeCheq Parental Consent Application But Trumpets General Support for COPPA Common Consent Mechanisms

Covington BUrling Law Firm

The Federal Trade Commission (“FTC”) recently reiterated its support for the use of “common consent” mechanisms that permit multiple operators to use a single system for providing notices and obtaining verifiable consent under the Children’s Online Privacy Protection Act (“COPPA”). COPPA generally requires operators of websites or online services that are directed to children under 13 or that have actual knowledge that they are collecting personal information from children under 13 to provide notice and obtain verifiable parental consent before collecting, using, or disclosing personal information from children under 13.   The FTC’s regulations implementing COPPA (the “COPPA Rule”) do not explicitly address common consent mechanisms, but in the Statement of Basis and Purpose accompanying 2013 revisions to the COPPA Rule, the FTC stated that “nothing forecloses operators from using a common consent mechanism as long as it meets the Rule’s basic notice and consent requirements.”

The FTC’s latest endorsement of common consent mechanisms appeared in a letter explaining why the FTC was denying AgeCheq, Inc.’s application for approval of a common consent method.  The COPPA Rule establishes a voluntary process whereby companies may submit a formal application to have new methods of parental consent considered by the FTC.  The FTC denied AgeCheq’s application because it “incorporates methods already enumerated” in the COPPA Rule: (1) a financial transaction, and (2) a print-and-send form.   The implementation of these approved methods of consent in a common consent mechanism was not enough to merit a separate approval from the FTC .  According to the FTC, the COPPA Rule’s new consent approval process was intended to vet new methods of obtaining verifiable parental consent rather than specificimplementations of approved methods.  While AgeCheq’s application was technically “denied,” the FTC emphasized that AgeCheq and other “[c]ompanies are free to develop common consent mechanisms without applying to the Commission for approval.”  In support of common consent mechanisms, the FTC quoted language from the 2013 Statement of Basis and Purpose and pointed out that at least one COPPA Safe Harbor program already relies on a common consent mechanism.

ARTICLE BY

Shelton L. Abramson
OF
Covington & Burling LLP