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CMA Investigates Hand Sanitiser Pricing Practices

Posted in EU and Competition

The investigation is being carried out under the CMA’s competition law powers rather than under its consumer protection functions.

By John D. Colahan and Anuj Ghai

On 18 June, the CMA released an update noting that it had launched an investigation under Chapter II of the Competition Act 1998 into suspected breaches of competition law by four pharmacies and convenience stores. In particular, the investigations relate to suspected charging of excessive and unfair prices for hand sanitiser products during the COVID-19 pandemic.

As noted in a prior blog post, the CMA believed that there was a significant risk that prices would rise above justifiable levels in a number of sectors because of the COVID-19 outbreak, coupled with the restrictions on businesses and people. As of 17 May, the CMA had written to more than 200 traders about this issue. In its communication, the CMA asked for more information or expressed concern about what the CMA considered may be unjustifiable price increases. Continue Reading

UK Releases Guidance on Modern Slavery Act Reporting

Posted in Dispute Resolution

The UK government continues to prioritise combatting modern slavery risks while also extending reporting deadlines amid the COVID-19 pandemic.

By Clare Nida

On 20 April 2020, the UK government published guidance for companies on how to approach their Modern Slavery Act statements during the COVID-19 pandemic. The government has stressed that businesses should continue to identify and address risks of modern slavery in their operations and supply chains; however, businesses can delay publishing their statements by up to six months without penalty, if necessary, because of the pandemic. The government also provided recommended mitigation measures for areas of increased modern slavery risk. Continue Reading

Focus on Culture and Conduct Brings New Considerations for Corporates and Investors

Posted in M&A and Private Equity

Companies and investors must consider the impact that poor corporate culture may have on their potential to achieve an exit, in particular an IPO.

By David Berman, Richard Butterwick, Chris Horton, Robbie McLaren, Anna Ngo, Nell Perks, Catherine Campbell, and Charlotte Collins

It is now apparent that no institution or business unit, whatever its geography, industry, sector, or size, is above the negative impact of a poor culture. Culture- related issues at Uber, Sports Direct, Boeing, and others highlight the implications of getting things wrong, including financial loss, reputational issues, and damage to investor confidence.

Often defined as “the way that people within an organisation behave when no one is looking”, culture is a growing area of focus for regulators and policymakers around the world. The focus on culture has become more acute during the COVID-19 pandemic, as investors and consumers observe and judge companies based on their navigation of the crisis, particularly treatment of employees and wider societal stakeholders.

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CMA Publishes Register of Competition Law Exclusion Orders Relating to COVID-19

Posted in EU and Competition

The UK government has relaxed the application of UK competition law to certain types of agreements across sectors.

By John D. Colahan and Anuj Ghai

On 21 May 2020, the CMA published a register containing links to each public policy exclusion order and notified agreement related to COVID-19 in the UK. A public policy exclusion order is a legislative tool used by the Secretary of State for Business, Energy and Industrial Strategy to relax UK competition law for certain agreements that may normally be considered anti-competitive.

The Secretary of State has made several public policy exclusion orders to enable a coordinated response to the COVID-19 pandemic. In March, for example, the UK government considered it necessary to relax the application of UK competition law to certain types of agreements in the groceries sector, in order to ensure a smooth and efficient supply of food and essential grocery products to isolated and vulnerable consumers. Continue Reading

Foreign Investment Controls — Are We Seeing a More Nuanced Approach to Private Equity?

Posted in M&A and Private Equity

Amid FDI screening regime expansion, deal teams have opportunities to capitalise on newly available exemptions, but must beware novel complexities.

By Jonathan Parker, Rachel K. Alpert, Stephanie Adams, Gillian Bourke, Zachary N. Eddington, Catherine Campbell, Tom Evans, and David Walker

US intervention in the proposed acquisition of hotel-software company StayNTouch by a Chinese investor and UK intervention in the acquisition of satellite telecommunications company Inmarsat plc by a private equity-led consortium reiterate the range of foreign direct investments (FDIs) that can draw government attention, and the disruptive impact that such attention can bring to sensitive deals.

A desire by governments to control investments by businesses from states perceived as hostile in key sectors (such as defence, critical infrastructure, and advanced technologies) has fuelled a widening of the range of investments being caught. Recent moves by governments to further tighten FDI screening rules in response to the COVID-19 crisis will only accelerate this trend.

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Culture and Conduct Ahead of Exit — Key Points for Private Equity

Posted in M&A and Private Equity

Buyout firms planning an acquisition or preparing a portfolio company for exit must consider the impact of poor corporate culture, particularly on a potential IPO.

By David Berman, Chris Horton, Robbie McLaren, Anna Ngo, Nell Perks, Charlotte Collins, Catherine Campbell, Tom Evans, and David Walker

No institution, whatever its geography, industry, sector, or size, is above the negative impact of a poor culture. Culture-related issues at Uber, Sports Direct, Boeing, and others highlight the implications of getting things wrong, including financial loss, reputational issues, and damage to investor confidence.

Often defined as “the way that people within an organisation behave when no one is looking”, the focus on corporate culture has become more acute during the COVID-19 pandemic, as investors and consumers observe and judge companies based on their navigation of the crisis, particularly the treatment of employees and wider societal stakeholders. LP expectations on PE firms to adequately diligence and monitor portfolio company culture are also rising, and the global regulatory direction of travel is clear. In our view, buyout firms planning an acquisition, or preparing a portfolio company for exit must consider the impact that poor corporate culture may have, in particular on an IPO.

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Scoring on Sports Deals

Posted in M&A and Private Equity

Buyout firms must beware the unique legal, regulatory, and commercial issues that can complicate sports transactions and impact returns.

By Patrick Mitchell, Alex McCarney, Stewart Robinson, Catherine Campbell, Tom Evans, and David Walker

Private equity interest in sports assets has grown over the last few years, with investments in teams, leagues, and other members of the sports ecosystem. Sports investments by sponsors, including CVC’s US$8 billion sale of Formula One racing in 2017, have underlined the strong returns available.

Today, the COVID-19 crisis, with the stresses that it has placed on sports media, sponsorship, and match-day revenue streams, has created new opportunities for investors — and interest is accelerating. Financial sponsors are continuing to seek out opportunities. Firms have invested in, or are in the process of investing in, a range of sports, from martial arts to football, and rights holders are signalling that they would welcome investment to see them through and beyond the current crisis.

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The Lipstick Effect — Are Kylie Jenner and New Technologies Making Beauty Deals Increasingly Attractive for Private Equity?

Posted in M&A and Private Equity

Digital due diligence becomes increasingly important when buying digitally native beauty brands.

By Deborah J. Kirk, Linzi Thomas, Camilla J. Dutton, Laura Kichenside, Catherine Campbell, Tom Evans, and David Walker

Recent high-profile beauty M&A deals, coupled with current economic uncertainty, have brought renewed interest in the “lipstick effect”. Much cited in the aftermath of the 2008/09 downturn, it describes how consumer demand for relatively affordable luxuries, such as lipstick, continues or even increases during challenging economic times. There are signs that the global beauty industry may once again prove resilient, with nail care being coined the “COVID-19 lipstick effect”, following double digit growth.

Attractive Opportunities

The global beauty industry, worth around US$532 billion prior to the COVID-19 outbreak, is expected to be worth US$805 billion by the end of 2024, according to Euromonitor data. The industry has demonstrated recession-resilience with continued growth (including during 2008/09), driven by digitalisation, social media and increasing demand from emerging economies. Investors are taking note — beauty deals offer attractive opportunities in growing companies with potential to generate significant margins at scale. PE accounted for 47% of 2019 beauty M&A deals.

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English Commercial Court: Foreign Judgment Did Not Establish Issue Estoppel

Posted in Commercial, Dispute Resolution

Parties may struggle to establish issue estoppel based on a foreign judgment, even when they agreed exclusive jurisdiction of English courts.

By Oliver Browne, Yasmina Vaziri, and Tom Watret

MAD Atelier International BV v. Manès [2020] EWHC 1014 (Comm) considers key aspects of the law of issue estoppel and abuse of process in relation to foreign judgments. The decision highlights that even when parties have chosen exclusive jurisdiction clauses in favour of the English courts in their transaction documentation, they could unexpectedly find themselves re-litigating issues in multiple courts. It also shows that whether issue estoppel will be available, or whether another party can be prevented from “abusively” re-litigating, in England, issues that have already been determined by a foreign court, may depend on the foreign court’s view as to the binding and preclusive effect of its own decisions. This introduces an element of uncertainty into the finality of international litigation, which is why parties in multi-jurisdictional disputes should always take advice early. Continue Reading

Latest COVID-19 Taskforce Update Sets Out CMA’s Response to Principal Areas of Concern

Posted in EU and Competition

The taskforce continues to receive and monitor complaints about unfair practices in relation to cancellations and refunds and potentially unjustifiable price rises.

By John D. Colahan and Anuj Ghai

On 21 May, the CMA released a further update setting out the work of its COVID-19 Taskforce in responding to complaints regarding competition and consumer protection problems arising from the novel coronavirus and measures taken to contain it. This follows a 30 April report (summarised here) which set out the programme of work the CMA intended to undertake to deal with complaints about unfair practices in relation to cancellations and refunds.

Based on the complaints received and additional information received from consumer bodies, such as Which? and Citizens Advice, the CMA’s principal concerns continue to relate to unfair practices in relation to cancellations and refunds and unjustifiable price increases, particularly for essential goods. The CMA notes that from 10 March to 17 May it was contacted more than 60,000 times about coronavirus-related issues; further, the rate at which consumers are contacting the CMA has increased in recent weeks suggesting that problems continue to persist.

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