It's Not Too Late to Get Ready for the GDPR
Caution When Exporting Luxury Goods
French Supreme Court Upholds Exclusive Supply Obligation where Necessary to Franchise Network
Guest interview with Beth Butterwick, CEO of Karen Millen
Antitrust Division to Criminally Prosecute No Poaching Agreements
Guest interview with Founder of innovative loyalty app, Akquire
Many of our clients are understandably concerned about the European Union’s General Data Protection Regulation (“GDPR”) which is set to go into force on May 25, 2018. While some companies have been working toward GDPR compliance for the last two years, we realize that other companies are just beginning the process of understanding the GDPR and its implications.
While coming into compliance with the GDPR in three months can feel overwhelming, it is not too late to begin moving in that direction. To that end, we have put together two accelerated programs to help our clients navigate the GDPR.
First, we will be providing a six-part weekly webinar program (i.e., 6 CLE hours) on GDPR compliance strategies. The first part will kick-off on April 3rd and continue with one hour trainings provided each week. We will be sending information on the program and how to register for each of the components through this listserv in the coming weeks.
Second, based upon the counseling that we have provided over the past two years to dozens of our clients, we have put together a list of the “top 50” most asked questions concerning the GDPR. Every week from now until the GDPR goes into force we will be publishing an article that provides practical and straightforward answers to each of these questions.
As the compliance deadline comes closer please do not hesitate to reach out to any of the members of the Data Privacy and Security Team if we can provide additional help or support concerning the GDPR.
Finally, to borrow from the Hitchhikers Guide to the Galaxy, the best advice always is simple: “don’t panic!”
[co-auuthor: Yeon-Ho Son (trainee)]
Luxury goods retailers must be cautious when exporting luxury goods, especially when they are leaving the EU. There are special rules applicable to exporting various types of goods, including in relation to 'luxury goods'. Such rules place restrictions on exports to certain countries and place a higher regulatory standard than for other types of goods.
Take diamonds for example. In order to export rough diamonds outside the EU, the exporter must obtain a Kimberley Certificate and attach it to the consignment. The potential consequence of non-compliance is the seizure of the goods.
In another example, in order to export art, antiques and cultural goods, the exporter may require a licence depending on the age and value of the goods. Such goods may be covered by an open licence, or an individual licence may need to be obtained, depending on whether it meets certain criteria. Any licence may also be subject to strict conditions that the exporter must be in compliance with.
There is also an outright ban on supplying 'luxury goods' to North Korea or Syria deriving from the Export Control (North Korea Sanctions and Iran, Ivory Coast and Syria Amendment) Order 2017, and the Export Control (Syria Sanctions) Order 2013. In these Orders, there is an exhaustive list of what constitutes luxury goods. The banned goods include (but are not limited to): pure bred horses; truffles; pearls; precious and semi-precious stones. The penalties are a criminal offence leading to a prison sentence and/or a fine.
The rationales behind such regulations are various, depending on the nature and destination of the proposed exports. It may be economic-based, for example to prevent a drop in supply of goods in the domestic market because it is more profitable to export. It may also be as part of foreign policy, for example as a component of trade sanctions — the EU implements UN sanctions through its Council Decisions and Regulations, which then have effect in English Law. In the case of North Korea, the UN Security Council has deemed that the proceeds of its imported luxury goods sales are contributing to its nuclear missile and weapons of mass destruction programmes.
In summary, retailers should tread carefully when exporting luxury goods and be wary of applicable restrictions and prohibitions. However, even in cases of an 'absolute' prohibition, there may be licences granted after careful review on a case-by-case basis.
[co-author: Emmanuelle Mercier]
Exclusive supply clauses are a frequent feature of franchise contracts. In accordance with EU Law, the French Supreme Court, by decision of 20 December 20171, ruled that the validity of such clauses depends on whether they are necessary to the preservation of the identity and reputation of the franchise network.
In the case under consideration, a bakery had entered into a nine-year franchise contract which contained an exclusive supply clause providing that the franchisee must purchase exclusively from a particular supplier which had developed a new concept for the manufacture of traditional bread made with natural yeast.
As a result of the franchisee having terminated the contract before its agreed term, the franchisor and the supplier claimed for damages for the losses incurred as a result of the breach of the franchise contract. In defense, the franchisee claimed that the exclusive supply agreement was an anticompetitive restraint of trade.
The French Supreme Court, implicitly following the position of the European Commission in Article 190-b) of its Guidelines on Vertical Restraints, which provides that "a non-compete obligation on the goods or services purchased by the franchisee falls outside the scope of Article 101(1) where the obligation is necessary to maintain the common identity and reputation of the franchised network" and that "in such cases, the duration of the non-compete obligation is (...) irrelevant under Article 101(1), as long as it does not exceed the duration of the franchise agreement itself", held that the exclusive supply clause at issue constituted a crucial element for the image and identity of the franchise network and was therefore valid.
Hence, the French Supreme Court acknowledged that exclusive supply clauses contained in franchise contracts are valid, regardless of their duration, if they are necessary to the preservation of the identity and reputation of the franchise network.
The Antitrust Division of the Department of Justice (“DOJ”) has indicated that, in the coming months, it intends to criminally prosecute companies that have entered into naked no-poaching agreements for violation of the antitrust laws.2 DOJ Assistant Attorney General Makan Delrahim announced the possible upcoming criminal charges at a January 19, 2018 conference hosted by the Antitrust Research Foundation. During his speech Delrahim referenced the DOJ’s 2016 guidance, which previously warned companies that an express or implicit agreement not to recruit or hire each other’s employees could be susceptible to criminal prosecution. Delrahim specifically called out activity that began prior to the issuance of the guidance and has continued from that time.3
In 2016, the DOJ and the Federal Trade Commission (“FTC”) issued joint guidance for human resources professionals and others who participate in hiring and compensation decisions (the “HR Antitrust Guidance”).4 The HR Antitrust Guidance covered three areas, including the risk of no-poaching agreements, and indicated that agreeing companies do not have to compete for the same customers for the agreement to violate the antitrust laws; they merely have to compete for the same employees.5
A naked no-poaching agreement is “separate from or not reasonably necessary to a larger legitimate collaboration between employers,” and is per se illegal without regard to its competitive effect.6 The DOJ has previously obtained civil consent judgments for no-poach agreements with the companies agreeing to stop the prohibited conduct. Delrahim’s comments promise what would be the DOJ’s first criminal actions for these violations.
How to Respond
Although the HR Antitrust Guidance does not explicitly exempt any agreements from liability, it suggests certain legitimate joint efforts may not run afoul of the antitrust laws. The guidance is clear, however, that “informal or formal, written or unwritten, spoken or unspoken” agreements are all vulnerable to criminal penalties. It is important to note both employers and individuals can be liable.7
To reduce their antitrust risk, in-house legal departments should include HR professionals and more traditional personnel in their antitrust risk management and compliance strategy. In addition, companies should update their antitrust training, monitoring, and auditing strategies to ensure compliance.
Nicola Conway talks with David John, Founder and CEO of Akquire Points Ltd; a brand new loyalty and rewards app linked directly to your debit and credit cards.