Morrison & Foerster’s Automotive Task Force represents clients in the automotive industry in their most important legal matters.
We have enlisted our Multi-Disciplinary Automotive Task Force to get their thoughts on what is likely to happen in terms of litigation, investigations and enforcement action in the automotive industry in 2022. We hope that these predictions will spark conversations and thoughts about how to navigate the future. year.
Haima Marlier on the SEC application:
The United States Securities and Exchange Commission (SEC) under the current administration has focused on two areas that directly affect the automotive and transportation technology space: (1) the use of acquisition companies to special purpose (SPAC) by startups and other companies to make public and (2) environmental, social and governance (ESG) disclosures and climate change. SPACs have been particularly active in automotive technology and transportation, especially in electrification startups. The SEC has reviewed conflict of interest disclosures that may arise between SPAC insiders and public shareholders, and will approach SPAC disclosures like traditional IPO disclosures. In December 2021, the SEC was particularly active in prosecuting automotive companies that went public through the use of SPAC, which included subpoenaing an electric vehicle (EV) company. ) related to revenue projections and filings and the conclusion of a US$125 million contract. settlement with a zero-emission transportation system provider linked to misrepresentations to investors. We expect this enforcement trend to continue into 2022. With respect to ESG and climate change disclosures, the SEC is conducting a wide-ranging investigation to determine whether public companies, including in the automotive sector, are following the agency’s 2010 Climate Change Disclosure Guidelines, with a goal of updating that guidance based on its findings. ESG disclosures are also an SEC review priority for 2022. Finally, as with any disclosure, the SEC will focus on whether ESG disclosures contain material omissions or misstatements relating to climate change and other questions.
Brian Kidd on the DOJ application:
With a renewed focus on white-collar and environmental crimes, the US Department of Justice (DOJ), and its various criminal and civil components, will focus more on the automotive industry. This will include pursuing the kinds of cases we have seen in the recent past, including efforts to manipulate emissions controls and faulty or failing auto parts. Along with these investigations, the DOJ will likely increase its focus on the auto industry’s role in climate change and focus on any non-compliance with increased environmental regulations the Biden administration is likely to put in place. In the EV space, this could translate into investigations into efforts to manipulate reported EV ranges and other forms of “greenwashing.” The DOJ’s Foreign Corrupt Practices Act (FCPA) unit, National Security Division, and Antitrust Division will also be on the lookout for foreign bribery cases, sanctions violations, and “no-poaching” agreements, such as indicated below.
James Koukios on the fight against bribes and corruption risks:
Although electric vehicles likely mitigate climate risk, they present a new kind of risk for automakers: the risk of being asked to pay bribes to obtain the raw materials used to power battery cells. electric vehicles. A typical electric vehicle requires six times more mineral input than a conventional car. Extractive industries have always faced a high risk of corruption, with a study finding that one in five cases of foreign bribery occurs in the extractive sector. There is no reason to believe that the mining of minerals such as cobalt and lithium, which are essential to the performance of electric vehicle batteries, will be any different. Up to 70% of the world’s cobalt supply is mined in the Democratic Republic of Congo, which ranks 170 out of 180 countries and territories surveyed for their perception of public sector corruption by Transparency International (TI). Most lithium is currently produced in countries less prone to corruption, such as Australia (TI tier 11) and Chile (TI tier 25), but as demand for lithium soars, automakers could turn to higher-risk countries like Argentina (TI rank 78) or Zimbabwe (TI rank 157) for their supplies. The risk of corruption is present even if the automaker is not engaged in mining the minerals itself. In a similar case, in December 2016, a Brazilian chemical company resolved allegations with US authorities that it had bribed Brazilian officials to obtain raw materials for its products from the country’s national oil company at a more favorable price. . Especially when moving into direct production of EV batteries, automakers should review and update their third-party due diligence procedures and other compliance measures to mitigate the risk of corruption in their supply chains. battery supply.
Brandon Van Grack on US sanctions and export controls:
US sanctions and export controls targeting China continue to cripple the semiconductor industry and the automakers that depend on it. Dating back to the Obama administration and reaching new heights in the Trump and Biden administrations, the national security measures that have been imposed on China have severely restricted global access to semiconductors and their development. And although the pandemic has exacerbated this shortage and the Biden administration is pushing for increased investments and developments in the production of semiconductors in the United States, the current shortage is the reality of the industry in the future. predictable. The US government’s deployment of export controls, sanctions and other national security tools targeting China will further limit the semiconductor industry, even after supply chain issues related to the pandemic.
Megan Gerking on antitrust enforcement:
The DOJ’s Antitrust Division continues to prioritize the criminal enforcement of anti-competitive behavior in labor markets, including investigating and prosecuting “no-poaching,” or no-solicitation, agreements between companies that compete for workforce. In October 2016, the FTC and DOJ announced a policy change to criminally charge companies and executives who enter into stand-alone agreements not to hire or solicit employees from each other. Since then, the DOJ has opened several investigations and brought criminal charges against companies and individual executives for allegedly entering into such agreements with competitors that have the effect of reducing wages or dividing the market. The Biden administration has reiterated its continued priority of antitrust enforcement in labor markets in its executive order on promoting competition in the U.S. economy and through policy statements and other public remarks. from the directorate of the DOJ’s antitrust division. Although criminal charges to date have been limited to the healthcare and engineering services industries, no industry is immune. And, unlike other competition violations, companies do not need to compete in their sale of goods and services to be considered competitors for employees. The trend is spreading – antitrust authorities in all jurisdictions are prosecuting anti-competitive behavior in labor markets as a priority.
Yuka Teraguchi on the ITC app:
U.S. patent holders may file a complaint with the U.S. International Trade Commission (ITC) seeking an exclusion order directing U.S. Customs and Border Patrol to prevent infringing goods from entering. in the United States and a cease and desist order against US importers and sellers of infringing goods. In 2021, the ITC received 82 new complaints, which was well above the annual average of 65 complaints in 2016-2020. About 10% of the complaints were about products in automotive, manufacturing and transportation technologies and 25% were about IT and telecommunications products, some of which are integrated into vehicles. For example, recent lawsuits have accused certain integrated circuits for vehicle components, navigation systems and vehicle control systems of patent infringement. As vehicles are increasingly equipped with computer and networking technologies, we expect the number of ITC complaints against the automotive industry to increase. In particular, autonomous driving technology is likely to involve a new generation of patent infringement claims.