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LITIGATING COMMERCIAL DEALS IN THE COURT OF PUBLIC OPINION
The ‘court’ of public opinion delivers the informal, collective judgement by the mass, often shaped by public discourse and social media sentiment. Recently, several commercial deals have been brought before the court of public opinion, such as Disney’s acquisition of 21st Century Fox and the ongoing Microsoft Activision deal.
The extent to which law firms should be involved in the court of public opinion remains contentious.
The Court of Public Opinion
Like the court of law, the court of public opinion is driven by active advocacy, interprets facts and evidence presented, delivers a judgement in favour of one party, and enforces a decision via public pressure. Often, these courts communicate with each other: a judicial decision shapes public opinion, and public opinion influences lawmakers and jurors.
However, these courts are distinct. Although cases are often tried in parallel in these two courts, one may win in one and lose in the other. Moreover, lacking due process and having lower standards of proof, the court of public opinion bases judgement on sentiments, the irrevocability of which precludes appeal to a higher court.
Typically, cases tried in the court of public opinion are criminal or involve high-profile individuals. Think of Johnny Depp’s victory and Derek Chauvin’s defeat (convicted in the killing of George Floyd) in both courts. Recently, however, there have been a number of commercial deals taken before the court of public opinion—with mixed outcomes.
Activision v CMA
Earlier in 2022, Microsoft announced plans to acquire Activision Blizzard, a $68.7 billion deal that would shape the emerging cloud gaming market (see article by Aqua Koroma).
In response to the Competition and Markets Authority (the UK’s antitrust watchdog) blocking the deal, Activision appealed to the court of public opinion. In addition to criticising the decision as a ‘major setback for the UK’s ambition to be a tech hub’ and a ‘disservice to UK citizens’, Activision’s chief communication officer implied that Activision might pull out of the UK (“We will need to reassess our growth strategy in the UK”) and concluded that ‘the UK is closed for business’ for innovative tech firms.
Now that a US judge ruled in favour of the deal and CMA and Microsoft have come to a legal ceasefire, the UK’s regulatory block represents the last hurdle before the deal’s consummation. It remains to be seen how the decision by the court of public opinion will affect subsequent negotiations.
Disney v DOJ
Disney’s landmark acquisition of 21st Century Fox in 2019 was an instance of a case being advocated in parallel within the two courts.
On the legal side, Disney carefully negotiated the deal to secure regulatory approval. On the public opinion side, and via strategic communication, Disney emphasised the public benefits of the deals and promoted alluring future plans whilst downplaying antitrust concerns and the consolidation of intellectual property. The positive narrative affirmed that the court of public opinion played a significant role in steering the deal towards completion.
Should law firms advise on the court of public opinion?
The benefits of a law firm’s involvement in the court of public opinion should be weighed against its costs.
By ‘litigating’ in this court, lawyers may shape the narrative surrounding the deal by managing the disclosure of information and clarifying the legal complexities. Crucially, lawyers could develop a more comprehensive legal strategy by being involved in this court, balancing purely legal advice and the impact on the client’s public perception due to any legal action.
In aligning advocacy in the court of public opinion with the overall legal strategy, lawyers could provide counsel that is holistic and attuned to the diverse challenges their clients face. However, in doing so, lawyers must heed ethical complications. The complexity of commercial issues lends to simplification, and the transparency beneficial to managing public perception can be at odds with client confidentiality.
Moreover, unlike PR firms, law firms lack relevant expertise and may be distracted from significant legal issues, and lastly, since judgement by the court of public opinion can rarely be appealed, law firms need to consider the risks of defeat before initiating such action.
Article written by David Zheng
TUPE AND BUSINESS ACQUISITIONS
Ordinarily, when M&A transactions are encountered, rarely are the attached immigration implications considered. For an acquisitor, however, they are afforded no such luxury.
Their liability for the eligible immigration statuses of transferred employees is detrimental. Consequently, they must be especially cognizant of the retained EU legislation, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
This essential piece of regulation not only protects the rights of employees upon transfer of employment (legally classified employee rights, benefits, and other terms of employment to remain unchanged) but, along with other legislation, such as the Immigration, Asylum and Nationality Act 2006, imposes the burden of statutory immigration checks on the incoming employer, with breaches of these obligations liable for civil and criminal penalties.
TUPE applies to all sales or transfers of businesses in the UK, from sole traders and partnerships to conglomerates.
The measures of TUPE
- Service provision changes – such as when a service rendered in a company is outsourced to another, when work is transferred in-house or when upon the end of a contract, a new contractor acquires said agreement (retendering), for example, catering and security services.
- Business transfers – when all or part of a business is transferred to another through an acquisition, when a business is formed through the dissolution of at least two others, when there is the transfer of goods and services conducive to a transfer of business, or when a company acquires another’s assets as part of a purchase.
Transactions excepted under TUPE include those provisions that are on a ‘one-off’ basis, such as one-off events, shares sold to new shareholders excluding a transfer of business, those transfers facilitated external of TUPE’s jurisdiction or the UK (adding further complications for cross-national acquisitions), and asset-only transfers.
Moreover, should an incoming employer acquire an insolvent company, TUPE ensures that the former remains unaccountable for redundancy obligations, such as employee redundancy payments.
As alluded, complicity in undertaking right-to-work checks means a business risks enforcement action. There are civil penalties, pending a tribunal’s outcome, for an incoming employer’s failure to report to a trade union or employee representatives at all transfer stages. The same applies to not permitting the statutory period for employee consultations if there is no economic, technical, or organisational reason (ETO) that requires a change in employment. However, this defence has a limited ambit.
Further, there is also the risk of criminal prosecution of the company and its directors for failure to adhere to TUPE’s requirements if there is ‘reasonable cause to believe’ that a business has not satisfactorily undertaken the requisite checks, with one of the potential outcomes being a prison term of up to 5 years.
From the employee’s point of view, the company could also be exposed to civil claims made by newly acquired employees for breach of contract, including in circumstances whereby termination of employment because of failure to meet recently undertaken immigration checks or the restructuring of an employee’s role owing to their immigration status, brings about a change of contract terms.
It is worth noting that the responsibility of certifying the status of employees does not fall solely on the transferee. The transferor must, with certainty, provide written records of employees, including particulars of employment and immigration statuses, within prescribed statutory time limits.
However, a transferee can further limit its vulnerability to penalties. During negotiations, it can protect itself against employee claims through contractual indemnities and by ensuring that all parties to the transaction are jointly and severally liable for any claims made by employees for indeterminate breaches. It can also, so long as it honestly does so, undertake and evince due diligence in adherence to TUPE.
Impact on the legal sector
Notwithstanding their financial complexities, transactions of this nature are further complicated by the statutory obligations imposed by TUPE. Thus, they call for the expertise of human resources and immigration lawyers, working alongside M&A lawyers at each stage of the transfers.
A human resources lawyer will advise on best practices, help to mitigate the probability of breaching HR laws and direct the business to develop policies nearly identical to previous ones, considering all aspects of the new organisational structure. For those employees injured by the transfer of business, they will likely consult with employment lawyers to bring forth claims for unfair dismissals or breach of contract.
For those immigration lawyers acting on behalf of the transferee, they must accurately interpret immigration law and its application, analyse company obligations and employee rights under requisite legislation, advise on mitigative measures to avoid breaches, and should the need arise, act as advocates or counsel in a court of law. There will also be those immigration lawyers consulted by employees on immigration statuses and tribunal claims in a bid to retain employment within a business.
As an outsider, it is difficult to fathom the intricate balance businesses must achieve in ensuring they stay onside of such laws. Still, with the expert guidance of qualified and experienced legal professionals, they will find it easier to remain so.