Morrison & Foerster’s Automotive Process Drive signifies automotive sector shoppers in their most significant legal issues.
We have tapped our multidisciplinary Automotive Endeavor Force to get their viewpoints on what is probably to happen in terms of litigation, investigations, and enforcement actions in the automotive field in 2022. We hope these predictions will provoke discussions and thoughts on how to navigate the coming year.
Haima Marlier on SEC Enforcement:
The U.S. Securities and Trade Commission (SEC) under the current administration has been hyper-concentrated on two regions that specifically impact the automotive tech and transportation space: (1) the use of specific function acquisition businesses (SPACs) by startup and other corporations to go general public and (2) environmental, social, and governance (ESG) and local weather alter disclosures. SPACs have been especially lively in the auto-tech and transportation room, particularly in electrification startups. The SEC has been scrutinizing disclosures of conflicts of fascination that can come up between SPAC insiders and general public shareholders, and will technique deSPAC disclosures like standard preliminary public giving (IPO) disclosures. In December 2021, SEC was significantly active in pursuing firms operating in the automotive sphere which have absent public by way of the use of SPACs, which included subpoenaing an electric-vehicle (EV) corporation similar to profits projections and statements and entering into a US $125 million settlement with a zero emissions transportation system supplier similar to misleading statements to traders. We count on to see this enforcement development continue into 2022. Turning to ESG and weather transform disclosures, the SEC is conducting a large-scale inquiry into irrespective of whether public businesses, like in the automotive place, are next the agency’s 2010 climate improve disclosure steering, with a purpose of updating that direction primarily based on its conclusions. ESG disclosures are also an SEC assessment priority for 2022. Last but not least, as with any disclosures, the SEC will emphasis on whether or not ESG disclosures comprise materials omissions or misstatements relating to weather improve and other challenges.
Brian Kidd on DOJ Enforcement:
With a renewed concentration on white collar and environmental crimes, the U.S. Section of Justice (DOJ), and its several legal and civil parts, will maximize its target on the automotive industry. This will contain the continuation of the kinds of instances we have viewed in the new previous, like initiatives to manipulate emissions controls and defective or faulty automotive areas. Along with individuals investigations, DOJ will possible boost its notice on the automotive industry’s part in local climate change, and aim any failure to comply with the enhanced environmental rules that the Biden administration is possible to place in place. In the EV space, this could translate into investigations into attempts to manipulate described EV ranges and other forms of “greenwashing.” DOJ’s Foreign Corrupt Practices Act (FCPA) Unit, Countrywide Security Division, and Antitrust Division will also be on the lookout for transnational bribery conditions, sanctions violations, and “no poach” agreements, as talked over down below.
James Koukios on Anti-Bribery and Corruption Chance:
When EVs will most likely mitigate climate risk, they pose a new sort of hazard for automakers: the hazard that they will be asked to pay out bribes to acquire the raw supplies employed to ability EV battery cells. A regular EV requires 6 periods the mineral inputs of a regular car. Extractive industries have historically confronted substantial corruption chance, with a single research discovering that 1 in five conditions of transnational bribery occurs in the extractive sector. There is no cause to believe that that extracting minerals this kind of as cobalt and lithium, which are vital to EV battery functionality, will be any diverse. As a great deal as 70 percent of the world’s cobalt source is mined in the Democratic Republic of the Congo, which ranked 170 out of the 180 nations and territories surveyed for their perceived public sector corruption by Transparency International (TI). Most lithium is at this time made in considerably less corruption-inclined countries, such as Australia (TI rank 11) and Chile (TI rank 25) but, as demand for lithium skyrockets, automakers could locate them selves turning to higher possibility countries these as Argentina (TI rank 78) or Zimbabwe (TI rank 157) for their supplies. Bribery possibility is existing even if the automaker isn’t engaged in extracting the minerals alone. In an analogous situation, in December 2016, a Brazilian chemical firm solved allegations with U.S. authorities that it experienced bribed Brazilian officials to acquire uncooked components for its products and solutions from the country’s countrywide oil company at a much more favorable cost. Specially as they turn to immediate generation of EV batteries, automakers really should revisit and update their 3rd-celebration thanks diligence processes and other compliance steps to mitigate corruption risk in their battery supply chains.
Brandon Van Grack on U.S. Sanctions and Export Controls:
U.S. sanctions and export controls focusing on China keep on to cripple the semiconductor sector and the auto manufacturers that count on it. Courting back again to the Obama administration, and achieving new heights in the Trump and Biden administrations, the national safety measures that have been imposed against China have seriously limited global obtain to and enhancement of semiconductors. And while the pandemic has exacerbated this scarcity, and the Biden administration is pushing for greater investments and developments in U.S. semiconductor creation, the ongoing scarcity is the industry’s actuality for the foreseeable upcoming. The U.S. government’s deployment of export controls, sanctions, and other national stability-similar tools concentrating on China will further more constrain the semiconductor field, even just after offer chain concerns related to the pandemic are settled.
Megan Gerking on Antitrust Enforcement:
The DOJ Antitrust Division proceeds to prioritize prison enforcement of anticompetitive perform in labor marketplaces, together with investigating and prosecuting “no poach,” or non-solicit, agreements among the firms that compete for labor. In Oct 2016, the FTC and DOJ declared a change in policy to criminally cost businesses and executives that enter into standalone agreements not to employ the service of or solicit staff members from just about every other. Considering that that time, DOJ has opened quite a few investigations and brought criminal expenses towards firms and specific executives for allegedly getting into these kinds of agreements with competition that proficiently lessen wages or divide the industry. The Biden administration has reiterated its ongoing priority of antitrust enforcement in labor markets in its Govt Get on Selling Levels of competition in the American Economic climate and as a result of plan statements and other community remarks by DOJ Antitrust Division leadership. Although the prison expenses to date have been minimal to health care and engineering companies industries, no marketplace is immune. And, as opposed to other competitors violations, organizations do not have to have to compete in their sale of goods and services to be regarded as competition for workforce. The development is expanding—antitrust enforcers throughout jurisdictions are pursuing anticompetitive carry out in labor markets as a priority.
Yuka Teraguchi on ITC Enforcement:
U.S. patent holders can file a complaint with the U.S. Worldwide Trade Fee (ITC) to seek an exclusion order directing U.S. Customs and Border Patrol to cease infringing products from entering the United States and a stop and desist buy against the importers and U.S. sellers of the infringing items. In 2021, the ITC received 82 new problems, which was considerably greater than the annual ordinary of 65 grievances in 2016–2020. About 10 p.c of the problems associated products in the automotive, producing, and transportation engineering place and 25 per cent included computer and telecommunications products, some of which are included into automobiles. For illustration, the latest issues accused particular built-in circuits for car or truck factors, navigation techniques, and motor vehicle regulate units of patent infringement. As cars grow to be extra equipped with computer and networking know-how, we hope the amount of ITC grievances in opposition to the automotive market to maximize. In individual, autonomous driving technological know-how is probable to implicate a new era of patent infringement allegations.