Morrison & Foerster’s Automotive Task Pressure signifies automotive industry purchasers in their most substantial legal matters.
We have tapped our multidisciplinary Automotive Activity Force to get their views on what is most likely to come about in conditions of litigation, investigations, and enforcement steps in the automotive marketplace in 2022. We hope these predictions will provoke discussions and ideas on how to navigate the coming 12 months.
Haima Marlier on SEC Enforcement:
The U.S. Securities and Exchange Fee (SEC) under the present administration has been hyper-targeted on two regions that instantly impact the automotive tech and transportation house: (1) the use of distinctive intent acquisition providers (SPACs) by startup and other providers to go general public and (2) environmental, social, and governance (ESG) and weather adjust disclosures. SPACs have been specially energetic in the automobile-tech and transportation place, notably in electrification startups. The SEC has been scrutinizing disclosures of conflicts of curiosity that can come up between SPAC insiders and community shareholders, and will solution deSPAC disclosures like traditional first general public presenting (IPO) disclosures. In December 2021, SEC was especially energetic in pursuing businesses operating in the automotive sphere which have absent public through the use of SPACs, which bundled subpoenaing an electric-auto (EV) business connected to earnings projections and statements and getting into into a US $125 million settlement with a zero emissions transportation method company relevant to misleading statements to investors. We be expecting to see this enforcement trend go on into 2022. Turning to ESG and climate alter disclosures, the SEC is conducting a significant-scale inquiry into no matter if community businesses, which include in the automotive room, are next the agency’s 2010 weather adjust disclosure steering, with a purpose of updating that steerage dependent on its findings. ESG disclosures are also an SEC evaluation precedence for 2022. Lastly, as with any disclosures, the SEC will concentration on no matter whether ESG disclosures have product omissions or misstatements relating to weather improve and other difficulties.
Brian Kidd on DOJ Enforcement:
With a renewed concentrate on white collar and environmental crimes, the U.S. Section of Justice (DOJ), and its different legal and civil components, will enhance its focus on the automotive field. This will include things like the continuation of the styles of instances we have witnessed in the current past, together with attempts to manipulate emissions controls and defective or faulty automotive pieces. Along with these investigations, DOJ will probable boost its notice on the automotive industry’s role in climate alter, and concentration any failure to comply with the elevated environmental restrictions that the Biden administration is most likely to put in area. In the EV place, this could translate into investigations into initiatives to manipulate described EV ranges and other kinds of “greenwashing.” DOJ’s International Corrupt Methods Act (FCPA) Unit, Nationwide Safety Division, and Antitrust Division will also be on the lookout for transnational bribery conditions, sanctions violations, and “no poach” agreements, as discussed beneath.
James Koukios on Anti-Bribery and Corruption Hazard:
Even though EVs will probably mitigate climate danger, they pose a new variety of possibility for automakers: the possibility that they will be asked to shell out bribes to obtain the uncooked materials made use of to ability EV battery cells. A regular EV needs six instances the mineral inputs of a standard motor vehicle. Extractive industries have traditionally faced large corruption chance, with a single analyze acquiring that one particular in 5 scenarios of transnational bribery happens in the extractive sector. There is no reason to imagine that extracting minerals this kind of as cobalt and lithium, which are important to EV battery overall performance, will be any different. As significantly as 70 percent of the world’s cobalt supply is mined in the Democratic Republic of the Congo, which rated 170 out of the 180 countries and territories surveyed for their perceived community sector corruption by Transparency International (TI). Most lithium is at this time developed in much less corruption-susceptible international locations, these as Australia (TI rank 11) and Chile (TI rank 25) but, as demand from customers for lithium skyrockets, automakers could possibly come across by themselves turning to better threat countries this kind of as Argentina (TI rank 78) or Zimbabwe (TI rank 157) for their supplies. Bribery risk is current even if the automaker isn’t engaged in extracting the minerals alone. In an analogous case, in December 2016, a Brazilian chemical company solved allegations with U.S. authorities that it had bribed Brazilian officials to obtain uncooked resources for its items from the country’s national oil company at a much more favorable value. In particular as they convert to immediate generation of EV batteries, automakers should really revisit and update their 3rd-bash because of diligence techniques and other compliance measures to mitigate corruption danger in their battery source chains.
Brandon Van Grack on U.S. Sanctions and Export Controls:
U.S. sanctions and export controls focusing on China carry on to cripple the semiconductor sector and the automobile suppliers that count on it. Relationship back to the Obama administration, and achieving new heights in the Trump and Biden administrations, the countrywide security measures that have been imposed against China have seriously restricted global access to and growth of semiconductors. And though the pandemic has exacerbated this scarcity, and the Biden administration is pushing for enhanced investments and developments in U.S. semiconductor manufacturing, the ongoing lack is the industry’s actuality for the foreseeable long run. The U.S. government’s deployment of export controls, sanctions, and other countrywide security-connected applications focusing on China will further constrain the semiconductor field, even following supply chain concerns connected to the pandemic are settled.
Megan Gerking on Antitrust Enforcement:
The DOJ Antitrust Division continues to prioritize prison enforcement of anticompetitive carry out in labor markets, such as investigating and prosecuting “no poach,” or non-solicit, agreements amongst businesses that compete for labor. In October 2016, the FTC and DOJ declared a change in plan to criminally charge businesses and executives that enter into standalone agreements not to employ or solicit workers from every other. Given that that time, DOJ has opened a number of investigations and introduced criminal costs versus corporations and specific executives for allegedly coming into these kinds of agreements with competitors that efficiently lower wages or divide the current market. The Biden administration has reiterated its ongoing priority of antitrust enforcement in labor marketplaces in its Government Order on Advertising Opposition in the American Economic climate and by means of policy statements and other general public remarks by DOJ Antitrust Division management. While the prison fees to day have been constrained to healthcare and engineering products and services industries, no business is immune. And, not like other competitiveness violations, corporations do not will need to contend in their sale of items and products and services to be viewed as opponents for personnel. The trend is expanding—antitrust enforcers throughout jurisdictions are pursuing anticompetitive conduct in labor marketplaces as a precedence.
Yuka Teraguchi on ITC Enforcement:
U.S. patent holders can file a grievance with the U.S. Intercontinental Trade Fee (ITC) to look for an exclusion purchase directing U.S. Customs and Border Patrol to halt infringing items from entering the United States and a cease and desist order against the importers and U.S. sellers of the infringing products. In 2021, the ITC gained 82 new grievances, which was a lot better than the yearly ordinary of 65 issues in 2016–2020. About 10 p.c of the issues included products and solutions in the automotive, production, and transportation technological know-how region and 25 p.c concerned computer system and telecommunications goods, some of which are integrated into vehicles. For instance, the latest grievances accused certain built-in circuits for motor vehicle components, navigation devices, and automobile handle systems of patent infringement. As cars grow to be additional equipped with laptop or computer and networking technologies, we anticipate the variety of ITC problems in opposition to the automotive field to increase. In individual, autonomous driving technological know-how is probable to implicate a new generation of patent infringement allegations.