Short Reads

Recent European Commission merger decisions signal an increased focus on innovation

Recent European Commission merger decisions signal an increased focus on innovation

03.07.2017 EU law

On 27 March 2017, the European Commission approved a merger between chemical companies Dow and DuPont subject to major remedies, including the divestment of DuPont's global R&D organisation. In this case, the Commission's review extended to the merger's potential impact on innovation "at the overall industry level". 

The Commission considered that innovation is a key competitive parameter in the pesticides industry. According to the Commission, post-merger, only three integrated players could effectively compete with Dow/DuPont at a global level throughout the entire (R&D) value chain (from discovering new active ingredients, to the manufacture and sale of final products). The Commission relied on evidence showing that the parties intended to cut back on R&D expenditure, and that the merged entity would have less incentives to innovate than Dow and DuPont would have separately. As a result, the Commission found that the merger would have significantly reduced "innovation competition" for pesticides, and called for the divestment of the vast majority of DuPont's global R&D organisation.

The importance of "innovation" as an assessment parameter under EU merger control law is not particularly new and is reflected in the Commission's horizontal merger guidelines (the Guidelines). The Guidelines, for example, recognise that a merger between two important innovators developing competing "pipeline" products (in a specific product market) may, under certain conditions, impede competition.

The assessment of such "pipeline overlaps" has played a role in numerous pharmaceutical merger decisions over the years. Traditionally, the Commission focused its review on pipeline products that have entered late phase (phase III) clinical trials. Such products have a higher likelihood of entering the market within a reasonably foreseeable timeframe. In recent years, however, the Commission has extended its review to products in the early stages of development, many of which may never be marketed. In Novartis/GSK Oncology, for example, the Commission analysed the merger's potential impact on the parties' overall clinical research programmes for ovarian and skin cancer treatments, including very early phase (phase I) pipeline products. More recently, on 9 June 2017, the Commission cleared a merger between J&J and Actelion, subject to commitments ensuring that the parties' phase II pipeline products would not be delayed or discontinued.

These developments show that – at least in innovation intensive industries – the Commission will continue to review the merging parties' full R&D portfolios in detail. This may require significant additional preparatory work (e.g. in terms of document collection and preparing economic analyses) before mergers are filed.

This article was published in the Competition Law Newsletter of July 2017. Other articles in this newsletter:

  1. Google gets a record EUR 2.42 billion antitrust fine for its shopping service
  2. ACM fines Dutch rail operator (NS) for an alleged abuse of dominance
  3. New Belgian Act on damage claims for competition law infringements

Team

Related news

01.11.2017 EU law
Nike can restrict sales via online platforms within its selective distribution system

Short Reads - On 4 October 2017, the District Court of Amsterdam ruled* in favour of sports goods manufacturer Nike in an action against a distributor, Action Sport, which had not complied with Nike's selective distribution policy. The District Court found that Nike's selective distribution system, which included a ban on sales via non-authorised online platforms, was compatible with competition law as it sought to preserve the luxury image of Nike's products.

Read more

01.11.2017 EU law
General Court upholds fine for 'gun jumping' EU merger control procedure

Short Reads - On 26 October 2017, the General Court (GC) dismissed an appeal lodged by Harvest Marine, a Norwegian seafood company, against a EUR 20 million fine imposed by the European Commission. The fine was imposed on Harvest Marine in 2014 for implementing its acquisition of Norwegian salmon producer Morpol before obtaining the required clearance from the Commission under the EU merger control rules, also referred to as "gun jumping" [see our August 2014 Newsletter].

Read more

01.11.2017 EU law
KLM and Amsterdam Schiphol airport offer commitments to reduce competition concerns

Short Reads - On 12 October 2017, the Dutch Authority for Consumers and Markets (ACM) published a draft decision accepting the commitments of Dutch airline KLM (KLM) and Amsterdam Schiphol airport (Schiphol). The commitments are aimed at eliminating the competition concerns identified by the ACM on the basis of a four-year investigation into interactions between KLM and Schiphol about growth opportunities of other airlines at Schiphol and airport capacity.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy and Cookie Policy