Companies with significant market share that are involved in a vertical merger should consider possible conduct remedies that the antitrust agencies may require to address competition concerns.

Google's proposed acquisition of travel software company ITA Software demonstrates the Obama Administration's willingness to challenge vertical mergers and use behavioral conditions to remedy antitrust issues. In a consent order filed on April 8, 2011, the Department of Justice (DOJ) Antitrust Division conditioned its approval of the deal on Google agreeing to take certain measures, such as licensing ITA's current software and developing and offering next-generation software to other travel websites.

Antitrust authorities are generally less likely to challenge vertical mergers than horizontal mergers because they do not directly reduce the number of competitors in a particular market. However, since January 2010, the DOJ and the Federal Trade Commission (FTC) have challenged several vertical deals, including, among others:

The Administration's more aggressive approach to analyzing vertical mergers may explain its increased use of conduct remedies. While the DOJ's 2004 Policy Guide to Merger Remedies recommends using divestitures rather than conduct remedies in most circumstances, the agencies relied on conduct remedies in clearing all of the deals above. The agencies may view conduct remedies as necessary in a vertical merger to address the merged company's increased ability to exclude competitors from the market without sacrificing the procompetitive benefits of the deal.

Companies with cross-border activities should be aware of the increasing coordination of pre-merger reviews between US and foreign antitrust authorities. In particular, companies that must give notice of a merger to more than one jurisdiction should ensure that their communications with those authorities are consistent and present their strongest antitrust position.

Two recent investigations highlight the DOJ's cooperation with international antitrust agencies. On May 6, 2011, the DOJ noted it coordinated with UK, Mexican and South African antitrust authorities in investigating the acquisition of Alberto-Culver by Unilever NV, Unilever PLC and Conopco. A few weeks earlier, the DOJ cited its close work with the German Federal Cartel Office in approving CPTN Holding's acquisition of patents and patent applications from Novell after the parties agreed to substantial changes to the deal.

Additionally, on March 31, 2011, the DOJ and the FTC entered into a cooperation agreement with the Chilean antitrust agency for the first time. This agreement, like others in place with eight countries and the European Commission, aims to enhance coordination of antitrust enforcement matters when appropriate (see Article, GC Agenda: December 2009/January 2010: Coordinated International Investigations).

The effective date for manufacturers of consumer products to comply with lead content certification and testing requirements of the Consumer Product Safety Improvement Act of 2008 (CPSIA) has been delayed until December 31, 2011. The delay only applies to requirements to test and certify for lead content in:

The CPSIA's other requirements (including limits on using lead and phthalate) remain unaffected.

Manufacturers of consumer products should note that the Consumer Product Safety Commission (CPSC) does not look solely at the manufacturer's intent in determining whether a product or component is considered a "children's product" under the CPSIA. As a result, many items that are not intended by the manufacturer for children 12 years of age or younger may still need to comply with the CPSIA's lead and phthalate content restrictions. Companies that manufacture consumer products and components that are not intended for use by children 12 years of age or younger should carefully review the CPSC's final interpretive rule to help evaluate whether the CPSC may view any of their products as a children's product (see Interpretation of "Children's Product," 16 C.F.R. § 1200 (2010)).

Public companies worried about obtaining stockholder approval of their executive compensation programs should consider reaching out to ISS and other proxy advisory firms in advance of their annual stockholders' meetings.

ISS has issued a number of recommendations against approval of company say on pay votes, often citing a perceived disconnect between executive pay and a company's financial performance. As of May 10, 16 companies had reported that their executive compensation programs were not approved by a majority of stockholders for the 2011 proxy season.

Companies concerned about their upcoming say on pay votes should consider the following actions:

For more information on dealing with proxy advisors, see Article, Proxy Advisors and Say on Pay.

Public companies should revisit their litigation-related disclosure practices in light of the SEC's efforts to improve compliance with Accounting Standards Codification Subtopic 450-20, Contingencies: Loss Contingencies (ASC 450-20). The SEC has recently expanded the focus of its campaign to improve loss contingency disclosure from financial institutions to a broader range of companies.

Under ASC 450-20 (formerly Statement of Financial Accounting Standards No. 5), when there are "reasonably possible" litigation loss contingencies, a company must describe the nature of the claims and either:

In drafting their Exchange Act reports, companies must balance the requirements of ASC 450-20 against their desire to avoid disclosing information that could damage their litigation strategies, while also avoiding material misstatements and omissions.

To strike an appropriate balance, companies should consult with their litigation counsel and auditors to decide whether an estimate of the possible losses or range of losses can be made or, if not, the reasons why. Where there are set claims for money damages, a company should consider disclosing an estimate of possible losses as a range between zero and a dollar amount equal to the total claims against it, since this approach relies on public information and should not interfere with litigation strategies.

Companies should also review the most recent annual and quarterly reports filed by US financial institutions, the earliest targets of the SEC's heightened scrutiny, as well as the related SEC correspondence.

The New York Court of Appeals recently adopted a rule allowing attorneys registered in other US jurisdictions to offer legal advice in New York as in-house counsel without violating the state's rules against the unauthorized practice of law (22 NYCRR Part 522).

The new rule, which took effect on April 20, 2011, requires attorneys presently employed in New York as in-house counsel, but not admitted to the state's bar, to register with the state within 90 days. Out-of-state attorneys who become in-house counsel in New York in the future must register within 30 days of the commencement of their employment. Failure to register within the required time period will constitute professional misconduct.

The rule authorizes a registered attorney to provide legal services in New York to her employer and its organizational affiliates, employees, officers and directors, on matters directly related to the attorney's work for the employer. The rule does not authorize the registered attorney to appear before any tribunal in the state.

Among other things, an in-house attorney who registers under this rule must:

In light of a recent US Supreme Court decision, companies should consider including language in consumer contracts prohibiting class action arbitrations.

The US Supreme Court recently held, in AT&T Mobility LLC v. Concepcion, that arbitration agreements subject to the Federal Arbitration Act (FAA) may legally prohibit consumers from bringing class-wide arbitrations against a defendant company. This ruling is welcome news to companies that require customers to sign arbitration agreements as a condition to receiving the company's goods or services. The court's decision trumps several states' laws and court rulings that rendered class action arbitration waivers unenforceable.

Because of the court's decision, companies should review their consumer contracts to determine whether they prohibit customers from bringing class-wide arbitrations. If the contracts do not include class action waivers, they should consider adding them to avoid the risk of a class action arbitration proceeding, which can be as expensive and lengthy as class action litigation. To do so, they should include language in the arbitration clause requiring:

For guidance on drafting an effective arbitration clause, see Practice Note, Standard recommended arbitration clauses and Standard Clauses, Standard Arbitration Clauses for the AAA, ICDR, ICC and UNCITRAL.

Employers now have guidance on how to report the cost of employer-sponsored health coverage on Forms W-2 issued to employees as required under health care reform. This reporting requirement generally applies to all employers that provide employer-sponsored health coverage. Under IRS guidance, the requirement is optional for 2011, but required for 2012 (Forms W-2 issued in January 2013).

Reportable health coverage includes the cost of employer-sponsored coverage under a group health plan that is excludable from an employee's gross income (subject to certain exceptions). The requirement is for informational purposes only and does not cause the coverage to be taxable. The guidance addresses, among other things:

Employers subject to this requirement should:

For more information on the health coverage reporting requirement, see Practice Note, W-2 Reporting for Employer-sponsored Health Coverage and Article, Form W-2 Health Care Reporting Made Optional for 2011.

Recently proposed guidance to broaden the definition of waterways covered by the Clean Water Act is likely to increase delays and costs for industrial companies operating near waterways and companies involved in real estate investment, development and construction. Even construction projects that are far away from running water will be affected.

Under the proposed guidance, waterways would include tributaries, open waters and wetlands that were not previously regulated. As a result, affected companies will have to acquire additional permits that previously would not have been necessary.

Interested parties can submit comments to the Environmental Protection Agency (EPA) and the US Army Corps of Engineers (Corps) by July 1, 2011. The Corps and EPA will issue regulations after they receive comments and finalize the guidance.

The Commodity Futures Trading Commission (CFTC) and SEC recently proposed joint rules and interpretive guidance further defining certain key swap-related terms under the Dodd-Frank Act to exclude certain types of transactions that have not historically been considered swaps. The proposed rules also clarify that foreign exchange swaps and forwards are swaps for Dodd-Frank purposes, although they were exempted by the Secretary of the Treasury from many Dodd-Frank swaps regulations. The proposed rules were issued on April 27, 2011 and the comment period extends for 60 days from the date of publication of the proposed rules in the Federal Register.

The following transactions are not considered swaps under the Dodd-Frank Act:

For more information on the new exemptions, see Legal Updates, CFTC and SEC Clarify Key Dodd-Frank Swaps Definitions and Loan Participations: Swaps under Dodd-Frank?.

Brand owners should take steps now to protect their trademarks before the upcoming launch of the new .xxx top-level domain (TLD). TLDs are the highest level of the internet domain name system (for example, .com and .gov).

The Internet Corporation for Assigned Names and Numbers recently approved the launch of the .xxx TLD for administration by ICM Registry (ICM). As a sponsored TLD, .xxx registrations for active sites will only be available for companies offering adult-oriented content. However, brand owners concerned about cybersquatting and other brand abuse should consider the pre- and post-launch rights protection mechanisms ICM has announced to block others from using their marks. These mechanisms are subject to change but at the time of press include:

More information on these mechanisms is available on ICM's website.

Companies that conduct e-mail marketing should take note of a recent district court decision finding that the CAN-SPAM Act applies broadly to online messages, not just to traditional e-mail.

In Facebook, Inc. v. MaxBounty, Inc., the US District Court for the Northern District of California held that communications sent to Facebook users' walls, news feeds and Facebook inboxes can be "electronic mail messages" under CAN-SPAM. In its decision, the court noted that:

The court extended the reasoning of the US District Court for the Central District of California in cases brought by MySpace against other defendants. Those cases found messages delivered to MySpace inboxes to be electronic mail messages because they involved routing by MySpace to a destination.

Among other things, CAN-SPAM requires that commercial electronic mail messages:

Companies that send commercial electronic mail messages should:

For more information on CAN-SPAM, see Practice Note, E-mail Marketing: CAN-SPAM Act Compliance.

Employers who have fluctuating workweek and tip credit arrangements in place should ensure compliance with recent Fair Labor Standards Act (FLSA) regulations issued by the Department of Labor (DOL). The regulations went into effect on May 5, 2011.

The fluctuating workweek is a method of calculating overtime that allows employers to pay nonexempt employees a fixed weekly salary despite fluctuating hours. With the new regulations, the DOL clarified that payments of bonuses or premiums, except overtime premiums, invalidate fluctuating workweek arrangements.

Employers should evaluate continued use of the fluctuating workweek, and if they decide to retain it:

The new regulations also establish that:

Best practice is for employers to provide all required notices in writing and obtain a signed acknowledgement of receipt.

For more information on wage and hour laws, see Practice Note, Wage and Hour Law: Overview.

The mere existence of overly-broad employment policies, even if not enforced, can violate employees' rights to engage in concerted activity regarding working conditions under Section 7 of the National Labor Relations Act (NLRA).

In Jurys Boston Hotel, the National Labor Relations Board (NLRB) set aside election results decertifying a union where it found that the employer maintained overbroad no solicitation, distribution, loitering and button-wearing policies. The NLRB found the policies had a "reasonable tendency to chill or otherwise interfere" with employees' rights to engage in pro-union activities during the election period.

Both unionized and non-unionized employers should:

For more information on the NLRA requirements, see Practice Notes, Labor Law: Overview and Employee Rights and Unfair Labor Practices under the National Labor Relations Act.

Companies considering making an acquisition through a reverse triangular merger (RTM) should be aware of a recent Delaware Court of Chancery decision holding that this structure can potentially constitute an assignment of the target's contracts.

In Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH, defendant Roche Diagnostics was party to a license agreement with the plaintiffs and a company that Roche subsequently acquired through an RTM. The license contained an anti-assignment provision that required the plaintiffs' consent for any assignment carried out "by operation of law." The plaintiffs claimed that the language captures RTMs, just as it does forward triangular mergers. In its motion to dismiss, Roche argued that because RTMs only create changes in ownership, they are comparable to stock acquisitions, which do not cause assignments of contractual rights.

The court, however, looked beyond the mere change in ownership and also considered Roche's subsequent actions. In particular, the court highlighted that within months of the merger Roche laid off all of the target's employees, vacated its facilities and discontinued its product lines. On the preliminary record, the court concluded that these facts distinguished the RTM from an ordinary stock acquisition and could form the basis for an assignment.

In its decision, the court implied that without those actions, the RTM alone would not have constituted an assignment. The ruling suggests that the effect of an anti-assignment provision cannot be analyzed solely on the basis of the acquisition structure. Rather, the acquiror's intentions for the target company must be considered before concluding that consent will not be required under a given contract.

A tenant should protect its lease from an unexpected early termination caused by the landlord's default under its agreements with third parties. For example, absent any protection for the tenant, a landlord's insolvency may put the tenant's lease at risk of early termination, leaving the tenant without any recourse for its damages, including the recoupment of its up-front investment in the leased premises. Most leases include an express provision that automatically subordinates the tenant's lease to existing and future mortgages and master leases affecting the landlord's real property.

A common way of ensuring against early lease termination is to obtain subordination, non-disturbance and attornment agreements (SNDAs) from any third parties that have priority over the tenant's leasehold interest.

SNDAs are governed by the laws of the state where the leased property is located. Some states have laws that automatically terminate any subordinate interests if there is a foreclosure action against the property. When negotiating its SNDA, a tenant should therefore understand the state specific laws to ensure it negotiates the most protection.

An SNDA consists of:

The tenant should seek to include in the SNDA the continuation of any specifically negotiated rights contained in its lease, such as rent credits, tenant allowances related to any tenant improvements, set-off or abatement rights and landlord casualty restoration or repair obligations.

For a form SNDA, with explanatory notes and drafting and negotiating tips, see Standard Document, Subordination, Non-Disturbance and Attornment Agreement (SNDA) (Pro-Lender).

For a form clause subordinating a lease to all security interests in the property, with explanatory notes and drafting and negotiating tips, see Standard Document, Agreement of Lease (Pro-landlord Long Form NY): Subordination.

The IRS recently issued Revenue Procedure 2011-29, which provides a safe harbor election for companies to currently deduct success-based fees paid in connection with specified business acquisitions (including mergers, asset purchases and acquisitions of majority interests in target companies). Success-based fees are contingent on the closing of an acquisition or merger and often include investment banker fees.

Under the Revenue Procedure, a company can elect to deduct 70% of a success-based fee related to a particular transaction and must capitalize the remaining 30%. By contrast, existing Treasury Regulations generally require a company to capitalize success-based fees unless it maintains adequate documentation (such as time records) to support a deduction for the portion of the fee allocable to activities that do not "facilitate" the acquisition (for example, bankers' fees for investigating a transaction prior to the date the company decided to proceed with the acquisition). Under the new safe harbor election, a company does not need to maintain this documentation to deduct 70% of the success-based fees.