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Focus on Regulation

Senate ENFORCE and House PROTECT Bills Could Subject U.S. Importers to New Antidumping and Countervailing Duty Evasion Allegations

As part of a package headlined by the Hatch-Wyden-Ryan bill to restore trade promotion authority, the Senate Finance Committee held an April 22, 2015 mark-up of an original customs and enforcement bill containing the Enforcing Orders and Reducing Customs Evasion (ENFORCE) Act. The ENFORCE Act creates procedures for a federal agency or interested party to make good faith allegations of a company’s evasion of antidumping (AD) and countervailing duty (CVD) orders to U.S. Customs and Border Protection (CBP). The House Ways and Means Committee marked up a House version of ENFORCE (called PROTECT) on April 23, 2015.

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Mandatory Commerce Department Outbound Investment Survey Deadline Approaching

Certain U.S. companies and their foreign affiliates should be aware that responses to a mandatory Commerce Department outbound investment survey are due as soon as May 29, 2015.  The survey is the BE-10 Benchmark Survey of U.S. Direct Investment Abroad, a broad statistical survey conducted every five years by the Commerce Department’s Bureau of Economic Analysis (BEA).  U.S. companies that fail to comply with the BE-10 reporting requirements could be subject to civil penalties of up to $25,000 or, in some cases, criminal penalties.

The BE-10 reporting requirements apply to any U.S. person that, at any time during the U.S. person’s 2014 fiscal year, had direct or indirect ownership or control of at least 10% of the voting securities of an incorporated foreign business or held an equivalent interest in an unincorporated foreign business (e.g., a branch).  A complete BE-10 report consists of a BE-10 form for the U.S. company that holds the voting interest in one or more foreign affiliates and separate BE-10 forms filed by the U.S. company on behalf of its foreign affiliates.

Please read our client alert for more details.

Updated Merger Filing Rules in COMESA

The Council of Ministers of the Common Market for Eastern and Southern Africa (“COMESA”) has adopted an amendment to the COMESA Competition Rules on the Determination of Merger Notification Thresholds. Companies now have greater clarity as to when they will be obliged to notify mergers under the regional competition law regime in operation across the 19 African countries that constitute COMESA.

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GSA Holds Public Meeting to Discuss Proposed Rule to Eliminate the Price Reductions Clause

The General Services Administration (GSA) held a public meeting on Friday, April 17, 2015, to discuss its recently proposed rule that, if implemented, would do away with the Price Reductions Clause (PRC) and replace it with a requirement that vendors report their pricing and other transactional data for covered government sales on a monthly basis. The proposed rule would establish a pilot program that would apply to orders placed against covered Federal Supply Schedule (FSS) contracts as well as GSA non-FSS contract vehicles. The rule would not apply, at least initially, to FSS contracts administered by the Department of Veteran Affairs (VA).

Overall, the comments raised at the meeting fell in line with anticipated concerns of the participants. Representatives from industry championed the removal of the PRC, but generally opposed the rule as drafted, expressing concern over the burdens associated with aggregating sales data and the potential for repeated post-award requirements for Commercial Sales Practices (CSP) data disclosures. From industry’s perspective, GSA has significantly underestimated the administrative burdens posed by the proposed monthly reporting and increased CSP disclosure requirements. Continue Reading

New Trade Promotion Authority Bill Increases Prospects for Significant Trade Deals With the Pacific Region and Europe

After months of behind-the-scenes negotiations, on April 16, 2015, Senate Finance Committee Chairman Orrin Hatch (R-Utah), Finance Committee Ranking Member Ron Wyden (D-Ore.), and House Ways and Means Committee Chairman Paul Ryan (R-Wis.) introduced legislation, S. 995 and H.R. 1890, to restore trade promotion authority (TPA). The TPA bill provides the administration with negotiating objectives for future trade agreements and allows it to submit implementing legislation for the final agreement to Congress for an up-or-down vote without amendments. The Senate Finance Committee has now announced it will hold a mark-up of the bill on April 22. The House Ways and Means Committee has announced a hearing on the bill for the same day.

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EMA publishes draft guidance on medication errors for public consultation

On 14 April 2015, the European Medicines Agency (“EMA”) published three draft guidance documents concerning medication errors for consultation.

The new European Union (“EU”) laws and regulations governing pharmacovigilance activities require reports of suspected adverse reactions arising from an error associated with the use of a medicinal product to be reported to EudraVigilance. To support the implementation of the new requirements, the EMA in collaboration with the national competent authorities of the EU Member States was mandated to develop draft guidance documents concerning the reporting of such medication errors.

The draft guidance documents are as follows:

Good practice guide on recording, coding, reporting and assessment of medication errors

This good practice guide clarifies specific aspects related to recording, coding, reporting and the assessment of medication errors. The guide outlines the obligations imposed on the competent authorities in the EU Member States, marketing authorisation holders and the EMA.
The guide also provides guidance in relation to the assessment of medication errors. This includes recommendations for marketing authorisation holders concerning the recording, coding, reporting and assessment of medication errors brought to their attention and which are not associated with adverse reactions.

Good practice guide on risk minimisation and prevention of medication errors

This good practice guide clarifies the key principles of risk management planning in relation to medication errors. The guide also describes the main sources and categories of medication errors, including population specific aspects in paediatric and elderly patients. Moreover, the draft document also provides guidance in relation to the minimisation of the risk of such errors throughout the product life cycle.

Risk minimisation strategy for high strength and fixed combination insulin products, addendum to the good practice guide on risk minimisation and prevention of medication errors.

The purpose of this guidance document is to minimise the potential risk of medication errors associated with the introduction of high strength insulin and fixed combinations of insulin with another non-insulin injectable blood glucose lowering agent. High strength insulin is considered to be an amount higher than the EU-wide standard of 100 units/ml concentration.

Interested stakeholders can submit their comments on the draft guidance documents to the following address: medicationerrors2013@ema.europa.eu. The consultation ends on 16 June 2015.

The Sixth Circuit in United Technologies Corp. Requires Government to Prove Actual Loss for False Claims Act Damages

The Department of Justice and qui tam relators were dealt another blow regarding how damages are calculated in False Claims Act (FCA) cases. In an FCA case involving allegations of defective pricing, the U.S. Court of Appeals for the Sixth Circuit in United States v. United Technologies Corporation overturned the lower court’s award of $657 million in damages.1 The Sixth Circuit ruled that the district court erred in accepting the government’s damages calculations, which were based “dollar-for-dollar” on the amounts by which the defendant’s cost and pricing estimates were inflated. The court emphasized that damages must account for whether the government received the benefit-of-the-bargain. If “the government gets what it paid for despite a contractor’s misstatements, it has suffered no ‘actual damages.’”2

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New Labor-Related Executive Order for Federal Contractors On the Horizon?

On April 15, 2015, the Congressional Progressive Caucus held a forum renewing their request for President Obama to issue another Executive Order related to labor policies governing Federal Contractors.  Specifically, the CPC is asking the President to issue an Executive Order giving “preference” to federal contractors who pay workers at least $15 an hour and offer benefits, paid leave, full-time hours and predictable schedules.  A preference $15 per hour floor would represent a substantial increase over the recently passed Executive Order 13658, which raised the minimum wage for workers on Federal construction and service contracts to $10.10 per hour.  In support of this initiative, House Democrats argue that the wage increase would save tax money by reducing reliance on federal subsidies for health care, housing and food.

Such an Executive Order raises several questions, and could necessitate a re-evaluation of the procurement process.  For example, would the proposed preference apply to all procurements, or just select procurements in targeted industries?  How would the preference be taken into consideration during evaluations?  Further, what additional information would contractors be required to submit to certify their compliance with the minimum wage floor and would this implicate additional auditing requirements?  Finally, the financial implications must be thoroughly analyzed.  Whether it is feasible for the federal contracting industry to undertake wage hikes when the trend regarding federal procurements is to keep costs low would be a consideration.  Any increases to the costs of procurement expenditures – both contract pricing and additional administrative costs to effectuate the policy – would still have to be weighed against the ultimate saving to the tax payer as proposed by the House Democrats urging the President to execute this order.

Relevant Links:

Congressional Progressive Caucus Press Release

Forum Video

Congressman Steny Hoyer’s Statement on the Forum

DOJ Continues to Focus on FRAND Negotiations

Citing a recent spike in litigation over fair, reasonable, and non-discriminatory patent royalties as evidence that the current system is “not working very well,” a senior U.S. Department of Justice (DOJ) official on Tuesday said that there need to be clearer rules for setting FRAND rates.

According to Renata Hesse, the Deputy Assistant Attorney General for Criminal and Civil Operations in the DOJ’s Antitrust Division, international standards-setting organizations should clarify their intellectual property policies so that patent-holders and potential licensees will be “at least speaking the same language when they’re sitting at the bargaining table.”

The inability of both sides to find common ground in negotiations over the value of patents is causing significant market distortions, Hesse said during a panel discussion put on by the Global Competition Review. She emphasized that the DOJ is not seeking lower licensing rates, but rather that the Department is “trying to help people set up a framework in which they can actually figure out” FRAND royalties.

Hesse’s comments came in response to the claim by co-panelist F. Scott Kieff, a Republican commissioner at the ITC, that potential licensees of standard-essential patents have an incentive for negotiations to break down so that a court or other third party can then set a lower royalty. Kieff and others have suggested that antitrust regulators such as the DOJ and FTC should not be as involved in FRAND issues because they are simply contract disputes. Hesse argued that the ability of SSOs to confer market power on patent owners makes competition law an appropriate mechanism for correcting abuses of that power.

Debarments Continue to Rise

Federal agency debarments rose almost 14% in Fiscal Year (FY) 2014 according to an annual report recently published by the Interagency Suspension and Debarment Committee.  The jump from 1,696 debarments in FY 2013 to 1,929 debarments in FY 2014 continues a five-year trend in which the number of annual debarments has almost doubled.

The large increase in recent years is due to pressure that the Congress and the Government Accountability Office (GAO) have placed on federal agencies to implement effective suspension and debarment programs.  Several agencies that were scrutinized by GAO in 2011 for seldom exercising their suspension and debarment authority to protect the Government’s interest now have very active suspension and debarment programs.

In this environment, federal contractors both large and small can lessen the risk of suspension and debarment by implementing robust ethics and compliance programs and internal controls.  Contractors that may be thinking about ways to improve their ethics and compliance programs and internal controls could ask the following five questions:

  1. What type of ethics training does the company currently offer employees and how often?
  2. Does the company have written policies that give employees clear, accurate, and practical guidance on ethics issues and standards of conduct?
  3. Do employees understand the company’s process for reporting potential misconduct and are they encouraged to use it?
  4. What are the company’s procedures for investigating and responding to alleged misconduct?
  5. Does the company have a designated Ethics and Compliance Officer who has a clearly defined role and responsibilities?

Revisiting these questions periodically demonstrates strong commitment to ethical standards of conduct and effective internal controls.  The benefits of both cannot be understated as the number of annual debarments continues to rise.