Short Reads

Recent European Commission merger decisions signal an increased focus on innovation

Recent European Commission merger decisions signal an increased focus

Recent European Commission merger decisions signal an increased focus on innovation

03.07.2017

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

09.12.2019 BE law
Stibbe expands EU/competition practice with new partner Sophie Van Besien

Inside Stibbe - Brussels, 9 December 2019 – Stibbe welcomes EU law, competition, and regulated markets lawyer Sophie Van Besien as a new partner in its Brussels office. Her expertise will enhance Stibbe’s service offering in the Benelux and contribute to the further development of its EU/competition and regulated markets practice. Sophie joins Stibbe on 9 December 2019.

Read more

05.12.2019 NL law
Big tech firms entering banking: be careful what you wish for

Short Reads - Big tech firms, whether entering or already active on payments markets, are under scrutiny. PSD2 has opened up the payments markets to non-bank companies, but this comes with both risks and opportunities. EU regulators are examining anticompetitive risks, for example the possibility of leveraging a strong position in one market into another market. Competition, innovation, privacy and security for financial transactions will all be hot topics as scrutiny increases on providers of payment services.

Read more

09.12.2019 BE law
Stibbe versterkt EU/competition praktijk met nieuwe vennote Sophie Van Besien

Inside Stibbe - Brussel, 9 december 2019 – Stibbe verwelkomt Sophie Van Besien, gespecialiseerd in Europees recht, mededingingsrecht en gereguleerde markten, als nieuwe vennote in het Brusselse kantoor. Sophie’s expertise zal Stibbe’s dienstverlening in de Benelux versterken en bijdragen aan de verdere ontwikkeling van zijn EU/competition en regulated markets praktijk. Sophie vervoegt Stibbe op 9 december 2019.

Read more

09.12.2019 BE law
Stibbe renforce sa pratique de droit européen et de la concurrence par la venue de Sophie Van Besien en qualité d’associée

Inside Stibbe - Bruxelles, le 9 décembre 2019 –  Stibbe a le plaisir d’accueillir Sophie Van Besien, avocate spécialisée en droit européen, droit de la concurrence et des marchés réglementés, en qualité de nouvelle associée au sein de son cabinet bruxellois. Son expertise permettra d’enrichir les prestations actuelles du cabinet au Benelux et de contribuer au développement de son activité en droit européen et en droit de la concurrence ainsi que des marchés réglementés. Sophie Van Besien rejoint Stibbe ce 9 décembre 2019.

Read more

05.12.2019 NL law
Walking a thin line: cooperation and collusion

Short Reads - Buying groups are under attack from competition authorities across Europe. Joint buying arrangements are aimed at strengthening participating companies' bargaining power towards their trading partners, usually resulting in lower prices or better quality for consumers. However, these buying arrangements must stay on the right side of the line between legitimate cooperation and anticompetitive collusion. Competition concerns may arise if the participating companies have a significant degree of market power or coordinate their conduct.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring