How to avoid becoming collateral damage in the US-China “tech war”
The benefits of paying close attention to details of US export controls and economic sanctions
Amid global market uncertainties and shifting regulatory priorities, where the only constant is change, Taiwanese businesses still can plot strategic pathways to success.
Welcome to our fourth report on global trends and opportunities for Taiwanese companies and investors conducting business internationally.
Although disruptive forces continue to buffet markets worldwide, advantages exist for savvy business leaders who pay close attention to global trends and act accordingly.
With the United States focusing more and more on China's technology industry as a national security priority, Taiwanese companies should take specific steps to decrease their risk of becoming collateral damage in a US-China "tech war." Similarly, despite a heightening US-China trade war, careful assessments of any supply chains that include China-made parts and related actions can help protect Taiwanese companies' access to US markets.
Design patents offer increasingly useful protections for design-focused Taiwanese companies that operate in the US. In the energy sector, Taiwan's offshore wind sector demonstrates vibrant potential for growth, particularly if Taiwan successfully resolves a few key challenges.
A new dynamism in the European Union's approach to antitrust enforcement provides guidance for growth-focused Taiwanese companies. And a recent change to US antitrust enforcement policy provides a compelling incentive for Taiwanese businesses to review their internal compliance programs and controls.
We hope you find this useful, and we look forward to seeing Taiwanese businesses grow and thrive in the year ahead.
The European Commission is moving quickly in a new investigation, seeking interim measures for the first time in two decades
Stay current on your favorite topics
The European Commission attracts plaudits from some commentators for its ability to undertake major antitrust cases in the technology sector and for its willingness to investigate sector giants like Microsoft, Intel, Google and Qualcomm. Still, it has received frequent criticism for the length of time that these investigations take compared to the fast-moving world of the technology sector. For example, the Commission's most recent antitrust decision, a €242 million fine imposed on Qualcomm in July 2019, involved conduct that started in 2009 and ended in 2011.
While the Commission would say that the time it takes is due to the complexity of its investigations and the need to respect defendants' rights, it may have absorbed some of this criticism. For the first time in nearly two decades, the Commission is seeking interim measures to suspend anti-competitive provisions, pending the outcome of a recently opened investigation.
In June 2019, the Commission began a formal investigation into US chip manufacturer Broadcom for possible restrictions of competition through exclusivity practices. Simultaneously, it issued a Statement of Objections as a first step towards imposing "interim measures" on the company.
For Taiwanese companies doing business in the European Union (EU), the use of interim measures in an ongoing antitrust investigation suggests an increasingly dynamic focus on enforcing EU competition law.
Under EU law, interim measures enable the Commission to act quickly to prevent suspected anti-competitive actions that could irreparably damage competition and the market. By adopting interim measures, the Commission can order the termination of suspected anti-competitive behavior while its investigation is still ongoing—and thus before it has been able to adopt a final decision.
EU competition law allows the Commission to adopt interim measures in antitrust cases, provided that there is:
The EU's General Court first recognized the Commission's power to adopt interim measures in its 1980 Camera Care judgment, stipulating that the Commission has "the power to take interim measures which are indispensable for the effective exercise of its functions, and, in particular, for ensuring the effectiveness of any decisions requiring undertakings to bring to an end infringements which it has found to exist." Since then, the Commission has had recourse to interim measures in only four other instances, the last time being in 2001.
Broadcom is the first time in 18 years that the Commission has sought interim measures in an antitrust case. (Having been involved in that last case (IMS Health) as a young lawyer, it seems a distant epoch: There were no smartphones; people still sent faxes; and Facebook had not even been founded.)
In the Broadcom investigation, the Commission considers interim measures warranted, because:
According to the Commission, the serious nature of the alleged competition concerns may lead to the elimination or marginalization of Broadcom's competitors before the end of the investigation, making interim measures indispensable.
The Commission's decision to pursue interim measures with Broadcom was not unexpected.
Margrethe Vestager, the EU's Commissioner for Competition, had publicly stated that she was looking for a "test case" to revive interim measures. With Broadcom, the Commission seems to have found its test case.
This test case will continue to unfold. Broadcom has the right to respond to the Commission's Statement of Objections and to request a hearing to argue its case against interim measures. Moreover, the full investigation's allegations against Broadcom are broader than those covered by the interim measures case. They also include granting rebates or other advantages conditioned on exclusivity or minimum purchase requirements, product bundling, abusive IP-related strategies and deliberately degrading interoperability between Broadcom products and other products. These will be fully investigated according to normal procedures, and Broadcom will have a separate right to respond to a Statement of Objections in the full investigation.
In addition, it remains to be seen whether the Broadcom case will lead to a general revival of interim measures in EU competition enforcement, and whether the Commission will consider using this procedure in sectors other than technology.
However, the Commission's decision to seek interim measures for the first time in two decades does suggest a renewed dynamism in EU competition law. Taiwanese companies that could be at risk for allegations of anticompetitive actions in Europe should keep an eye on this potential trend.
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2019 White & Case LLP