Texas Federal Court Holds that Dodd-Frank Act Whistleblower Protection Law Does Not Authorize Jury Trials [Video]
On February 20, 2025, Judge Horan held in Edwards v. First Trust Portfolios LP that a Dodd-Frank whistleblower retaliation plaintiff is not entitled to a jury trial. This opinion underscores the importance of bringing additional claims that can be heard by a jury, including a Sarbanes-Oxley (SOX) whistleblower retaliation claim.
Aaron Edwards filed suit against his former employer, First Trust, alleging that he was terminated in retaliation for raising concerns about a gift program. Edwards claimed that First Trust’s practice of only awarding gifts to financial advisors at the end of the year who sold the most First Trust products during that year constituted an illegal sales contest under SEC regulations. He brought claims under the whistleblower protection provisions of SOX, the Dodd-Frank Act, and the Consumer Financial Protection Act (CFPA). After Judge Horan denied First Trust’s motion for summary judgment, First Trust moved to strike Edwards’ jury demand for his Dodd-Frank retaliation claim.
In contrast to an express provision in SOX clarifying that a SOX plaintiff “shall be entitled to trial by jury,” the whistleblower protection provision of the Dodd-Frank Act does not expressly provide for a right to a jury trial, so this dispute hinges on whether Dodd-Frank Act retaliation remedies are legal or equitable in nature (if the remedies are legal, then there is a right to a jury trial under the Seventh Amendment). Per the Supreme Court’s decision in SEC v. Jarkesy, the key factor determining “whether a monetary remedy is legal is if it is designed to punish or deter the wrongdoer, or, on the other hand, solely to restore the status quo.” 603 U.S. 109, 123 (2024).
A prevailing whistleblower in a Dodd-Frank whistleblower retaliation action is entitled to reinstatement, double back pay with interest, and litigation costs, including attorneys’ fees. Edwards argued that double back pay damages are legal in nature because they “go beyond restoring the status quo to deter and punish Dodd-Frank violators” and that Dodd-Frank’s doubling of back pay transmutes it from an equitable to legal remedy because it “serves to deter future misconduct by litigants.”
First Trust, however, asserted that under Fifth Circuit precedent, Dodd-Frank retaliation remedies, including reinstatement and back pay, are equitable in nature. Relying on a Georgia district judge decision, Judge Horan held that reinstatement and back pay are generally recognized as equitable remedies and that the automatic doubling of back pay does not change it from an equitable remedy to a legal one. See Pruett v. BlueLinx Holdings, Inc., No. 1:13-cv-02607-JOF, 2013 WL 6335887 (N.D. Ga. Nov. 12, 2013).
Since Edwards is already trying his SOX claim before a jury, and the motion to strike was filed close to trial, Judge Horan held that a binding jury will be empaneled for Edwards’s SOX claim and the same jury will serve as an advisory jury for Edwards’s Dodd-Frank claim.
Strategic Considerations: Why a Whistleblower Should Bring Both SOX and Dodd-Frank Whistleblower Retaliation Claims
Where a whistleblower that suffered retaliation qualifies for protection both under SOX and the Dodd-Frank Act, we recommend bringing both claims uto maximize the potential recovery. There are four advantages to bringing a SOX claim in addition to a Dodd-Frank claim:
Uncapped special damages: The Dodd-Frank Act authorizes economic damages and equitable relief but does not authorize non-economic damages. In contrast, SOX authorizes uncapped “special damages” for emotional distress and reputational harm.
Exemption from mandatory arbitration: SOX provides an unequivocal exemption from mandatory arbitration, but Dodd-Frank claims are subject to arbitration.
Preliminary reinstatement: If an OSHA investigation concludes that an employer violated the whistleblower protection provision of SOX, OSHA can order the employer to reinstate the whistleblower. However, there is some dispute as to whether an OSHA order of reinstatement is enforceable. See, e.g., Gulden v. Exxon Mobil Corp., 119 F.4th 299 (3d Cir. 2024).
Favorable causation standard: A far more generous burden of proof (“contributing factor” causation under SOX, rather than “but for” causation under Dodd-Frank).
There are four advantages to bringing a Dodd-Frank claim in addition to a SOX claim:
Double back pay: Dodd-Frank authorizes an award of double back pay (double lost wages) plus interest, whereas SOX authorizes ordinary back pay with interest along with other damages. Both statutes authorize reinstatement and attorney fees.
Longer statute of limitations: Whereas the statute of limitations for a SOX retaliation claim is just 180 days, the statute of limitations for a Dodd-Frank retaliation claim is a minimum of 3 years after the date when facts material to the right of action are known or reasonably should have been known by the whistleblower.
Broader scope of coverage: SOX whistleblower protection applies primarily to employees of public companies and contractors of public companies. The Dodd-Frank prohibition against whistleblower retaliation applies to “any employer,” not just public companies.
No administrative exhaustion: In contrast to SOX, Dodd-Frank permits a whistleblower to sue a current or former employer directly in federal district court without first exhausting administrative remedies at DOL.
Whistleblower Protections for SEC Whistleblowers
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Corporate Transparency Act : Enforcement Suspended and New Rules to Come
FinCEN and the Department of the Treasury both provided updates this week regarding the Corporate Transparency Act.
On February 27, FinCEN announced that it would release an interim final rule before the current filing deadline of March 21. It will not issue any fines, penalties, or other enforcement actions against any companies (foreign or domestic) for failing to file or update their BOI reports by March 21. Any fines, penalties, or other enforcement actions will only proceed once the interim final rule becomes effective and the new deadlines in the interim final rule have passed.
On March 2, the Treasury Department provided a further update regarding the upcoming rule changes. The proposed rule is expected to narrow the CTA’s scope so that U.S. citizens and domestic reporting companies are exempt, and only foreign reporting companies will be required to comply.
Competition Currents | March 2025
United States
A. 1.FTC secures $5.68M HSR gun-jumping penalty from 2021 deal.On Jan. 7, 2025, the FTC, in conjunction with the Department of Justice (DOJ) Antitrust Division, settled allegations that sister companies Verdun Oil Company II LLC and XCL Resources Holdings, LLC exercised unlawful, premature control of EP Energy LLC while acquiring EP in 2021. This alleged “gun-jumping” violation involved Verdun and XCL exercising various consent rights under the merger agreement and coordinating sales and strategic planning with EP during the interim period before closing. In settling, the parties agreed to pay a total civil penalty of $5.68 million, appoint or retain an antitrust compliance officer, provide annual antitrust trainings, use a “clean team” agreement in future transactions involving a competing product, and be subject to compliance reporting for a decade.
Further information about this settlement and the factual background can be found in our January GT Alert. 2.2025 HSR thresholds took effect Feb. 21, 2025. On Jan. 10, 2025, the FTC approved updated jurisdictional thresholds and filing fees for the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. These revisions are made annually, with the size-of-transaction threshold for reporting proposed mergers and acquisitions under the Clayton Act increasing from $119.5 million to $126.4 million for 2025. These changes took effect on Feb. 21, 2025. The adjustments are based on changes in the gross national product and consumer price index as mandated by the HSR Act and the 2023 Consolidated Appropriations Act. 3.FTC releases staff report on AI partnerships & investments. In January 2025, the FTC issued a report under former Commissioner Khan examining several partnerships among participants in the AI technology chain. Broadly, participants in the AI chain include (1) providers of specialized (and scarce) semiconductor chips used to provide the computational power to train and refine generative AI models, as well as generate the actual output (be it text, images, or data); (2) cloud service providers that enable access to computing infrastructure; (3) AI developers; and (4) AI application creators. The report highlights several areas of concern with respect to such partnerships, including traditional antitrust concerns around competitor access to important resources, increased switching costs for participants, and the exchange of sensitive technical and business information.
Current FTC Chairman Andrew Ferguson—then commissioner—issued a concurring and dissenting statement (joined by Commissioner Holyoak) shortly after the report’s release. While signaling areas of disagreement and discouraging the Commission from “running headlong to regulate AI,” the dissent does not appear to depart significantly from FTC views with respect to a focus on Big Tech when it comes to AI. According to Ferguson, “AI may [] be the most significant challenge to Big Tech firms’ dominance since they achieved that dominance.” He cautioned, however, that the Commission must strike a delicate balance, safeguarding against regulation that hinders U.S. AI technology development while ensuring that “Big Tech incumbents do not control AI innovators.” 4.FTC secures settlement with private equity firm in antitrust “roll-up” case. On Jan. 17, 2025, the FTC settled a second administrative case against private equity firm Welsh, Carson, Anderson, and Stowe and its affiliates for allegedly monopolizing certain local Texas anesthesiology markets through an anticompetitive “roll up” strategy. In May 2024, a federal judge dismissed Welsh Carson from a similar FTC action, but held that Welsh Carson’s conduct could be challenged in federal court in the future if the FTC can allege specific facts that it controls a company actively engaged in ongoing violations or is otherwise directly involved in another attempt to violate the law, “beyond mere speculation and conjecture,” and could still pursue an in-house administrative case against the private equity firm.
The FTC settled its in-house case, discussed in a May 2024 GT Alert, in a consent order designed to both limit Welsh Carson’s investment in this space and identify future investment strategies in this or an adjacent space, which in the view of the Commission would risk becoming another anticompetitive “roll up.” The order requires Welsh Carson to:
freeze its investment in USAP at current levels and reduce its board representation to a single, non-chair seat;
obtain prior approval for any future investments in anesthesia nationwide, as well as prior approval for certain acquisitions by any majority-owned Welsh Carson anesthesia group nationwide; and
provide 30-days advance notice for certain transactions involving other hospital-based physician practices nationwide.
The Commission voted 5-0 to accept the consent agreement for public comment. 5.Federal court denies Commission’s bid to block Tempur Sealy’s $4B Mattress Firm deal. On Jan. 31, a Texas federal court denied the FTC’s challenge to preliminarily enjoin Tempur Sealy International Inc.’s planned $4 billion purchase of Mattress Firm Group Inc. The parties thereafter closed the merger, and the FTC then withdrew the matter from in-house adjudication, effectively ending its challenge. The FTC challenged the deal in July 2024, asserting that the combination of the world’s largest mattress supplier, Tempur Sealy, with the largest retail mattress chain in the United States, Mattress Firm, would give the new firm the ability and incentive to suppress competition and raise prices for mattresses by blocking rival suppliers from selling in Mattress Firm stores.
In September, Tempur Sealy offered to sell 178 stores and seven distribution centers to Mattress Warehouse, in an effort to alleviate the FTC’s concerns. The companies offered to preserve 43% of premium “slots” in Mattress Firm stores for rival manufacturers, up from a previous offer of 28%. The FTC countered that the court should not give weight to this “unenforceable promise” that Tempur Sealy could break at any time. The judge did state that “the proposed acquisition won’t substantially harm competition … [b]ut even if assumed to the contrary, Defendants’ commitments to divest certain stores and to maintain going-forward slot allocations resolves any lingering concern.” 6.Daniel Guarnera named FTC Bureau of Competition director. On Feb. 10, Chairman Ferguson appointed Daniel Guarnera as director of the Bureau of Competition. Guarnera previously served as chief of the Civil Conduct Task Force at the DOJ Antitrust Division. During his tenure, the task force filed monopolization suits against certain Big Tech companies, as well as multiple cases involving agriculture and labor markets. Prior to that role, he was a trial attorney with the Antitrust Division during the first Trump administration. He also served as special counsel to U.S. Senate Judiciary Committee Chairman Charles Grassley during the confirmation of President Trump’s Supreme Court appointee, Justice Neil Gorsuch.
The Commission voted 4-0 to approve Guarnera’s appointment as director of the Bureau of Competition, with Chairman Ferguson stating “[h]e has tremendous experience litigating antitrust cases in critical markets, including agriculture and Big Tech” and “using the antitrust laws to promote competition in labor and healthcare markets—two of my top priorities.” 7.FTC chair clarifies 2023 merger review guidelines remain in effect. On Feb. 18, 2025, FTC Chairman Ferguson issued a public statement to FTC staff stating if “there is any ambiguity, let me be clear: the FTC’s and DOJ’s joint 2023 Merger Guidelines are in effect and are the framework for this agency’s merger-review analysis.” Ferguson explained that FTC should “prize stability and disfavor wholesale recission,” to provide predictability for businesses, enforcement agencies, and the courts. In Ferguson’s view, the guidelines reiterate prior policy statements, guidelines, and decisional case law. 8.FTC launches inquiry on tech censorship. On Feb. 20, 2025, the FTC launched a public inquiry into how technology platforms deny or degrade users’ access to services based on the content of their speech or affiliations. The Commission’s press release said, in announcing the inquiry, “Censorship by technology platforms is not just un-American, it is potentially illegal. Tech firms can employ confusing or unpredictable internal procedures that cut users off, sometimes with no ability to appeal the decision. Such actions taken by tech platforms may harm consumers, affect competition, may have resulted from a lack of competition, or may have been the product of anti-competitive conduct.” The FTC is requesting public comment on how consumers may have been harmed by technology platforms that “limited their ability to share ideas or affiliations freely and openly.” Comments are open until May 21, 2025. B. Department of Justice (DOJ) Civil Antitrust DivisionDOJ sues to block Hewlett Packard Enterprise’s proposed $14 billion acquisition of rival Juniper Networks.
On Jan. 30, 2025, the DOJ Antitrust Division sued to block Hewlett Packard Enterprise Co.’s proposed $14 billion acquisition of wireless local area network (WLAN) technology provider Juniper Networks Inc. The Division alleges that HPE and Juniper are the second- and third- largest providers, respectively, of enterprise-grade WLAN solutions in the United States and that the deal would “eliminate fierce head-to-head competition between the companies, raise prices, reduce innovation, and diminish choice.” The Division says that the proposed transaction between HPE and Juniper would further consolidate an already highly concentrated market.
“HPE and Juniper are successful companies. But rather than continue to compete as rivals in the WLAN marketplace, they seek to consolidate — increasing concentration in an already concentrated market. The threat this merger poses is not theoretical. Vital industries in our country — including American hospitals and small businesses — rely on wireless networks to complete their missions. This proposed merger would significantly reduce competition and weaken innovation, resulting in large segments of the American economy paying more for less from wireless technology providers,” Acting Assistant Attorney General Omeed A. Assefi said. The Division asserted that Juniper has been a “disruptive force that has grown rapidly from a minor player to among the three largest enterprise-grade WLAN suppliers in the U.S.,” and that its innovation has decreased costs and put competitive pressure on HPE that HPE seeks to alleviate by acquiring Juniper. C. U.S. Litigation
1.Goldstein v. National Collegiate Athletic Association, Case No. 3:25-00027 (M.D. Ga. Feb. 20, 2025). On Feb. 20, 2025, the Honorable Judge Tilman E. Self III denied a college baseball player’s request for a temporary restraining order that would have prevented the National Collegiate Athletic Association (NCAA) from barring the student from the 2025 baseball season. The plaintiff filed a suit earlier this month that joins other similar suits seeking to invalidate the NCAA’s eligibility rule which gives college athletes no more than five years to play four seasons of college sports. In denying the temporary restraining order, Judge Tilman scheduled a follow-up hearing to allow for a more fulsome evidentiary hearing on a longer injunction. 2.State of Arkansas v. Syngenta Crop Protection AG, Case No. 4:22-cv-01287 (E.D. Ark. Feb. 18, 2025). Federal Judge Brian S. Miller denied two large pesticide manufacturers’ motion to dismiss the State of Arkansas’ lawsuit alleging that the manufacturers conspired to prevent generic pesticides from gaining market entry. In the lawsuit, Arkansas alleges that these manufactures entered into “loyalty programs,” which pay distributers and retailers incentives if they limit or refuse to sell generic crop-protection products whose patents have expired. In allowing the lawsuit to proceed, Judge Miller noted that the State has sufficiently alleged that these loyalty programs foreclose generic competitors from entering the market successfully. 3.Earth’s Healing Inc. v. Shenzhen Smoore Technology Co., Case No. 3:25-cv-01428 (N.D. Cal. Feb. 11, 2025). A Chinese-based vape manufacturing company and its U.S.-based distributors were sued in a putative class action, alleging that the defendants conspired to keep the price of marijuana vaping pens and cartridges high by limiting competition among distributors. The complaint alleges that Shenzhen Smoore Technology forced its distributors to enter into a horizontal conspiracy not to solicit each other’s retail customers and report any distributor who violated this non-solicitation policy. The proposed class includes any licensed cannabis business in the 24 states that have legalized marijuana for recreational use that have sold Shenzhen’s products since November 2016. 4.Alliance of Automotive Innovation v. Campbell, Case No. 1:20-CV-12090 (D. Mass. Feb. 11, 2025). On Feb. 11, 2025, the Honorable Judge Denise L. Casper dismissed a lawsuit an automakers’ advocacy group brought that sought to block the State of Massachusetts’s “right-to-repair,” which allows customers and mechanics open access to vehicles’ “telematics” systems. These systems are used to electronically track a vehicle’s location, speed, fuel efficiency, and other metrics. The automakers claimed that applying this state law to automobiles violates the National Traffic and Motor Vehicle Safety Act and the Clean Air Act and raises the risk of impairing the cybersecurity protections installed in these systems. Judge Casper’s order dismissing the case was filed under seal, and the has automakers have already indicated an intent to appeal the decision to the U.S. Court of Appeals for the First Circuit.
The Netherlands
A. Dutch Competition Authority (ACM) Dutch commitments decision spotlights ACM’s enforcement policy.
The Authority for Consumers and Markets (ACM) recently closed a cartel investigation into three chiropractic trade associations without imposing sanctions. The investigation concluded after the associations promised not to prohibit their members from offering discounts and free examinations. This decision was intended to promote competition, but critics raised concerns about transparency and the fair treatment of other companies that may have received harsher penalties for similar violations. Critics also pointed out that the ACM appears more reluctant to penalize the healthcare sector, leading to additional questions about its policy’s fairness and consistency. B. Dutch Court Decision Rotterdam District Court confirms egg purchasing cartel violation.
The Rotterdam District Court confirmed the findings of the ACM against three egg-product manufacturers who were fined for price-fixing, supplier allocation, and sharing competitively sensitive information in the egg-purchasing market. In 2021, the ACM sent a statement of objections, concluding that the three companies had violated the cartel prohibition provisions of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) and Article 6(1) of the Dutch Competition Act. Coordinating purchasing prices leads to such a significant restriction of competition (“by object” violation) that the ACM was not required to analyze the effects of the practice. The court acknowledged the companies’ objections to the amount of the fines and, since the proceedings exceeded the reasonable timeframe by a few weeks, all fines were reduced by EUR 5,000. The court set the fines at EUR 995,000, EUR 7,655,000, and EUR 15,736,500.
Poland
A. UOKiK president tightens the noose on price fixing agreements.
The president of the Office of Competition and Consumer Protection continues to focus on alleged price-fixing agreements, in particular those maintaining minimum prices (so-called RPMs) in online sales. Recent proceedings indicate an increased level of scrutiny on pricing practices, particularly around online distribution. 1.Fines imposed on pet-food distributor, Empire Brands. The UOKiK president has imposed a fine on Empire Brands, a pet food distributor, for engaging in resale price maintenance practices in online sales channels (online stores and digital marketplaces). Resellers were required to set prices that were at least equal to those Empire Brands offered in its own online store. According to the UOKIK president, the company penalized resellers by sending warnings, altering payment terms, restricting access to promotions, and terminating business relationships. Following the investigation, the UOKiK president imposed a fine of approximately PLN 353,000 (approximately EUR 84,000/USD 87,000) on Empire Brands. In addition, the UOKIK president also penalized the company’s managers, who received individual fines of PLN 82,000 (approximately EUR 20,000/USD 20,000) and PLN 39,000 (approximately EUR 9,000/USD 10,000), respectively. 2.Charges brought against sanitary equipment distributor, Oltens. UOKiK president also announced charges against Oltens, a distributor of sanitary equipment, for allegedly fixing online resale prices. The UOKiK president suspects that Oltens has entered into a price-fixing agreement with independent resellers of its products. The company allegedly imposed minimum resale prices for online sales, preventing retailers from offering lower prices (including within promotional campaigns). According to the UOKIK president, Oltens may have ensured compliance by actively monitoring resellers and intervening against those who deviated from set prices, including by refusing to supply or terminating cooperation agreements. The proceedings are pending. 3.Trend of enforcement. The Oltens and Empire Brands cases add to a growing list of resale price maintenance investigations the UOKiK president has conducted. In recent years, the competition authority has taken similar actions against multiple companies. For example, in 2024, Dahua Technology was fined PLN 3.7 million (approximately EUR 900,000/USD 900,000) for restricting the pricing policies of its distributors, and Kia Polska was fined PLN 3.5 million (approximately EUR 800,000/USD 900,000) for imposing minimum resale prices on its dealers. The UOKiK president considers RPMs to be particularly harmful to competition, given their capacity to restrict freedom of establishing prices, therefore negatively affecting market competitiveness and consumer interests. Infringing companies may be subject to significant financial penalties, which can be up to 10% of their annual turnover. The UOKiK president may also impose individual fines on managers of up to PLN 2 million. Moreover, anticompetitive contractual provisions would be void, and affected entities can seek damages in civil courts.
Italy
A. Italian Competition Authority (ICA) 1.Mulpor and IBCM fined for repeatedly failing to comply with ICA ruling. In January 2025, ICA fined Mulpor Company S.r.l. and International Business Convention Management Ltd. (IBCM) EUR 3.5 million for repeated non-compliance with a 2019 prohibition decision on unfair trading. In ICA’s view, the two companies sent allegedly deceptive communications to businesses and micro-companies, under the pretext of requesting business data verification, while in fact leading recipients to enter into multi-year contracts for advertising services. ICA considered these communications, resembling those that led to earlier fines in 2019 and 2021, to be disguised as updates to a database called the “International Fairs Directory.” But by signing the forms, business and micro-companies committed to a three-year advertising contract.
ICA concluded that these communications were deceptive, causing recipients to unknowingly subscribe to unwanted services. IBCM also allegedly used undue pressure by threatening legal actions to collect payments for the unsolicited services. 2.Radiotaxi 3570 fined for repeatedly failing to comply with ICA ruling. ICA imposed an approximately EUR 140,000 fine on Radiotaxi 3570 for repeated non-compliance with a June 2018 ruling, which found certain agreements in Rome’s taxi service market to be anticompetitive. According to ICA, the company failed to eliminate allegedly restrictive non-compete clauses in its statutes and regulations that ICA believed hindered competition. Radiotaxi 3570 did not comply with the measures ICA required, including submitting a written report outlining corrective actions, nor did it pay the imposed fines. ICA is considering imposing further penalties, including daily fines, and may consider suspending the company’s operations for up to 30 days in the event of persistent non-compliance. 3.Redetermination of Imballaggi Piemontesi S.r.l.’s cartel penalty. In 2019, Imballaggi Piemontesi S.r.l. was fined more than EUR 6 million for its participation in an anti-competitive cartel in the industry that produces and markets corrugated cardboard sheets. In 2023, after a Council of State ICA judgment– which involved a EU Court of Justice referral for a preliminary ruling on that matter (C-588/24) – ICA had to reassess the fine imposed on Imballaggi Piemontesi S.r.l. on the basis, inter alia, of the effective involvement in the cartel.
The company argued for a reduced penalty, but ICA determined that its participation was to be considered “full” in any case. As a result, ICA maintained the fine at EUR 6 million, which was equal to 10% of the company’s total turnover, within the legal limit.
European Union
A. European Commission Commission sends Lufthansa supplementary statement of objections.
The European Commission has issued a supplementary statement of objections to Lufthansa, ordering the airline to restore Condor’s access to Lufthansa’s feed traffic to and from Frankfurt Airport as agreed in June 2024. This step follows an investigation into potential competition restrictions by Lufthansa’s transatlantic joint venture with other airlines. The European Commission has preliminarily assessed that this joint venture restricts competition on the Frankfurt-New York route and that interim measures are needed to prevent harm to competition on this market.
Previously, Lufthansa and Condor had special prorate agreements (SPAs) allowing Condor to access Lufthansa’s short-haul network to feed its long-haul flights. In 2020, Lufthansa notified Condor of the termination of their SPAs. The European Commission expressed preliminary concerns that without these agreements, Condor could struggle to operate sustainably on the Frankfurt-New York route, further undermining the competitive market structure. To ensure the effectiveness of any future decision, Lufthansa must reinstate the previous agreements. This case falls under Articles 101 of the TFEU and 53 of the EEA Agreement, which prohibit agreements that restrict competition. B. ECJ Decisions
1.CJEU addresses preliminary questions on the restrictive nature of technical specifications. The Court of Justice of the European Union (CJEU) ruled on the interpretation of Article 42 of the EU’s Public Procurement Directive (Directive 2014/24/EU) regarding technical specifications for public procurement. The case involves a dispute between DYKA Plastics, which produces plastic drainage pipes, and Fluvius, the Belgian grid operator for electricity and natural gas in all municipalities in Flanders. Fluvius required that only drainage pipes made of stoneware and concrete can be used. DYKA argued that this requirement violates the principles of procurement, leading to four preliminary questions addressed to the CJEU.
The CJEU ruled that technical specifications must describe the characteristics of the works, supplies, or services, and that contracting authorities may not make specific mentions of materials—like references to stoneware or concrete—that favor or eliminate certain companies. The CJEU also explained that unless the use of a specific material is unavoidable, references to that material must be accompanied by the words “or equivalent.” In conclusion, the CJEU stated that eliminating companies or products through incompatible technical specifications necessarily conflicts with the obligation to provide equal access to procurement procedures and not to restrict competition per Article 42 of Directive 2014/24. 2.Beevers Kaas BV v. Albert Heijn België NV raises preliminary questions about parallel obligation. The case involves a dispute between Beevers Kaas, the exclusive distributor of branded dairy products in Belgium and Luxembourg, and Albert Heijn, a distributor in other markets. Beevers Kaas alleges that Albert Heijn violated exclusivity arrangements by selling in Belgium, while Albert Heijn argues that it cannot be prohibited from actively selling and that the exclusivity agreement offers insufficient protection. The case was referred to the CJEU to address the application of Article 4(b)(i) of the former EU Vertical Block Exemption Regulation (Regulation (EU) 330/2010 – old VBER), which has since been replaced.
First, the CJEU asked whether the “parallel obligation” requirement (where a supplier granting exclusivity to one buyer in a territory must also restrict other buyers from actively selling in that territory) may be fulfilled merely by observing that other buyers are not actively selling in the exclusive territory. Advocate General Medina’s January 2025 opinion states that the mere observation that other purchasers are not actively selling in the area is insufficient.
Second, the CJEU was asked to clarify whether proof of compliance with the “parallel obligation” must be maintained throughout the entire applicable period, or only when other purchasers show their intent to sell actively. According to Advocate General Medina, the supplier must generally demonstrate that the parallel obligation is fulfilled for all its other buyers within the EEA during the entire period for which it claims the benefit of the block exemption.
Japan
A. JFTC orders mechanical parking garage manufacturers to pay a surcharge of approximately JPY 520 million for bid-rigging allegations. In December 2024, the Japan Fair Trade Commission (JFTC) issued cease-and-desist orders to five manufacturers of mechanical parking garages and other facilities for bid-rigging allegations. The JFTC also ordered four manufacturers to pay a surcharge of approximately JPY 520 million in total.
According to the JFTC, the manufacturers repeatedly engaged in bid-rigging to determine which companies would receive orders from major general contractors, and at what price. The manufacturers are suspected to have engaged in bid-rigging, but one of them is also suspected of avoiding JFTC orders under the leniency program. The JFTC sent the proposed disciplinary measures to the manufacturers and will issue an order after receiving feedback from each. B .JFTC issues cease-and-desist orders to a cloud services company for the first time. In December 2024, the JFTC issued a cease-and-desist order to MC Data Plus, Inc., a company providing cloud services regarding labor management, for unfair trade practices that allegedly prevented customers from switching to other companies’ services. The order comes after the JFTC conducted an on-site inspection of MC Data Plus in October 2023.
According to the JFTC, starting in 2020, MC Data Plus refused to provide its clients with information on their employees, which the client registers on the cloud, in a form compatible with other labor safety services, due to the protection of personal information. The JFTC determined that such an act falls under the category of “interference with transactions (unjustly interfering with a transaction between its competitor),” which Japanese antimonopoly law prohibits.
This is the first time that a cease-and-desist order has been issued in connection with transactions regarding cloud services. MC Data Plus has filed a lawsuit to have the order revoked and has also filed a petition to suspend the order’s execution.
1 Due to the terms of GT’s retention by certain of its clients, these summaries may not include developments relating to matters involving those clients.
The Uncertainty Of Officer Appointments In California LLCs
The California Revised Uniform Limited Liability Company Act, Cal. Corp. Code § 17701.01 et seq., clearly authorizes the appointment of officers:
A written operating agreement may provide for the appointment of officers, including, but not limited to, a chairperson or a president, or both a chairperson and a president, a secretary, a chief financial officer, and any other officers with the titles, powers, and duties as shall be specified in the articles of organization or operating agreement or as determined by the managers or members. An officer may, but does not need to, be a member or manager of the limited liability company, and any number of offices may be held by the same person.
Cal. Corp. Code § 17704.07(u). The CARULLCA even makes provision for the method of the appointment of officers:
Officers, if any, shall be appointed in accordance with the written operating agreement or, if no such provision is made in the operating agreement, any officers shall be appointed by the managers and shall serve at the pleasure of the managers, subject to the rights, if any, of an officer under any contract of employment.
Cal. Corp. Code § 17704.07(v). The use of the plural “managers” suggests that an individual manager does not have the authority. But if an individual manager lacks the authority, what vote is required? The statute is conspicuously silent on this question. Notably, the statute does not use the defined term “majority of the managers”, which unless otherwise provided in the operating agreement, means more than 50% of the managers of the limited liability company. Cal. Corp. Code § 17701.02(l).
These questions can be easily avoided, by answering them in the operating agreement.
Delaware Court of Chancery Reminds Delaware Counsel of the Court’s Expectations
The Delaware Court of Chancery is the nation’s preeminent business court due to the large number of businesses that call Delaware home. Both Delaware state and federal courts require Delaware counsel to be actively involved in all aspects of the case. For example, Delaware Court of Chancery Practice Guidelines state that “The concept of ‘local counsel’ whose role is limited to administrative or ministerial matters has no place in the Court of Chancery. The Delaware lawyers who appear in a case are responsible to the Court for the case and its presentation.” While these guidelines are a good start, clients who find themselves in this Court should rely on local counsel for expectations related to Delaware practice that will not be found within the Guidelines.
An example of this unwritten guideline is a Delaware practice touchstone—civility. Clients unfamiliar with Delaware should be aware that although zealous litigation is expected, the Court will not tolerate a deviation from the Delaware practice of civility. The head of the Court of Chancery recently reminded parties in a letter filed on the docket to both parties of the Court’s expectations. In In re SwervePay Holdings Acquisition, LLC, C.A. No. 2021-0447-KSJM, Chancellor McCormick reminded the Parties:
You all have been less than understanding with each other, and that is regrettable. You can do better. Dig deep and hit reset, please. Allow the Delaware attorneys to advise on all aspects of this matter, including the relevant deadlines, the need to meet them, and the need to extend basic courtesies like brief extensions when requested. I am not sure what happened in these circumstances, but it also bears reminding that non-Delaware attorneys should not dump a brief on their Delaware friends at the last minute. If that admonition is irrelevant to the parties here, all the better.
The Court of Chancery has had a steady increase in expedited actions, which leaves little patience for the Court’s involvement in trivial scheduling or discovery disputes. According to the most recent Court of Chancery Annual Report of the Judiciary, the request for expedition increased 8% and the overall caseload increased 10%.
If your client is in Delaware, rather than run to the Court to work it out for you, the parties should work it out when possible. Delaware is not a jurisdiction for gamesmanship, especially in the Court of Chancery where your fact-finder is the Chancellor or Vice Chancellor, as there are no jury trials in the Court of Chancery.
Make sure you keep local counsel actively involved, as they can advise on best practices in the Delaware Court of Chancery.
EU Omnibus Package: Proposed Changes to Reduce ESG Compliance Burdens for Businesses
On 26 February 2025, the European Commission (Commission) published the so-called “EU Omnibus Package” (Proposal). The Proposal aims to reduce the administrative burden for businesses operating in the EU by easing compliance requirements under several key EU environmental, social, and governance (ESG) laws, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). The Proposal must be read against the background of the “Draghi report” on European competitiveness published last year, which urged to reduce the administrative and regulatory burden within the EU, and the Commission’s target to reduce such burden by 25% overall and by at least 35% for SMEs. This GT Alert provides an overview of the most important proposed changes to these regulations.
Key Proposed Changes
Amendments to CSRD
Scope of application for EU companies: The CSRD’s scope of application would be limited to undertakings that have more than at least 1,000 employees and either a net turnover of at least EUR 50 million or a balance sheet total of at least EUR 25 million. In addition, publicly listed small and medium sized undertakings (SMEs) that do not meet these thresholds shall be completely removed from the scope of the CSRD. The Commission estimates that these changes would remove approximately 80% of the current in-scope companies from the scope of the CSRD. Currently, the CSRD still captures all “large” undertakings, being companies which meet two of the three following criteria: (i) average number of employees: 250; (ii) balance sheet total: EUR 25 million; and (iii) net turnover: EUR 50 million, as well as listed SMEs (regardless of their number of employees).
Scope of application for non-EU companies: The Proposal suggests to significantly increase the threshold for non-EU companies to be subject to reporting requirements under the CSRD. The reporting obligation for non-EU companies shall now only be triggered if the ultimate non-EU parent company has a total turnover in the EU of at least EUR 450 million at group level (now: EUR 150 million) and either a “large” EU-based subsidiary (meeting two out of three criteria referred to above) or a branch in the EU with a turnover of at least EUR 50 million (now: EUR 40 million). The employee threshold was not raised to 1,000 for EU subsidiaries of non-EU parent companies, which may have been an oversight.
Scope of reporting requirements: The scope of the reporting requirements set out in the European Sustainability Reporting Standards (ESRS) shall be simplified through a reduction of the number of data points to be reported in the CSRD report. The Proposal also removes the obligation for the European Commission to adopt delegated acts to supplement CSRD in order to, where appropriate, provide for reasonable assurance standards. This would mean that CSRD would, also in the future, only require an audit opinion about the compliance of the sustainability reporting based on limited assurance standards.
Timing of reporting: The Proposal suggests postponing the CSRD reporting requirements by two years for all so-called “wave 2” and “wave 3″ companies, i.e. companies which are currently required to report under the CSRD in 2026 (over the financial year 2025) or 2027 (over the financial year 2026). If the Proposal is adopted, these companies would only have to provide their first CSRD report in 2028 and 2029, respectively. On the contrary, the Proposal does not change the timing of the reporting for so-called “wave 1” companies (i.e. publicly listed EU companies, insurances and banks with an average number of employees during the financial year of at least 500) which are already required to do CSRD reporting in 2025 (for the financial year 2024). The Commission intends to fast-track this part of the Proposal to provide legal certainty for companies with looming reporting obligations in 2026, and to “win time” for adoption of the envisaged substantive changes (in particular the introduction of the 1,000-employee threshold). Should the substantive changes be adopted and become effective as they currently stand, the “wave 1” companies that do not meet the new scoping criteria (because they have more than 500 but less than 1,000 employees) would no longer be subject to the CSRD.
Amendments to CS3D
Timing of due diligence obligations: The Proposal leaves the thresholds for the applicability of the CS3D unchanged but proposes to postpone the deadline for Member States to transpose the CS3D into national law by one year to 26 July 2027. Consequently, the first phase of application of the new due diligence obligations (i.e. for large companies) would begin on 26 July 2028.
General limitation of due diligence obligations to direct business partners: The Proposal generally limits the due diligence obligations of in-scope companies to direct business partners. An exception (i.e. an obligation to conduct an in-depth assessment of adverse impacts at the level of indirect business partners) shall only apply in limited circumstances where the company has plausible information suggesting that adverse impacts have arisen or may arise at the level of the respective indirect business partner. Hence, it would no longer be required to monitor and assess the entire supply chain.
Greater intervals for monitoring: As another significant relief for in-scope companies, the Proposal suggests requiring companies to assess the adequacy of their supply chain due diligence measures only every five years instead of every 12 months.
Termination of business relationships: Under the Proposal, in-scope companies would no longer be required to terminate their entire business relationship with business partners towards which preventive or corrective measures have failed to address their adverse impacts on human rights or environmental objectives. Instead, they would only be required to terminate business relationships with respect to the activities concerned.
Other Proposals
The Proposal also includes:
measures to reduce the regulatory burden and scope of the Taxonomy Regulation, including by introducing materiality thresholds and reducing reporting templates by around 70%;
changes to the Carbon Border Adjustment Mechanism (CBAM), including by exempting small importers from CBAM obligations; and
an amendment to the InvestEU Regulation, involving reduced reporting requirements.
Outlook
It remains to be seen whether the Proposal will become law in its current form. It is still subject to approval by the European Parliament and the Council of the EU Member States. Generally, EU legislative procedures can last up to 18 months – which is why the Commission has asked to fast-track the changes, in particular regarding the postponement of CSRD deadlines.
Whilst some EU politicians have raised concerns that the Proposal would lead to a setback for the EU’s sustainability objectives, the Proposal would significantly reduce the compliance burden for companies and limit the CSRD’s scope of application. For this reason, the Proposal has found support in some key EU Member States (e.g. Germany). Further intense discussions can be expected as the legislative procedure moves along.
Considerations for Companies
Until the Proposal becomes final and is adopted, the existing ESG rules (including CSRD) will continue to apply. What steps should companies consider taking before then? In particular for the CSRD, the answer depends on the circumstances for each company:
Companies that are already required to report under CSRD (“wave 1” entities) in 2025 should continue to comply. Companies with more than 500 but less than 1,000 employees may no longer be required to comply after adoption of final rules, but whether those rules will indeed become effective in their current form remains to be seen.
For companies that are currently due to report under CSRD in 2026 and 2027 (“wave 2” and “wave 3” entities), the prudent approach is to continue preparing for CSRD on the basis of the existing rules.
Non-EU parent companies of EU subsidiaries or branches should reconsider applicability of the scope to determine whether they will be required to report in 2029.
All companies are advised to monitor the development of upcoming rules.
What Doesn’t The DFPI Regulate?
In the mid 1990s, I had the privilege of serving as Commissioner of Corporations for the State of California. At that time, the DOC was known as a tough securities regulator. However, the times they were a changin’. In 1996, Congress enacted the National Securities Markets Improvement Act (NSMIA) which significantly limits the authority of the states to require qualification/registration of securities transactions.
During my tenure, the DOC also regulated health care service plans (aka HMOs and PPOs). Historically, these had been primarily nonprofit organizations and the regulatory concern had been with financial soundness. At the time many of these plans were converting to for profit. At the same time, many people were being moved into a managed care model and there was a great deal of public antipathy towards the managed care industry and the DOC’s oversight of that industry. Several years after I left the DOC, the legislature transferred oversight of managed care organizations to a new department – the Department of Managed Healthcare.
During my years in state government, regulation of state chartered financial institution was trifurcated amongst the DOC, the State Banking Department, and the Department of Savings & Loan (before becoming Commission of Corporations, I served as the interim Savings & Loan Commissioner). A significant change occurred on July 1, 2013, when the DOC and the Department of Financial Institutions (DFI) merged to form the Department of Business Oversight (the DBO). As a result, regulation of state chartered depository financial institutions became centralized in the DFI.
In 2021, the Governor and the legislature made the unfortunate decision to rebrand the DFI with the ungainly moniker of Department of Financial Protection and Innovation (DFPI). Currently the DFPI administers and/or enforces the following:
Banks and Credit Unions
Commercial Banks
Industrial Banks
Public Banks (Assembly Bill 857)
Credit Unions
Trust Companies & Departments
Securities and Investment
Securities (Corporate Securities Law of 1968)
Franchises (Franchise Investment Law)
Capital for Businesses (Capital Access Company Law)
Broker-Dealers & Investment Advisers (Corporate Securities Law of 1968)
Digital Financial Assets (Digital Financial Assets Law)
Non-Bank Financial Services
Money Transmitters
Debt Collectors
Check Sellers, Bill Payers & Proraters
Covered Persons (California Consumer Financial Protection Law )
Lending and Borrowing
Consumer & Commercial Loans (California Financing Law)
Payday Lenders (California Deferred Deposit Transaction Law)
Insurance Premium Finance (California Industrial Loan Law)
Home and Property Financing
Residential Mortgage Lenders & Servicers (California Residential Mortgage Lending Act)
Mortgage Loan Originators (California Financing Law and California Residential Mortgage Lending Act)
Property Assessed Clean Energy (PACE) (AB 1284 (Chapter 475, Statutes of 2017)
Escrow Agents
Escrow Agents (Escrow Law)
Education Financing
Student Loan Servicers (California Student Loan Servicing Act and subsequent enactments)
SEC Division of Corporation Finance Expands Confidential Review Accommodations for Draft Registration Statements
On March 3, 2025, the staff of the Securities and Exchange Commission’s (SEC) Division of Corporation Finance (the Division) announced that it enhanced certain existing accommodations under the Jumpstart Our Business Startups Act, which was enacted in April 2012 and which accommodations were expanded in 2012 and 2017, that allow for confidential SEC review of certain draft registration statements by expanding the availability of certain general accommodations and by including additional accommodations for companies that have gone public but have not yet achieved “Well-Known Seasoned Issuer” (WKSI) status.1
Following Monday’s announcement, issuers will now be able to submit all of the following draft registration statements for nonpublic review:
a registration statement under the Securities Act of 1933, as amended, for an initial public offering of securities or for any subsequent public offering of securities, regardless of how much time has passed since the initial public offering (rather than only up to one year later, as had previously been the case);
a registration statement on Form 10, 20-F or 40-F for the initial registration of any class of securities under either Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act) or any subsequent registration statement for the registration of a class of securities under either Section 12(b) or Section 12(g) of the Exchange Act, regardless of how much time has passed since the issuer became subject to the reporting requirements of the Exchange Act; or
a registration statement for a de-SPAC transaction where the SPAC survives the business combination as the public company and the co-registrant target would otherwise be independently eligible to submit a draft registration statement.2
The new guidance is particularly significant for public companies that have been public for more than a year but have not yet achieved WKSI status, as it permits such companies to continue to confidentially submit draft registration statements indefinitely. As a result, non-WKSI’s may now avoid suffering the market pressure associated with filing a registration statement publicly and effectively pre-announce a transaction before launch, as was previously required. Moreover, reporting companies may now exclude the name of the underwriter(s) from their initial draft registration statement submissions so long as the company provides such name(s) in subsequent submissions and public filings. Finally, pursuant to the 2017 expansion of accommodations, issuers that confidentially submit a draft registration statement subsequent to their initial registration statement must make such registration statement and nonpublic draft submission publicly available on the EDGAR system at least two business days prior to any requested effective time and date; under the new guidance, however, the staff will now consider reasonable requests to expedite that two-business day period.
In issuing this new guidance, the Division underscored that “further expansion of these accommodations can facilitate capital formation, without diminishing investor protection.”
1 A WKSI is an issuer that meets all of the following obligations at some point during a 60-day period preceding the date the issuer satisfied its obligation to update its shelf registration statement: (i) the issuer is eligible to register a primary offering of its securities on Form S-3 or Form F-3; (ii) as of some date within 60 days of its eligibility determination date, the issuer has an outstanding minimum $700 million in worldwide market value of voting and non-voting equity held by non-affiliates (i.e., public float)– or – has issued at least $1 billion aggregate amount of non-convertible securities other than common equity, in primary offerings for cash in the last three years; and (iii) the issuer is not an ineligible issuer (i.e., an issuer that has not filed all required reports under Section 13 or 15(d) of the Exchange Act in the preceding 12 months; a blank check company; an issuer in an offering of penny stock; or the like). The benefit of WKSI status is automatic effectiveness of registration statements on Form S-3 or F-3, without any SEC review.
2 In essence, this accommodation puts the traditional de-SPAC structure on even footing with alternative de-SPAC structures that already allow confidential submission (i.e., where the target company or a newly formed company is the registrant).
CTA Enforcement Halted Again: Treasury Department Suspends CTA Requirements for Domestic Reporting Companies
In yet another update to the ongoing saga of the Corporate Transparency Act (CTA), the Financial Crimes Enforcement Network (FinCEN), the agency of the U.S. Department of the Treasury (“Treasury Department”) that enforces the CTA, announced on February 27, 2025, that it would not issue any fines or penalties or take any other enforcement actions against companies for a failure to provide beneficial ownership information (BOI) until a new interim final rule on the CTA is released.
On March 2, 2025, the Treasury Department provided further guidance on the CTA, announcing that it would halt enforcement of the CTA with respect to U.S. citizens and domestic reporting companies.
In its press release announcing this update, the Treasury Department stated that it will not enforce any penalties or fines associated with the BOI reporting requirements under the existing CTA rules; however, it will also issue a new proposed rule (to be released no later than March 21, 2025, according to FinCEN’s February 27, 2025, announcement) that will narrow the scope of the reporting requirements under the CTA to “foreign reporting companies only.”
Under the CTA, a “foreign reporting company” is any entity that is formed under the law of a foreign country and has registered to do business in the United States by the filing of a document with a secretary of state or any similar office, while a “domestic reporting company” is any entity that is formed in the United States by the filing of a document with a secretary of state or any similar office. We note, however, that the Treasury Department could seek to modify these definitions as part of its new proposed rule.
The immediate takeaway, based on this guidance from the Treasury Department, is that all domestic reporting companies are no longer required to file BOI and will not be subject to liability for not filing.
We will continue to monitor additional developments regarding the CTA, including the expected further guidance from the Treasury Department, to determine what the CTA filing requirements and deadlines will be for foreign reporting companies.
Green, But Lean: EU Eases Sustainability Rules Without Ditching Climate Goals
On 26 February 2025, the European Commission published the Omnibus Simplification Package, a set of proposals designed to streamline key EU sustainability regulations, eliminate redundancies, and reduce administrative burden and compliance costs for companies — while preserving the EU’s ambitious environmental objectives.
If adopted in the currently proposed form, companies will have more time to comply with the CSRD reporting requirements and the CSDDD supply chain due diligence obligations. In fact, the Omnibus Simplification Package proposes postponing by two years the entry into application of the CSRD reporting requirements for companies that have not yet started implementing the CSRD (i.e. large companies and listed SMEs), while the new CSDDD framework is postponing by one year the transposition deadline (to 26 July 2027) and the first phase of the application of the sustainability due diligence requirements covering the largest companies (to 26 July 2028).
The Omnibus Simplification Package also proposes to revise the scope of the CSRD and the CSDDD. The reporting requirements under CSRD would only apply to large undertakings with more than 1,000 employees (i.e. undertakings that have more than 1,000 employees and either a turnover above €50 million or a balance sheet total above €25 million) and the CSDDD due diligence obligations would be significantly narrowed down, in particular by limiting them to direct contract partners.
While many businesses welcome the reduced regulatory burden as well as its postponement, some critics argue that it weakens corporate accountability and dilutes transparency efforts. In any event, the Omnibus Simplification Package is still at a proposal stage and is set to spark intense debate in the EU Parliament and Council, with global stakeholders—including the U.S.—closely monitoring the developments and trying to influence them to meet their own goals.
This alert provides insights into the most relevant proposed changes to CSRD and CSDDD and what those mean for businesses operating under the EU’s evolving sustainability framework.
The Omnibus Simplification Package presented by the European Commission includes:
A proposal for a Directive, the sole content of which is to postpone the application of reporting requirements in the CSRD for certain groups of companies and the transposition deadline as well as the first wave of application of the CSDDD (Omnibus Directive I).
A second proposal for a Directive amending the actual content of and obligations under the CSRD and the CSDDD (Omnibus Directive II).
A draft Delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts subject to public consultation.
A proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation.
A proposal for a Regulation amending the InvestEU Regulation.
Proposed changes to the CSRD
Postponement of the Starting Date for Reporting for Certain Companies
The Omnibus Directive I proposes a two-year postponement of the implementation of reporting requirements for companies in the second and third waves (see table below) This is to allow the European co-legislators to find agreement on the Commission’s proposal for substantive changes as provided in the Omnibus Directive II.
This postponement is intended to give companies some legal certainty and prevent a scenario where companies would be required to report for the financial year 2025 (second wave) or 2026 (third wave), only to be later relieved from reporting duties if and when the Omnibus II Directive with its higher thresholds is approved. No amendments to the timeline have been proposed for wave four non-EU ultimate parent companies; as a result, those companies continue to be required to report for the first time in 2029 for financial year 2028 (but may opt to report on a consolidated group basis before). Companies already covered in the first wave seem to have to continue reporting on the basis of the existing CSRD – the Omnibus Proposal does not mention any postponement of their duties.
According to Article 3 of the proposed text of the Omnibus Directive I, Member States shall implement the provisions of the Directive by 31 December 2025 at the latest. This indicates that the Commission is assuming that the Omnibus Directive I will be approved quickly by the European legislators – while the content-related Omnibus Directive II may well take considerably longer to get through the legislative process.
In this framework, wave 2 companies currently required to report in 2026 for FY 2025 will have to consider the timing of their preparations for CSRD readiness: once the Omnibus I Directive is approved the postponement will still need to be transposed into national laws to become effective, but (a) we expect Member States to be fairly quick since there seems to be broad agreement about the postponement (in contrast to the content related proposals of the Omnibus Directive II) and (b) we would argue that the postponement would have a pre-effect, which would make it very difficult for Member States to implement current CSRD obligations and impose fines before the new starting date.
New Scoping Thresholds
According to the proposed text of the Omnibus Directive II, only large companies or parent companies of large groups with more than 1,000 employees (individually or in the case of a holding company on a consolidated basis) will be required to prepare sustainability reports under Article 19a and 29a of the Accounting Directive.
That change in itself would reduce the number of undertakings subject to mandatory sustainability reporting requirements by about 80%. In comparison to the current requirements (see table below for details), the new employee threshold would lead to some of the undertakings in the first and second wave and all undertakings in the third wave (listed SMEs) falling out of the scope of the CSRD should Omnibus Directive II be approved.
In addition, the threshold for EU turnover for non-EU parent companies has been raised from €150 to €450 million, and the threshold for an EU branch from €40 to €50 million. These amendments in the reporting thresholds are meant to more closely align the CSRD with the CSDDD, which already only applies to companies above the 1,000 employee and €450 turnover threshold.
Wave
Type of company
Current thresholds and due date for reporting
Proposed thresholds
1(Current kick-off date for reporting: 2025 for FY 2024 – not changed by the postponement proposal in Omnibus Directive I)
Public interest entities (e.g. credit institutions, insurance undertakings and others) already subject to the NFRD
More than 500 employees
With average 1,000 employees
2(Current kick-off date for reporting: 2026 for FY 2025 – may be postponed by Omnibus Directive I to 2028 for FY 2027)
EU companies/parent companies of a groupCompanies (EU or non-EU) with securities listed on EU regulated markets
Exceeding at least two of the following three thresholds (on a consolidated basis at a group level):
Balance sheet total: > €25 million
Net turnover: > €50 million
Average number of employees: > 250
With average 1,000 employees and exceeding one of the following two thresholds (on a consolidated basis at a group level):
Balance sheet total: > €25 million
Worldwide net turnover: > €50 million
3(Current kick-off date for reporting: 2027 for FY 2026, with opt-out option for two years – may be postponed by Omnibus Directive I to 2029 for FY 2028)
SMEs with securities listed on an EU regulated market
Below the thresholds for the second wave companies (see above).
Reporting in 2027 for financial year 2026, with the possibility to opt out for a further twoyears.
Out of scope
4(Current kick-off date for reporting: 2029 for FY 2028 – not changed by the postponement proposal in Omnibus Directive I)
Non-EU ultimate parent companies
Generating a net EU turnover of at least €150 million (at group level) and with
at least one large subsidiary in the EU (i.e., exceeding two out of three of: balance sheet of €25 million and/or turnover of €50 million and/or 250 employees) or
a branch in the EU that generated a net turnover of €40 million
Generating a net EU turnover of at least €450 million (at group level) and with
at least one large subsidiary in the EU (as defined in the Accounting Directive, i.e., exceeding two out of three of: balance sheet of €25 million and/or turnover of €50 million and/or 250 employees) or
a branch in the EU that generated a net turnover of €50 million
Reducing the Trickle-Down Effect by Limiting the Information That Companies Within Scope May Request From Smaller Companies in Their Value Chain
The CSRD requires undertakings to report value-chain information to the extent necessary for understanding their sustainability-related impacts, risks and opportunities.
The current CSRD establishes a so-called value-chain cap, which states that the European Sustainability Reporting Standards (ESRS) may not contain mandatory reporting requirements that would require undertakings to obtain information from SMEs in their value chain that exceeds the information to be disclosed under the proportionate standard for listed SMEs.
The proposed Omnibus Directive II extends this value chain cap from SMEs to companies up to 1,000 employees. In turn the Commission is proposing to adopt simplified standards for voluntary use by out of scope companies having fewer than 1,000 employees, based upon the current simplified standard prepared for non-listed SME by EFRAG, that such companies can use as a shield to limit their response to information requests from banks, large companies and other stakeholders in scope of the CSRD.
Revision of the ESRS
The range of sustainability topics covered by the current ESRS is not changed by the proposed Omnibus Directive II and, despite speculation, the double materiality requirement is not removed. The Commission has proposed to revise the delegated regulation (EU) 2023/2772 establishing the ESRS with the aim to reduce the number of mandatory ESRS datapoints, by removing those deemed least important for general purpose sustainability reporting and further distinguishing between mandatory and voluntary datapoints, and to further enhance the already very high degree of interoperability with global sustainability reporting standards.
According to the text of the Omnibus Directive II, the Commission will adopt the revised ESRS delegated act in time for those undertakings in wave 2 – which according to the proposed new timelines would be required to start reporting under the CSRD in 2028 for FY 2027 – to apply the revised standards.
Deletion of Sector Specific Standards
The Omnibus Directive II proposes to delete the empowerment for the Commission to adopt sector-specific reporting standards (currently due on 30 June 2026) to avoid a further increase in the number of prescribed datapoints that undertakings should report on and facilitate the reporting process. Should undertakings require additional guidance to report on sustainability matters common to the specific sector in which they operate, the Commission specifies that they may have recourse to existing international sustainability reporting standards and sectoral sustainability reporting initiatives.
No Move to Reasonable Assurance
The Commission is currently mandated to adopt reasonable assurance standards by October 1, 2028, based on an assessment of their feasibility for companies. However, the draft of Omnibus Directive II is intended to eliminate this requirement, ensuring that no reasonable assurance standards are introduced and that assurance over CSRD reports remains at the limited assurance level.
Since the amount of work for a limited assurance engagement is significantly less than for a reasonable assurance engagement, this is designed to save companies cost and time: a limited assurance engagement is usually provided in a negative form (stating that no matter has been identified by the assurance provider to conclude that the subject matter is materially misstated) while the conclusion of a reasonable assurance engagement would have to be provided in a positive form (providing an opinion on the measurement of the subject matter against previously defined criteria). In addition, the Commission committed to issue targeted assurance guidelines by 2026.
Voluntary Taxonomy and Partial Taxonomy-Alignment Reporting Option
By virtue of Article 8 of the Taxonomy Regulation undertakings reporting under the CSRD also publish information about the eligibility and alignment of their economic activities with the EU Taxonomy. The proposed provisions in the Omnibus Directive II create a derogation for companies with more than 1,000 employees and an EU turnover below EUR 450 million by making the Taxonomy reporting voluntary. However, companies that have made progress toward sustainability targets but only partially meet EU Taxonomy requirements may choose to voluntarily report their partial alignment. This allows them to showcase their efforts, demonstrate progress toward full compliance, and gain recognition for their commitment to sustainability.
Proposed changes to the CSDDD
Postponement of Applicability of CSDDD and Scope
With respect to CSDDD, the Omnibus Directive I proposes to postpone the transposition deadline by one year to 26 July 2027 (instead of 2026). The Omnibus Directive I also postpones the compliance deadline for the first wave of companies (i.e. those that have more than 5,000 employees and report a net annual worldwide turnover of more than €1.5 billion), which would therefore have to comply with the CSDDD from 26 July 2028 onwards. There is however no change regarding companies that were already meant to comply with the CSDDD from 26 July 2028, or later from 26 July 2029. In addition, the Commission proposes to bring forward the publication of its guidelines for compliance with due diligence obligations under the CSDDD to July 2026, instead of January 2027.
Indirect Business Partner Assessment No Longer Required and Suspension of the Business Relationship as Last Resort
The Omnibus Directive II limits the due diligence measures to the companies’ own operations, those of their subsidiaries and, where related to their chains of activities, those of their direct business partners thus excluding the assessment at the level of indirect business partners.
However, such assessments of indirect business partners will still be required if the company has plausible information that suggests that adverse impacts have arisen or may arise at the level of the operations of an indirect business partner. According to the recitals of the Omnibus Directive II, ‘plausible information’ means information of an objective character that allows the company to conclude that there is a reasonable likelihood that the information is true, for example if it has received a complaint or is in the possession of information, notably via credible media or NGO reports about harmful activities at the level of a business partner, reports of recent incidents, or where the company through its business contacts knows about problems at a certain location (e.g., conflict area).
In addition, the proposal Omnibus Directive II removes the duty to terminate the business relationships in the case of both actual and potential adverse impacts. Should a company assess that the business operations of such a supplier are linked to severe adverse impacts, for instance child labour or significant environmental harm, and the company has unsuccessfully exhausted all due diligence measures to address these impacts, as a last resort the company should suspend the business relationship while continuing to work with the supplier towards a solution, where possible using any increased leverage resulting from the suspension. Irrespective of the termination duty being removed, companies can of course still decide to terminate for severe breaches.
Extended Interval for Periodic Assessments and Updates
In order to reduce the burden on companies and their business partners (which are often SMEs), the Omnibus Directive II proposes to extend to five years (instead of each year) the requirement that companies carry out a periodic assessment of their (and their business partners’) operations and measures to assess the adequacy and effectiveness of due diligence measures.
However, companies will still be required to conduct such assessments ad hoc whenever there are reasonable grounds to believe that the measures are no longer adequate or effective, or that new risks of occurrence of adverse impacts may arise.
Reduced Requirements for Climate Change Mitigation Plans
As a result of the Omnibus Directive II, while companies will still be required to adopt a climate change mitigation plan, such a plan would no longer have to be “put into effect” as required by the CSDDD but rather include an “outline of implementation actions planned and taken”.
Reducing the ‘Trickle-Down’ Effect on SMEs
To avoid unnecessary burdens on SMEs, the Omnibus Directive II intends to limit the information that companies may request in the context of their risk-mapping obligations from their direct business partners with fewer than 500 employees, to the information covered by the voluntary sustainability reporting standards (VSME) set out under the CSRD.
Extension of Maximum Harmonization Requirements
In order to ensure a more uniform transposition of the CSDDD, the Omnibus Directive II extends the scope of maximum harmonization of the CSDDD to several additional provisions that regulate the core aspects of the due diligence process. In practice, this means that Member States will be prohibited from enacting diverging national provisions regarding certain key requirements, including the identification duty, the duties to address adverse impacts that have been or should have been identified, and the duty to provide for a complaints and notification mechanism.
Changes to the Civil Liability Provisions
The Omnibus Directive II proposes to remove the specific EU-wide civil liability regime provided in the CSDDD, including the obligation for Member States to allow representative actions by trade unions or NGOs. Instead, under the Omnibus Directive II, Member States would remain free to provide such rules in their national laws.
Financial Penalties
The Omnibus Directive II removes the minimum cap for financial penalties (5% of net worldwide turnover in the preceding financial year) currently stated in the CSDDD and the requirement that the fine be assessed based on the company’s net worldwide turnover. The Commission will issue guidance to assist Member States’ supervisory authorities to set the appropriate level of penalties to be imposed, provided that Member States are prohibited from setting maximum limits of penalties that would prevent the imposition of penalties in accordance with the principles and factors set out in the CSDDD.
Deletion of the Review Clause for Financial Services
The Omnibus Directive II proposes to remove the CSDDD’s financial services review clause, which currently commits the Commission to submit by 26 July 2026 a report to the European Parliament and to the Council on the necessity of setting up due diligence requirements for the financial services sector. Indeed, according to the European Commission, this review clause did not leave enough time to take into account the experience on the general due diligence framework under the CSDDD.
Omnibus Directive II and policy considerations on the future of simplification measures
With respect to all the simplification measures and changes proposed in the Omnibus Directive II, which would substantially impact the scope and way of reporting under the CSRD and conducting due diligence under the CSDDD as explained above, Article 5 of the current proposal text provides for a deadline of 12 months for Member States to implement the directive into national law once the Directive enters into force. However, the European Commission’s publication of the proposal initiates a complex and lengthy process involving negotiations, amendments, and further discussions across multiple EU institutions, which creates uncertainty around the legislative timeline.
In particular, the proposal will need to be debated and approved by Members of the European Parliament and Member States at the Council of the EU. The political landscape in Europe has deeply changed since CSRD and CSDDD were adopted (respectively, November 2022 and May 2024), and there is a much stronger focus on competitiveness, economic growth, and simplification.
In the European Parliament, the majority center-right European People’s Party welcomed the Omnibus Proposal and supports the process of cutting regulatory burdens on companies. Members of the second largest group, the Socialists&Democrats, oppose significant rollbacks of sustainability regulations, emphasizing the importance of environmental protection and corporate accountability. In particular, Lara Wolters, CSDDD rapporteur, stated that the group “cannot accept the watering down of sustainability, labour and human rights standards in the CSDDD and CSRD”. The debate in the European Parliament is likely to be lengthy and heated.
In Council, most of the Member States are aligned with the Commission’s approach of simplifying EU regulations. Germany and France have previously advocated for delaying and easing the implementation of the rules, calling for a concrete postponement of CSRD and suggesting increasing thresholds for company size and turnover in both CSRD and CSDDD. In contrast, Spain supports maintaining robust environmental reporting standards, underlining the importance of due diligence requirements: while the Spanish government support delaying the application of CSRD, it insists that these rules become mandatory for all companies eventually. Italy has also shown limited opposition to the proposed amendments, suggesting that rules should immediately apply to larger companies and delays and more favorable requirements should be adopted for smaller businesses. However, and given Council’s position on CSDDD in the previous legislative term, it is possible that Member States will adopt a negotiating mandate in line with the Commission’s proposal.
European policymakers will inevitably need to keep an eye on the potential actions of the U.S. government. Twenty-six U.S. states have sent a letter to President Trump urging retaliatory measures against the CSDDD due to its extraterritorial impact beyond Europe. The letter calls on the United States Trade Representative to launch an investigation under Section 301 of the Trade Act of 1974 to assess whether the CSDDD constitutes an unreasonable or discriminatory measure that burdens or restricts U.S. commerce.
Additionally, another letter sent to Congress urges U.S. officials to push for an indefinite suspension of the directive’s implementation based on the following argumentation lines: The directive mandates extensive supply chain due diligence based on UN and OECD principles, which have not been ratified by the U.S. Congress. It also disregards U.S. corporate governance standards. Finally, US companies are not bound by net zero transition plans akin to those imposed on the UE companies, as requested under the CSDDD.
Gabriela da Costa and Edoardo Crosetto contributed to this article
New Rulemaking Announced: Treasury Department Suspends Reporting, Enforcement and Fines under the Corporate Transparency Act until Further Notice
How Did We Get Here?
The Corporate Transparency Act (CTA) went into effect on January 1, 2024, and was enacted as part of the Anti-Money Laundering Act of 2020. Administered by the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury (FinCEN), the CTA is designed as another tool in the mission to protect the financial system from money laundering, terrorism financing, and other illicit activity. FinCEN issued the implementing final rules on September 29, 2022. Pursuant to these rules, reporting companies[1] formed before 2024 were to file their initial beneficial ownership reports (BOIRs) with FinCEN by January 1, 2025. Reporting companies formed after January 1, 2024, and before January 1, 2025, were to file their initial BOIR within 90 days following their formation.
In late 2024, multiple lawsuits were filed challenging the constitutionality of the CTA. Plaintiffs in those cases sought, and in many cases obtained, injunctions excusing them from filing their initial BOIRs until the merits of the case were decided. In two of the cases, federal judges issued nationwide injunctions excusing all reporting companies from filing their initial BOIR during the pendency of the case. As we recently reported, the United States Supreme Court on January 3, 2025 overturned the nationwide injunction in one of those cases, narrowing the injunction to just the plaintiffs in that particular case. On February 18, 2025, the district court judge in the other case narrowed his nationwide injunction to just the plaintiffs in that case. All of the cases continue to work their way through the federal court system.
As a result, on February 19, 2025, FinCEN issued a notice declaring a new filing deadline of March 21, 2025, for initial BOIRs. Then on February 27, 2025, FinCEN announced that by March 21, 2025, it would propose an interim final rule that further extends BOIR deadlines. Moreover, FinCEN stated it would not issue fines or penalties or take any enforcement actions until that forthcoming interim final rule became effective and the new relevant due dates in the interim final rule have passed. The Treasury Department also issued a comparable press release on February 27, 2025, but added that it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect. The Treasury Department stated that the interim final rule that it would issue by March 21, 2025, would propose narrowing the scope of the rule to foreign reporting companies only.
Current Status
The recently announced actions by the Department of Treasury effectively mean that:
FinCen won’t enforce penalties or fines against companies or beneficial owners who do not file by the March 21 deadline.
If your reporting company was created by the filing of a document with a secretary of state or a similar office under the law of a State or Indian Tribe and all of the beneficial owners of your reporting company are U.S. citizens, the Department of Treasury has stated it intends to amend the rules to eliminate the obligation for your reporting company to ever file a BOIR report and accordingly, FinCEN will never enforce penalties or fines against your reporting company or its U.S. beneficial owners.
If your reporting company was created by the filing of a document with a secretary of state or a similar office under the law of a State or Indian Tribe and some of the beneficial owners are NOT U.S. citizens, FinCEN won’t currently enforce any penalties or fines against the company or its foreign beneficial owners until after the new rules go into effect. The Department of Treasury press release suggests that it will eliminate the obligation to file a BOIR for your domestic reporting company with non-U.S. beneficial owners, but we must await the proposed new rule to see if FinCen is proposing to narrow the rule in this manner. The CTA itself defines what is a reporting company without this distinction of ownership by U.S. citizens or non-U.S. citizens. Given that the CTA’s stated objective to combat illicit activity, it would seem useful for FinCEN to have information about the non-U.S. citizenship ownership of a domestic reporting company.
If your reporting company was created by the filing of a document outside of the United States and you have registered your company with a secretary of state or a similar office under the law of a State or Indian Tribe, FinCEN won’t currently enforce any penalties or fines against the company or its foreign beneficial owners until after the new rules go into effect. Foreign companies are currently subject to the BOIR only if they are registered to do business in the United States. Foreign registered companies who are not registered to do business in the United States are not currently subject to the BOIR requirements (even if they are doing business here). Narrowing the BOIR reporting rules in this manner would seem to result in far fewer reporting companies. We await further communication from the Department of Treasury on this position.
State Level Developments
Lastly, we note that with this major development on the federal level, states may adopt CTA-like legislation for entities created or registered under their state law. The State of New York has already done so by enacting the New York Limited Liability Company Transparency Act (the NY LLCTA) which mirrors the CTA in many respects, with key differences. The NY LLCTA applies only to limited liability companies (LLCs) created under New York law or registered to do business in New York. Under the NY LLCTA, these reporting LLCs must disclose their beneficial owners to the New York State Department of State (DOS) beginning on January 1, 2026. LLCs that qualify for one of the CTA’s 23 exemptions will be exempt under NY LLCTA, but must file an “attestation of exemption” with DOS.
It is not clear whether any other states will enact comparable legislation. This includes Delaware, which has always been the preferred state for domestic businesses to incorporate, including 30% of Fortune 500 companies. More recently, however, Texas and Nevada have been courting companies to reincorporate in their states. These other states offer tax breaks and perceived business-friendly regulations. Faced with potentially losing corporate business to other states, it is not known whether Delaware would risk giving companies another reason to consider incorporating elsewhere.
ENDNOTES
[1] A “reporting company” is defined under the CTA as “a corporation, limited liability company, or other similar entity” that is either “created by the filing of a document with a secretary of state or a similar office under the law of a State or Indian Tribe” or “formed under the law of a foreign country and registered to do business in the United States.”
Navigating the Changing Landscape of Corporate Transparency Act Compliance
Both the U.S. Department of the Treasury and FinCEN, a bureau within the Treasury Department, have issued statements, which, taken together, indicate a significant reduction in the enforcement of the Corporate Transparency Act (CTA) beneficial ownership information (BOI) reporting requirements against U.S. citizens and domestic reporting companies. Specifically, the Treasury Department has indicated its intent to narrow, via forthcoming rule changes, the scope of the BOI reporting requirements to foreign reporting companies only and to halt any penalties or fines against U.S. citizens and domestic reporting companies following implementation of these rule changes.
The Treasury Department has yet to issue the proposed rulemaking reflecting these changes to the scope of BOI reporting requirements, and it will be important to see the proposed rulemaking to better understand how the Treasury Department and FinCEN plan to effect these changes. Items to look out for in any proposed rulemaking include:
Whether U.S. citizens who are beneficial owners of foreign reporting companies will need to comply with BOI reporting efforts of foreign reporting companies.
Whether domestic reporting companies with foreign beneficial owners will be subject to any BOI reporting requirements.
How the language regarding ending enforcement of penalties and fines against U.S. citizens and domestic reporting companies for non-compliance is worded (i.e., eliminating altogether enforcement against all U.S. citizens and domestic reporting companies or a general, discretionary pause by FinCEN).
In addition, the validity or legality of any proposed rulemaking regarding the narrowed scope of the CTA may be challenged in the courts. And, as noted in our previous alert, there are still a number of court cases pending, and Congress is also considering bills that would affect the CTA. Accordingly, this is unlikely to be the last update in the CTA enforcement saga.
The U.S. Department of the Treasury issued the following release regarding enforcement of the CTA:
Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies
The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.
“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”
In addition, FinCEN issued the following release regarding enforcement of the CTA:
FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines
WASHINGTON––Today, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines. No fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed. This announcement continues Treasury’s commitment to reducing regulatory burden on businesses, as well as prioritizing under the Corporate Transparency Act reporting of BOI for those entities that pose the most significant law enforcement and national security risks.
No later than March 21, 2025, FinCEN intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.
FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements. FinCEN will consider those comments as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities, as well to determine what, if any, modifications to the deadlines referenced here should be considered.