Companies should ensure that all employees undergo compliance training to enable them to identify and avoid illegal invitations to collude.

The Federal Trade Commission (FTC) recently filed complaints against InstantUPCCodes.com and Nationwide Barcode, and their respective principals, Jacob Alifraghis and Philip Peretz, charging them with attempting to collectively raise their prices for universal product codes (UPCs) in violation of Section 5 of the FTC Act. The FTC alleged that defendant Alifraghis e-mailed defendant Peretz to discuss raising UPC prices, and that they continued pricing discussions for five months. The principals also invited non-party competitor, Company A, to collude on prices, but Company A was unresponsive. The FTC brought charges despite the parties not ultimately taking any action to raise prices.

In separate proposed decision and orders, the FTC prohibited the defendants from, among other things:

To avoid an invitation to collude charge, companies should advise employees to:

For more on federal antitrust analyses of invitations to collude, see Practice Note, Invitations to Collude.

Counsel should be aware of changes in Mexican competition law that affect closing timelines where a premerger filing is required in Mexico.

Effective July 7, 2014, the Mexican Economic Competition Law replaced the 21-year old Federal Competition Law, creating, among other things:

Parties could previously close a transaction in Mexico at their own risk after filing, unless the competition authority issued a stop order requiring closing to be postponed until the competition authority issued a decision.

Increasingly, counsel for transacting parties with global operations must coordinate premerger and post-merger notification filings in multiple jurisdictions. Therefore, counsel should:

Companies should reevaluate how they use aggregated online reviews to substantiate product claims given a recent case of first impression from the National Advertising Division (NAD).

The NAD recently recommended that Euro-Pro Operating, LLC discontinue advertising that its vacuum cleaner is “America’s Most Recommended” because that claim was not sufficiently substantiated. Euro-Pro’s claim was based on its survey of over 10,000 consumer reviews aggregated from various national retailers’ websites. Euro-Pro argued that its compilation of online reviews:

Although the NAD agreed that the aggregated reviews created a statistically significant sample size, it found that Euro-Pro’s aggregated data:

The NAD allows advertisers to support product claims using new technology and information, such as crowd-sourced, online data. However, advertisers must adhere to the NAD’s standards of truthfulness, reliability and representativeness for substantiating claims. Because aggregated online reviews may lack the reliability and controls of individual reviews, advertisers should be cautious about using this type of data for making claims. The risks are arguably higher for comparative claims than they are for monadic or non-comparative claims.

When relying on aggregated online reviews to substantiate product claims, companies should ensure that the data meets the NAD’s standards for substantiation and is:

For resources to assist in identifying key legal and business issues when undertaking advertising and marketing activities, see the Advertising and Marketing Toolkit.

Public companies should reassess the composition of their boards and board committees amid signs that activist investors and proxy advisory firms are increasingly focused on director tenure.

Key developments addressing issues related to director tenure include the following:

To avoid unwanted attention from activist investors, companies should carefully evaluate the tenure of their directors, both on the board itself and on key committees. While longer service may enable a better understanding of the company and its industry, it also limits a company’s ability to promote board diversity and bring in directors with new skills and perspectives.

For more on board composition issues, see Article, Board Composition, Diversity and Refreshment.

According to a recent US Supreme Court decision, employee stock ownership plan (ESOP) fiduciaries can no longer rely on the Moench presumption of prudence, which applied when a plan fiduciary was directed by the plan document to invest in company stock.

In Fifth Third Bancorp v. Dudenhoeffer, the Supreme Court held that ESOP fiduciaries are subject to the same fiduciary duty of prudence as other ERISA fiduciaries, except the duty to diversify plan investments. ESOP fiduciaries are not entitled to a special presumption of prudence and must act with the same level of prudence that a prudent fiduciary in a similar capacity would use when determining the investments to be offered in the plan.

However, this decision may help ESOP fiduciaries defend breach of fiduciary duty claims based on declining stock prices. In particular, the Supreme Court found that:

ESOP fiduciaries should consider ways to address a decline in the value of company stock in accordance with securities laws. Additionally, companies may want to consider whether they should:

For an overview of ESOPs, see Practice Note, Employee Stock Ownership Plans (ESOPs).

Large employers should take note of two conflicting circuit court decisions regarding whether premium tax credits are available to individuals who purchase coverage on the federally facilitated health insurance exchanges. Availability of the tax credits may impact whether employers are subject to health care reform’s employer mandate.

Health care reform included a tax credit for certain low- and middle-income individuals to offset the cost of insurance policies purchased through the exchanges. In final regulations, the IRS took the view that the tax credits were available to individuals who purchase insurance on both the state-run and federally facilitated exchanges.

In Halbig v. Burwell, however, the DC Circuit rejected the IRS’s broad interpretation of the statute and held that the health care reform law “unambiguously restricts” tax credits to insurance purchased on exchanges established by the states. The Fourth Circuit came to the opposite conclusion in King v. Burwell, deferring to the IRS’s construction of the health care reform law.

Availability of the tax credits may impact penalties under the employer mandate, which apply if:

Absent the IRS’s interpretation of the law, an employer would not face employer mandate penalties if credits are unavailable in states without a federally facilitated exchange.

For now, as the conflicting rulings are appealed and related cases work through the courts, the government has indicated that premium tax credits will continue to be provided for the federally facilitated exchanges.

For more on health care reform, see Practice Note: Health Care Reform: Overview and Employer Mandate Toolkit.

Companies subject to the Children’s Online Privacy Protection Act (COPPA) and the parties that assist them in obtaining verifiable parental consent should review their practices for obtaining consent to ensure compliance with recently updated FTC guidance.

The FTC issued updates in July 2014 to its FAQs for complying with COPPA and the COPPA Rule, addressing COPPA’s verifiable parental consent requirement. Specifically, the FTC:

These updates reflect the FTC’s continued focus on ensuring accountability for COPPA compliance. Both companies subject to COPPA and the parties that assist them in obtaining verifiable parental consent should make sure that they understand each other’s practices when relying on those practices.

For more on COPPA and COPPA compliance, see Practice Note, Children's Online Privacy: COPPA Compliance.

For model COPPA privacy policy disclosures, see Standard Clause, Children’s (COPPA) Privacy Policy Notice.

A recent Second Circuit decision clarifies for employers the application of the Fair Labor Standards Act’s (FLSA’s) learned professional exemption to entry-level professionals.

To be learned professionals, exempt from federal minimum wage and overtime compensation, employees must:

In Pippins v. KPMG LLP, the court held that entry-level accountants are exempt. In doing so, the court concluded that:

This decision applies to all professions, including finance, education and engineering. As a result, all employers should ensure that:

State exemptions may differ and the federal exemptions are currently under review by the US Department of Labor.

For more on the exemptions from the FLSA’s minimum wage and overtime compensation requirements, see FLSA White Collar Exemptions Checklist.

Companies conducting internal investigations should take steps to maximize the attorney-client privilege protection in light of a recent DC Circuit decision.

In In Re: Kellogg Brown & Root, Inc., the DC Circuit reversed the district court’s outlier decision and confirmed that the attorney-client privilege applies to internal investigations where seeking legal advice is one significant purpose of the investigation. Seeking legal advice need not be the sole purpose of the investigation. As a result, companies can once again claim attorney-client privilege protection where, in addition to seeking legal advice, an internal investigation:

This ruling provides protection for companies conducting internal investigations into employee misconduct, including harassment, workplace violence, and health and safety violations. These investigations often are conducted pursuant to a regulation or corporate policy, in addition to seeking legal advice, and involve non-attorneys, such as human resources personnel.

To maximize attorney-client privilege protection during an internal investigation, companies should:

For more on internal corporate investigations, see Practice Notes, Handling Employment-related Internal Investigations and Internal Investigations: US Privilege and Work Product Protection.

Several significant changes to the rules of the Commercial Division of the New York State Supreme Court will become effective on September 2, 2014.

The new rules double the monetary threshold for cases filed in the commercial division of several counties, making it more difficult for cases subject to the threshold to be assigned to the commercial division. These counties and their new threshold amounts, which are exclusive of punitive damages, interest, costs and attorneys’ fees, are:

Earlier this year, the monetary threshold for cases in the New York County (Manhattan) commercial division increased to $500,000.

Additionally, the new rules:

For more on these changes and New York’s commercial division courts generally, see Legal Update, Mandatory Mediation, Higher Monetary Thresholds and Other Changes in the New York Commercial Division and Practice Note, Practicing in the Commercial Division of the New York State Supreme Court.

Companies drafting dispute resolution provisions in multiple agreements for single or related transactions should make sure that these provisions are clear and consistent to avoid costly motion practice over whether to resolve disputes by litigation or arbitration. Two recent cases show that joining non-signatories to arbitral proceedings often requires court intervention.

Moss v. BMO Harris Bank, N.A. demonstrates the courts’ general willingness to require a signatory to an arbitration clause to arbitrate with non-signatories disputes related to the agreement containing the arbitration clause. In Moss, the federal district court granted three banks’ motion to compel arbitration even though the plaintiffs’ arbitration agreements were with other financial institutions. Conversely, Transatlantic Reinsurance Co. v. National Indemnity Co. illustrates that courts will generally not estop non-signatories from avoiding arbitration unless they have received direct benefits from the agreement containing the arbitration clause.

When drafting dispute resolution provisions for multiple agreements, counsel should at least provide for dispute resolution in the same place and under the same rules. Arbitral institutions such as the American Arbitration Association and the International Chamber of Commerce have model clauses that are easy to use. Parties selecting a particular arbitral institution should also use that institution’s own rules.

Additionally, arbitration clauses should provide for:

For more on drafting arbitration clauses in multi-party or multi-contract cases, see Practice Note, Drafting Multi-party Arbitration Clauses.

A recent amendment to the Delaware General Corporation Law (DGCL) broadens access to Section 251(h) for buyers of public companies. This amendment, in addition to other amendments to the DGCL, the Limited Liability Company Act (LLC Act), the Delaware Revised Uniform Limited Partnership Act (DRULPA) and the Delaware Revised Uniform Partnership Agreement (DRUPA), became effective on August 1, 2014.

DGCL Section 251(h) was enacted in 2013 to allow tender offers to proceed to a second-step merger after acquisition of a majority of the target shares, rather than 90% of those shares. Under the amended statute:

The other amendments relate to:

For more on these amendments and their purposes, see Legal Update, Delaware 2014 Statutory Amendments Signed into Law.

A recent Delaware Code amendment permits parties to contract out of the traditional statute of limitations period for breach of contract claims without the need for a sealed instrument.

Under ordinary circumstances, the limitations period is three years for breach of contract claims and four years for contracts governed by Article 2 of the Delaware UCC. Previously, Delaware common law had permitted parties to opt in to a 20-year limitations period by entering into a contract filed under seal. As of August 1, 2014, the seal requirement no longer applies.

The new subsection applies to written contracts involving at least $100,000. The limitations period specified in the contract may include:

However, the limitations period may not exceed 20 years, regardless of the language in the contract.

The statute, as amended, only addresses breach of contract claims. Recently, the Delaware Court of Chancery concluded in Capano v. Capano that claims of fraudulent inducement expire at the end of the ordinary three-year period.