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Focus on Regulation

The EU Commission’s study on options to regulate directors’ duties and corporate governance

The EU Commission recently published a study on options to regulate directors’ duties and corporate governance which argues that short-termism reduces long-term sustainability of European businesses. The purpose of such study is to contribute in reaching the United Nations Sustainable Development Goals (UNSDGs) adopted in 2015 and the objectives defined by the Paris Agreement on climate change.

In that regard, while communicating the European Green Deal, the EU Commission highlighted the fact that corporate governance should address the issue of sustainability in the decision‑making process.

Study on sustainability in EU corporate governance

In that context, the EU Commission recently published the study on options to regulate directors’ duties and corporate governance which argues that short-termism reduces long-term sustainability of European businesses.

According to the EU Commission’s study there is not any defined threshold above which one can state that the focus on short term is excessive. Short-termism is evaluated in relative terms by (i) assessing the evolution over the time span of the amount of net corporate funds being used for pay-outs to shareholders (in the form of dividends or shares buybacks) compared with the evolution of the amount used for the creation of value over the life cycle of the firm and (ii) comparing between different companies, sectors or countries

This study thus aims at (i) identifying the causes of short-termism in corporate governance and (ii) assessing their relationship with current market practices and/or regulatory frameworks as well as (iii) finding potential EU solutions, including through common EU rules.

As for the root causes of short-termism, the study points out seven “key problem drivers” which are grounded in EU regulatory frameworks and market practices. The first problem would be that directors’ duties and company interests are interpreted narrowly and tend to favour short-term maximisation of shareholder value. Moreover, the study identifies a growing pressure from investors to focus on short-term benefits rather than long-term investments. It also appears that companies lack strategic perspective over sustainability and their current practices do not address sustainability risks and impacts. The actual board remuneration structures and the current board composition would incentivise short-term financial returns and would not fully support a shift towards sustainability. In addition, corporate governance frameworks and practices would not take into account the long-term interests of stakeholders in the decision-making process, and there is an alleged lack of enforcement of directors’ duties regarding the long-term interests of the company.

EU intervention

The study thus identifies three specific objectives that should be pursued by any future EU intervention to tackle the issue of short-termism and its cross-border effects such as climate change and pollution: (1) strengthening the role of directors in pursuing their company’s long-term interest, (2) improving directors’ accountability for their business conduct and the sustainability of their corporate governance and (3) promoting corporate governance practices contributing in the sustainability of companies.

For these measures to be taken, the study favours a “hard legislative” option, that is to institute a minimum of common rules that would promote the creation of long-term value. These rules could be adopted on the basis of Article 50(1) and (2)(g) of the Treaty on the Functioning of the European Union (TFEU), which allows the EU to coordinate safeguards to protect the interests of companies’ members and other stakeholders to reach freedom of establishment. EU intervention could also be based on Article 114 of the TFEU, which gives the EU the competence to adopt measures to harmonise regulations to ensure the proper functioning of the internal market.

Likely positive impacts of EU intervention

The EU Commission foresees a number of positive impacts resulting from its new propositions. EU intervention would create more legal certainty and level playing fields as to the necessary measures that should be taken to achieve sustainability in corporate governance. It would also give more leverage to business partners to comply with human rights commitments at all stages of the supply chain. Moreover, the Commission maintains that reaching sustainable objectives in corporate governance would improve the productivity, the profitability and the attractiveness of EU companies. Framing long-term decisions could also make EU businesses less vulnerable to short-term economic and social changes and to sudden crises such as the COVID-19 pandemic. Finally, this would also benefit to the economy and to the society as a whole, as increasing investments for innovation, research and technological development would generate macro-economic growth and help the transition to sustainability.

A public consultation on sustainability and corporate governance should be held in the coming months to inform on the EU Commission’s legislative proposal in this regard. Businesses should keep an eye out for the potential enactment of new EU rules increasing directors’ duties which will likely impact the enforcement of businesses’ policies to prevent any adverse human rights impacts that may be associated with their activities.


Ongoing discussions at UN level on a draft international treaty binding businesses on Human Rights related due diligence and obligations: Major changes introduced by the Second Revised Draft

The Second Revised Draft of the legally binding instrument on business and human rights was released in August 2020 by the Chairperson of the Open-ended Intergovernmental Working Group on Transnational Corporations and other Business Enterprises with respect to Human Rights (OEIGWG). It is a step forward before the adoption of a UN Legally Binding Instrument in the field of business and human rights. Please see our previous reports on these discussions at the bottom of this post.

A broader scope

The Second Revised Draft includes State-owned enterprises in the definition of legal entities undertaking business activities which clarifies that domestic business activity is covered by the Draft Treaty. It also refers to “business relationship” instead of “contractual relationship”, a term formerly used in the Revised Draft which was perceived as a limitation to the multiple ways in which companies relate to one-another. Continue Reading

Parts of our blog are moving!

We have moved parts of our blog to the new technology platform EngageEngage will give you the legal and regulatory insight and analysis you need, from across our global network, when you need it.

If you are signed up to receive emails from us, you’ll soon receive an email with details on how to use Engage to continue to stay up-to-date on the latest developments in regulation, as well as on different topics published by the firm if you’d like.

We are gradually moving all other blog content to Engage as well, but while we are making this transition, you will continue to be able to find content related to Aviation and Energy and on this website.

We value your loyal readership and look forward to seeing you on Engage!

Consumer IoT – European Commission initiates inquiry into the consumer Internet of Things sector

The European Commission (“Commission”) has launched an antitrust sector inquiry into the Internet of Things (“IoT”) sector for consumer-related products and services within the European Union. The Commission is looking to develop a better understanding of how this fast-moving sector works and some of the potential issues that may arise from a competition law perspective.  The regulator intends imminently to send requests for information to a range of players in this sector and already plans to publish a preliminary report on its findings in the spring of 2021. As such, the inquiry offers companies in the IoT sector an opportunity to steer the Commission’s approach to competition in this area.

Continue Reading

Coronavirus: The Hill and the Headlines – COVID-19 D.C. Update – July 15, 2020

Your guide to the latest Hill developments, news narratives, and media headlines provided by the Hogan Lovells Government Relations and Public Affairs team.

In Washington:

  • The White House denies that it is trying to undermine the nation’s top disease expert, Dr. Anthony Fauci. Today the President’s trade advisor, Peter Navarro blasted Dr. Fauci’s handling of the coronavirus in a scathing USA Today op-ed entitled, “Anthony Fauci has been wrong about everything I have interacted with him on” and says he listens to Fauci with “skepticism and caution.” White House spokeswoman Alyssa Farah tried distancing the White House from the op-ed claiming in a tweet that the op-ed didn’t go through “normal White House clearance processes” and only Navarro’s opinion. Later, President Trump told reporters he had a good relationship with Dr. Fauci and Navarro’s comments were his own adding “shouldn’t be doing that.”  This afternoon, White House Chief of Staff Mark Meadows said that Navarro “violated” instructions by him and other staff to “de-escalate” the situation between the White House and Dr. Fauci. Dr. Fauci called the White House’s efforts to discredit him “bizarre” and responded that it ultimately harms President Trump.
  • Chairs from five House Committees wrote a letter to Secretary of Defense Mark Esper and Secretary of Health and Human Services Alex Azar, seeking answers as to why the Administration has not used funding in the CARES Act for the Defense Production Act to boost production of critical medical supplies and equipment needed to combat COVID-19, such as personal protection equipment and diagnostic testing.
  • Retired Gen. Joseph Dunford, the former chair of the joint chiefs of staff, has withdrawn himself from consideration to chair a coronavirus oversight panel tasked with managing the implementation of the US$500 million coronavirus relief fund.
  • A White House campaign released Tuesday is advocating for new “pathways” to jobs as the coronavirus pandemic has left many Americans out of work. The campaign entitled “Find Something New” encourages Americans who are unemployed or unhappy in their jobs or careers to seek new opportunities and promote vocational training rather than two-or-four year college programs. 
  • In a sudden reversal of his previous comments and opinion on masks, President Trump urged Americans to wear masks to prevent coronavirus spread. When asked about mandates on wearing masks during a CBS News interview on July 14,  Trump responded that governors should go by Centers for Disease Control and Prevention (CDC) guidelines, but stopped short of saying there should be a federal mandate.  Despite yesterday’s comments, the President did not wear a mask as he landed and greeted officials today in Georgia. 
  • CDC Director Robert Redfield warned that this fall and winter will be “one of the most difficult times we’ve experienced in American public health” and urged young people to wear face coverings in a tweet saying, “I believe if everyone, including #Millenials and #GenZ, wear a cloth face covering for the next 4 to 6 weeks, we can get the #COVID19 epidemic under control.”
  • The Food and Drug Administration (FDA) has added three more hand sanitizers to its rolling list of products recalled because of possible contamination with a toxic chemical.  In total, over 65 of the cleansers have now tested positive for methanol, which can be poisonous if absorbed through the skin or ingested, according to the FDA’s latest update. The items have been introduced into the market at a time of heightened risk, with more consumers relying on sanitizers to help insulate themselves from infection with COVID-19.

In the News:

  • Republicans are looking for ways to ensure participants at the Republican National Convention in Jacksonville, Florida are safe, as the state remains one of the major COVID-19 hotspots.  Officials are exploring alternative outdoor venues around the VyStar Veterans Memorial Arena for the evening programs.  Many Republican elected officials have already announced that they will not be attending the event that is scheduled from August 25-27 and it is still unknown how many people will be allowed to attend.   
  • Walmart and Sam’s Club will require customers at all of its US stores to wear masks beginning next week, becoming the largest retailer to mandate facial coverings as coronavirus cases continue to rise.
  • Oklahoma Governor Kevin Stitt (R) announced Wednesday that he has tested positive for COVID-19, becoming the first U.S. governor known to have the virus. Stitt had pushed an aggressive reopening plan and rarely wears a mask.  The Governor also attended the President’s Tulsa campaign rally.  Stitt says that he feels “fine,” other than being a “little bit achy.” He said he’ll be quarantining and working from home.
  • Alabama Gov. Kay Ivey (R) announced a state-wide mask order beginning Thursday that will be in effect until July 31. The order will replace all local rulings on masks for the two weeks it is in effect. 
  • JC Penny says it will close an additional 152 stores and cut 1,000 jobs as it tries to fight its way out from under bankruptcy protection.  The retailer said Wednesday that the jobs to be eliminated will include corporate, field management, and international positions.

Coronavirus: The Hill and the Headlines – COVID-19 D.C. Update – July 14, 2020

Your guide to the latest Hill developments, news narratives, and media headlines provided by the Hogan Lovells Government Relations and Public Affairs team.

In Washington:

  • Senate Majority Leader Mitch McConnell (R-KY) on Monday told reporters that when the Senate returns next week Republicans will start discussions on the next coronavirus stimulus package with their Democratic counterparts.  “I think you can anticipate this coming to a head sometime within the next three weeks,” he said.  But House Majority Leader Steny Hoyer (D-MD) told Democrats on a caucus call on Monday that the House might be in session an extra week on the first of August to finish up coronavirus negotiations.  The expanded unemployment benefits are due to expire by the end of this month.  McConnell reiterated that no bill will pass the Senate without liability protection “for everyone related to the coronavirus.”
  • The Trump Administration is changing a new data reporting protocol and ordering hospitals to bypass the Center for Disease Control and Prevention (CDC) and instead send critical COVID-19 information to the Department of Health and Human Services (HHS).  The CDC normally collects information on patients, available beds and additional data and would no longer become a data recipient.  Critics fear the administration’s moves could lead to the data being distorted for political gain.  The White House is also asking governors to consider sending its National Guard to its hospitals to help improve data collection about the virus.
  • The Trump administration on Tuesday rescinded a policy that would have stripped visas from international students whose courses moved exclusively online amid the coronavirus pandemic.  The move comes after the policy announcement last week sparked a flurry of litigation, beginning with a suit brought by Harvard University and the Massachusetts Institute of Technology (MIT), followed by California’s public colleges and later a coalition of 17 states, among others. The development marks one of the few times the Trump Administration has backed down from implementing a major immigration-related policy without first being ordered by a judge to do so.  
  • Schools should bring students back to class, but local leaders will need to watch local infection rates, Dr. Anthony Fauci said Tuesday. “Let’s try and get them open to the extent that we can, but let’s take a look at the dynamics of the infection in the area that you’re in,” Fauci said during a Georgetown University Global Health Initiative webinar. “We should try as best as possible to keep the children in school for the reasons that the unintended downstream ripple effect consequences of keeping the kids out of school and the impact on working families, and on other aspects of society can be profound,” Fauci said.  President Trump during an interview with CBS News said it would be a “terrible decision” if schools don’t open on time in the fall, ignoring possible concerns from those who view it as unsafe.
  • The executives of four private companies running immigration detention centers told lawmakers that about 900 of their employees have tested positive for COVID-19.   The companies — GEO Group, CoreCivic, Management & Training Corporation (MTC), and LaSalle Corrections — all contract with U.S. Immigration and Customs Enforcement. 
  • POLITICO is reporting that some Republicans are breaking from President Trump’s coronavirus talking points on testing, wearing masks, and reopening schools.  The lack of timely testing caused staunch ally Sen. Lindsey Graham to suggest it was time for the President to invoke the Defense Production Act to compel companies to produce testing supplies or incentivize pool testing.  Even Florida Gov. Ron DeSantis is taking a more “somber tone” as he gives his daily reports and started acknowledging the need for faster testing.
  • Four former CDC directors wrote a Washington Post op-ed accusing the Trump administration of politicizing public health information. The former directors said that the Trump administration’s undermining of the public health officials and casting public doubt has resulted in the sharp rise in COVID-19 cases and deaths. “As the debate last week around reopening schools more safely showed, these repeated efforts to subvert sound public health guidelines introduce chaos and uncertainty while unnecessarily putting lives at risk,” wrote the former CDC health officials Tom Frieden, Jeffrey Koplan, David Satcher and Richard Besser.


In the News:

  • A Covid-19 vaccine developed by the biotechnology company Moderna in partnership with the National Institutes of Health (NIH) has been found to induce immune responses in all of the volunteers who received it in a Phase 1 study. Moderna’s is considered the leading vaccine prototype in the US, was the first to enter human trials and is the first to complete phase 1 in the country If the next phase of testing in more people goes well, the company will be on track to make 500 million a year, with the goal of 1 billion by the end of 2021.
  • Across the U.S., states are seeing record-breaking spikes in the number of coronavirus cases and deaths.  Oklahoma reported 993 cases of the virus on Tuesday, a single-day record for the state.  Florida, Utah and Alabama all broke their records for most deaths in a single day.
  • Some retailers are ending the pay raises or “hero pay” they started when the pandemic began, despite recent COVID-19 surges in many states.  Stop & Shop is the latest retailer to make such a move, ending a 10 percent pay raise it gave its 56,000 employees this spring.  Amazon, Kroger and Albertsons have also ended pandemic hourly pay raises, though some of them continue to give out bonuses.  ShopRite said it planned to end its $2-an-hour raise early next month.
  • North Carolina Governor Roy Cooper (D) announced Tuesday that schools will reopen this fall with students splitting time between classroom and remote learning. The plan also includes increased social distancing with schools operating at no more than 50 percent and buses at no more than 33 percent capacity.
  • An estimated 5.4 million Americans have lost their health insurance between February and May according to a new study by Families USA. The nonpartisan consumer advocacy group found that the estimated increase in uninsured workers was nearly 40 percent higher than the highest previous increase, during the recession of 2008.
  • Starting Wednesday, Best Buy will require shoppers to wear masks in an effort to keep customers, communities and employees safe, the company said in a news release.  
  • Vox Media is preparing layoffs after furloughing about 100 employees in April as part of virus-related cost cutting, according to people familiar with the matter.  Vox’s revenue fell 40 percent short of internal forecasts for the second-quarter and is on pace to fall 25 percent below forecast for the year. 
  • Mall owners are finding creative ways to use their parking lots during the coronavirus pandemic, even setting up the empty expanses as sources of revenue.  Brookfield Properties is working on a deal with entertainment company Kilburn Live to turn parking lots at a number of its U.S. malls into drive-in theaters, hosting movies and virtual concerts. 

The US-Canada border is expected to remain closed until at least August 21, CNN reports citing two Canadian government sources. There will be stepped-up enforcement and surveillance at most Canadian land borders in the coming weeks, the sources add. By mutual agreement, the US-Canada border has been closed to all non-essential traffic since March. Canadian Prime Minister Justin Trudeau is expected to formally announce the decision later this week

Coronavirus: The Hill and the Headlines – COVID-19 D.C. Update – July 13, 2020

Your guide to the latest Hill developments, news narratives, and media headlines provided by the Hogan Lovells Government Relations and Public Affairs team.

In Washington:

  • Education Secretary Betsy DeVos is defending President Trump’s push to reopen schools this fall despite the surge in COVID-19 cases.  DeVos said the combination of virtual or in-person learning is not a valid choice.  She says it is up to districts and local officials to reopen schools in their community and hotspots can be dealt with on a case-by-case basis.  DeVos said the Centers for Disease Control (CDC) guidelines for opening schools are meant to be flexible.   
  • The media is reporting that the White House is trying to undermine the reputation of Dr. Fauci as he continues to disagree with President Trump on the COVID-19 crisis.  White House officials have been distributing misleading “opposition information” on Dr. Anthony Fauci. The talking points include out-of-context and incomplete statements made by Dr. Fauci.  President Trump last week said Dr. Fauci “is a nice man, but he’s made a lot of mistakes” and on Sunday,  Coronavirus Task Force member Adm. Brett Giroir told NBC’s Meet the Press, “Dr. Fauci is not 100 percent right, and he also doesn’t necessarily, he admits that, have the whole national interest in mind.” 
  • Dr. Anthony Fauci said the U.S. is seeing a surge in new coronavirus infections because the country never shut down entirely.  Early in the outbreak, U.S. coronavirus cases peaked at around 30,000 new cases a day before falling and plateauing at roughly 20,000 new cases per day, according to Johns Hopkins University.  As some states began to reopen in late April through June, new cases began to surge, Fauci told Stanford Medicine Dean Lloyd Minor during an interview. “We did not shut down entirely,” Fauci said. “We need to draw back a few yards and say, ‘OK, we can’t stay shut down forever.’ …You’ve got to shut down but then you’ve got to gradually open.”
  • Former White House Chief of staff Mick Mulvany wrote an op-ed for CNBC criticizing the U.S. testing process and calling on another round of stimulus that should focus on the root cause of fighting COVID-19.  “Any stimulus should be directed at the root cause of our recession: dealing with COVID. I know it isn’t popular to talk about in some Republican circles, but we still have a testing problem in this country. My son was tested recently; we had to wait 5 to 7 days for results. My daughter wanted to get tested before visiting her grandparents, but was told she didn’t qualify.  That is simply inexcusable at this point in the pandemic,” he wrote.
  • Senate Democrats  released  proposals in eight key policy areas that are crucial to ensuring one or more safe, effective COVID-19 vaccines that are produced, distributed, and administered widely enough to end the COVID-19 pandemic.  Minority Leader Chuck Schumer (D-NY) and Senate Health, Education, Labor and Pensions (HELP) Ranking Member Sen. Patty Murray (D-WA) released the “roadmap” which includes $25 billion in new emergency funding to support vaccine development in the next coronavirus relief package.  
  • Despite Congres being in recess for the next two weeks, there are several coronavirus hearings this week.  On Tuesday, July 14, the House Homeland Security Subcommittee on Oversight, Management, and Accountability will hold a  hearing entitled “Reviewing Federal and State Pandemic Supply Preparedness and Response.”  The House Foreign Affairs Subcommittee on Europe, Eurasia, Energy and the Environment holds a hearing on “The Importance of Transatlantic Cooperation During the COVID-19 Pandemic.”  On Friday, July 17, the House Ways and Means Subcommittee on Social Security will hold a hearing on “The Impact of COVID-19 on Social Security and its Beneficiaries.”
  • A pot of money meant to help prop up small businesses during the coronavirus pandemic has run out of funds. The Economic Injury Disaster Loan Advance (EIDL) program, a federal measure offering grants of up to $10,000 to entrepreneurs, ended after reaching the $20 billion funding limit allowed by Congress, the Small Business Administration (SBA) announced Saturday. The EIDL Advance program, created by the CARES Act, gave emergency grants to small businesses within three days of their application being filed.   The grants don’t have to be repaid, even if an application for an EIDL loan, which offers up to $150,000 in funding,  was ultimately denied. However, the grants were plagued by long delays and changing rules.  

 In the News: 

  • On Monday, Officials from 17 states and the District of Columbia filed a federal lawsuit to stop the Trump administration requirement that international students take in-person classes at colleges and universities or risk deportation. The lawsuit was filed after U.S. Immigration and Customs Enforcement (ICE) announced on July 6 that students attending schools planning to stay online for classes in the fall would no longer be allowed to stay in the U.S. on F-1 or M-1 visas. 
  • This week we will learn a lot about COVID-19’s effects on the economy from company earnings to important data like June retail sales.  On Tuesday, the Consumer Price Index for June is released as well as earnings from Wells Fargo, JPMorgan, Citigroup and  Delta.  On Thursday, June retail sales information will be released. 
  • The Florida Department of Health reported the largest daily increase of COVID-19 infections in any state since the pandemic began over the weekend with 15,299 new cases.  Across the country, more than half the states are dealing with increased rates of new cases compared to last week.  And more than half the states have paused or rolled back their reopening plans in hopes of getting coronavirus under control.
  • Voters in Texas, Maine, and Alabama go to the polls tomorrow in races that could determine who controls the Senate come January. 
  • Some major U.S. airlines are keeping middle seats unoccupied to facilitate some social distancing on its planes, however, one report suggests the move may come at a price for passengers. With fewer seats to sell, airlines may be forced to ramp up the price of passenger fares in order to break even this year, according to the International Air Transport Association, which has openly opposed mandating social distancing measures that would leave middle seats empty.  
  • The Washington Post’s Eli Rosenberg reports that “Four months into the worst recession since the Great Depression, tens of thousands of workers” putting many Americans in dire financial straits.   State unemployment offices are overwhelmed and have been hampered by years of neglect and budget cuts.


Coronavirus: The Hill and the Headlines – COVID-19 D.C. Update – July 10, 2020

Your guide to the latest Hill developments, news narratives, and media headlines provided by the Hogan Lovells Government Relations and Public Affairs team.

In Washington:

  • Sens. Ben Cardin (R-MD) and Marco Rubio (R-FL) led a letter from a group of 31 senators calling on Senate leadership to include an international response to COVID-19 in the next coronavirus package. According to the Centers for Disease Control and Prevention (CDC), 70 percent of the world remains underprepared to prevent, detect, and respond to a public health emergency.  Furthermore,  over three dozen countries – including Ethiopia, Nigeria, South Sudan, Syria, Venezuela, and Yemen – could experience famines in 2020.
  • National Institute of Allergy and Infectious Diseases Director Dr. Anthony Fauci, yesterday said states needed to pause reopening efforts. “Rather than think in terms of reverting back down to a complete shutdown, I would think we need to get the states pausing in their opening process,” he told The Hill. Fauci’s comment differs from the previous one he made a day earlier in a Wall Street Journal interview when he said states “should consider” shutdowns. 
  • Almost 100 members of Congress are demanding the Trump administration halt its order to deport any international students whose coursework is being moved completely online, according to a letter led by Sen. Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA) to the heads of Department of Homeland Security (DHS) and ICE. “This new policy would effectively punish international students at colleges, universities, and other institutions that have decided to move their courses online in order to protect their communities from COVID-19,” the letter said. 
  • On July 21, the five executives of the leading coronavirus vaccine developers, all of which are participating in the U.S. government Operation Warp Speed project, will testify before the House Energy and Commerce Oversight Subcommittee.  
  • The U.S. Department of Agriculture said Thursday that it will be offering aid to producers of more than 40 new fruits, vegetables, herbs, roots, and commodities through the $16B Coronavirus Food Assistance Program that Congress authorized.
  • Seven Senate Democrats on Thursday wrote a letter to the acting Comptroller of the Currency (OOC) Brian Brooks saying the regulator mischaracterized federal law when it asserted in an official document that it can preempt a number of state coronavirus relief measures in the interest of uniform standards for banks, according to POLITICO.   Led by Sens. Amy Klobuchar (D-MN) and Sherrod Brown (D-OH) said the agency must issue a determination of federal preemption on a case-by-case basis, not categorically.
  • On July 9, former Vice President Joe Biden laid out how his administration plans to handle the coronavirus and the resulting beleaguered U.S. economy.  His plans include “multiple scenarios” on a COVID-19 vaccine, federal guidance, and bolstering the U.S. supply chain of critical goods and PPE needed to combat the virus.  Biden also introduced a $700 billion plan to revive the U.S. economy that emphasizes job creation and U.S. manufacturing.
  • CNN is reporting that President Trump and Dr. Anthony Fauci are not speaking to each other despite the current pandemic.  “Dr. Fauci is a nice man, but he’s made a lot of mistakes,” Trump said this week.  Dr. Fauci was also told not to attend this week’s past coronavirus task force meeting and sources say that Trump and Fauci haven’t spoken in over two weeks.  “I have a reputation, as you probably have figured out, of speaking the truth at all times and not sugar-coating things,” Fauci told the Financial Times this week.

In the News: 

  • Former FDA Commissioner Dr. Scott Gottleib told CNBC on Friday that he believes there continues to be a significant number of unreported coronavirus cases in the U.S., suggesting as many as 1 in 150 people in the country could be infected. 
  • The WHO yesterday unveiled new guidelines on the spreading of the novel coronavirus that acknowledge some reports of airborne transmission of the virus, but stopped short of confirming that the virus spreads through the air in such cases as choir practice, in restaurants or in fitness classes. 
  • Stocks rose midday Friday after news of a potential coronavirus treatment. The Dow Jones Industrial Average traded 200 points higher, or 0.8 percent. The S&P 500 climbed 0.4 percent. The Nasdaq Composite lagged, trading just below the flatline. 
  • Gilead Sciences announced new findings Friday that its antiviral drug remdesivir reduced the risk of death for severely sick coronavirus patients by 62 percent compared with standard care alone. The company said its analysis also found that treatment was associated with “significantly improved clinical recovery.” The findings are being presented at the Virtual COVID-19 Conference as part of the 23rd International AIDS Conference, the company said.
  • The U.S. reported a daily record of 65,500 new cases of COVID-19 on Thursday, according to data compiled by Johns Hopkins University.  It’s the second time this week the U.S. topped its record for new infections reported in a 24-hour period as outbreaks expand across a number of states, mostly across the American South and West. 
  • The volume of loans in active forbearance, in which borrowers are allowed to delay their monthly payments, fell by 435,000 from the previous week, the largest one-week drop yet,  according to mortgage data firm Black Knight. That is the largest one-week drop yet.  Roughly 4.14 million loans were in forbearance, representing 7.8 percent of all active mortgages, down from 8.6 percent the prior week. 
  • German biotech firm BioNTech SE that has partnered with Pfizer Inc. to develop a coronavirus vaccine is confident it will be ready to seek regulatory approval by the end of the year, according to its chief executive.  Several hundred million doses could be produced even before approval, and over 1 billion by the end of 2021, CEO Dr. Ugur Sahin told The Wall Street Journal.
  • California Xavier Becerra announced it will be the first state to challenge the Trump administration’s decision to bar international students from remaining in the U.S. if their coursework is provided entirely online when classes resume in the fall. The lawsuit seeks a preliminary injunction against enforcement of the new visa policy issued by Immigration and Customs Enforcement (ICE).

A new study says the world’s top brands, such as L’Oréal, Dell, Bloomberg News, Microsoft, and Merck Group, are unwittingly funneling their advertising spending to websites that traffic in COVID-19 disinformation. 

Coronavirus: The Hill and the Headlines – COVID-19 D.C. Update – July 9, 2020

Your guide to the latest Hill developments, news narratives, and media headlines provided by the Hogan Lovells Government Relations and Public Affairs team.

In Washington:

  • Just as some federal agencies are calling for federal employees who are teleworking to return, several Virginia and Maryland lawmakers are warning that it might be too early.  “Reopening too quickly by ending maximum telework threatens to erase the progress made against the virus and endanger the health and safety of federal employees and everyone else in an agency’s region through increased community spread,” Sens. Chris Van Hollen (D-MD), Ben Cardin (D- MD), Tim Kaine (D-VA) and Mark R. Warner (D-VA) wrote in letters to Office of Management and Budget (OMB) and the Office of Personnel Management (OPM).  Van Hollen said it was “grossly irresponsible” to bring back federal employees at this point and said that Congress has several legislative options to block the return of federal workers.
  • NIAID Director Dr. Anthony Fauci said Wednesday that states need to face problems with their coronavirus responses because “if you don’t admit it, you can’t correct it.” Fauci told a Wall Street Journal podcast. Fauci suggested that states experiencing a surge in cases should consider shutting down and warned against being “mindful of what happens when you throw caution to the wind” and ignore health advice.
  • House Speaker Nancy Pelosi rejected the White House’s calls to limit the next coronavirus relief package to $1 trillion dollars. In a press conference today, the Speaker said that $1 trillion does not come anywhere near enough given the recent surge in cases.  “We need $1 trillion for state and local. We need another $1 trillion for unemployment insurance and direct payments. Something like that, but probably not as much, for the testing, tracing, treatment,” Pelosi said.  Pelosi aims to clear the package by the end of the month and vowed to not “cave” to Republican demands to scale back worker protections.
  • Dr. Robert Redfield announced today that it will not revise its guidelines for reopening schools despite pressure from President Trump to do so.  Redfield said the agency will provide additional reference documents.  “Our guidelines are our guidelines, but we are going to provide additional reference documents to aid basically communities in trying to open K-through-12s,” Redfield said. “It’s not a revision of the guidelines; it’s just to provide additional information to help schools be able to use the guidance we put forward.”
  • Rep. Mark Pocan wrote a letter to  American Airlines and United Airlines chastising the companies for operating at full capacity rather than using social distancing policies like their competitors.   The congressman called for the companies to reconsider their booking practices immediately.  Pocan ended the letter with “P.S. It is neither “American” or standing “United” with the people who’ve bailed out your industry – the taxpayers – to throw them under the proverbial flying airbus to make a few extra bucks.”
  • The Independent Restaurant Coalition organized a letter with American Express, Coca-Cola, Delta Air Lines, Hyatt Hotels, Resy, Sysco and US Foods to Sens. Roger Wicker (R-MS) and Kyrsten Sinema (D-AZ) supporting the legislation the senators introduced that would create a $120 billion Independent Restaurant Revitalization fund to help the restaurant industry that has been ravaged by the coronavirus. “Without restaurants, every one of our businesses would be impacted and the economic framework of cities and towns across all parts of the United States would be dramatically altered for the worse,” they wrote.
  • Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, cast doubt on the use of “challenge trials” when testing for a COVID-19 vaccine saying it could cause “ethical heartburn.”  In human challenge studies, people are exposed to the disease and with no cures existing for COVID-19, could be lethal to vulnerable patients. “If something bad happens, you don’t have a perfect fix for it,” said the FDA’s Peter Marks.
  • The Washington Post is reporting that Trump administration and congressional Republicans are exploring whether to restrict the number of Americans receiving the next round of stimulus payments. Proposals include dropping the $75,000 income threshold.  Senate Majority Leader has been advocating that payments should be targeted to help those earning under $40,000 a year.


In the News:

  • California and Florida were among 12 states that hit a record-breaking, seven-day average for daily new COVID-19 cases on Wednesday, according to data from Johns Hopkins University.  Nationally, cases grew by more than 20 percent from a week ago.
  • The Biomedical Advanced Research and Development Authority (BARDA) is investing $42 million to help Becton, Dickinson, and Company, ramp up its production of syringes and needles ahead of the future coronavirus vaccination push.
  • Wells Fargo is preparing to cut thousands of jobs later this year in an effort to reduce costs, according to a report from Bloomberg Law. The plans being drawn up by Wells Fargo executives could eventually lead to tens of thousands of jobs being cut, Bloomberg reported citing people with knowledge of the confidential talks.
  • Starbucks customers will have to wear masks to enter company-owned locations starting July 15.  Customers who are not wearing facial coverings at locations without a local government mandate can use curbside pick-up, drive-thru lanes or delivery to receive their Starbucks drinks.
  • Rates on 30-year mortgages have fallen to record lows for the third consecutive week as inflation remains muted in a weakened economy, even in the face of persistent demand from homebuyers.
  • Dartmouth College is eliminating five varsity athletic teams and 15 staff positions, including eight coaches, to help ease a budget deficit made worse by the COVID-19 pandemic.  110 students are impacted and it reduces the number of varsity teams to 30 the college said Thursday in a statement.


EU wine producers can now benefit from a temporary relaxation in competition rules

The European wine sector has been greatly affected by the COVID-19 pandemic. According to statistics from the European Commission (EC), there has been a 30% reduction in the volume of wine sold and a 50% drop in the value of sales across the EU from mid-March until to end of May 2020, compared to sales before the closures. As simply put by the EC, while COVID-19 has led to an increase of home consumption in wine, this has not compensated for the drop in demand in the hospitality and catering industry resulting in part from the closure of bars, restaurants and hotels. In recognition of the economic disruption faced by growers and producers of wine, and the fact that the situation is not forecasted to improve in the next 6 months, the EC has taken a rare step to adopt legislation to formally authorise certain agreements in the wine sector that may have otherwise fallen foul of EU competition law.

Article 101(1) of the Treaty on the Functioning of the European Union prohibits agreements that restrict competition. The prohibition includes, for example, agreements between market players that are aimed at limiting or controlling production. Thus, actions between suppliers seeking to agree on production volumes would typically be caught under Article 101(1) TFEU and be void, and potentially attract fines.

Under Regulation (EC) No 1308/2013 (otherwise known as the Common Markets Organisation Regulation), the EC is allowed to adopt acts that suspend the application of Article 101(1) TFEU to agreements in certain agricultural sectors during periods of “severe imbalance in markets” where the agreements strictly aim at stabilising the sector and do not impair the functioning of the internal market.

The EC has now adopted a new Regulation (2020/975) which specifically authorises farmers, farmers’ associations, associations of such associations, recognised producer organisations, associations of recognised producer organisations and recognised interbranch organisations (“operators”) to enter into agreements on the production of wine grapes and wine, including with regard to transformation and processing, storage, joint promotion, quality requirements and production planning. Provided that these agreements do not impair the functioning of the internal market, and are strictly aimed at stabilising the wine sector, they benefit from derogation from Article 101(1) TFEU. Importantly, the derogation does not apply to agreements on partitioning the market, discrimination on the basis of nationality or price-fixing. The derogation applies for period of 6 months from 8 July 2020, covering the first part of the 2020/2021 wine marketing season which starts in August.

The Regulation will increase the level of scrutiny by competition authorities in the wine sector. Already back in April last year, the French competition authority raided the premises of companies suspected of having engaged in possible anticompetitive practices involving wine and spirits. While there has been no suggestion that that particular investigation is now impacted by the EC’s measures (indeed the derogation does not have retrospective effect), the actions of operators in the wine sector will now be in the spotlight. The price of derogation from the competition rules is a reporting mechanism for operators to report on their concluded agreements, and for Member States in turn to report on those agreements to the EC. Competition authorities throughout the EU will now have to closely monitor cooperation efforts in this sector.

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