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 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

01.08.2018 EU law
Belgian Court of Cassation annuls decision prohibiting pharmacists from using Google Adwords

Short Reads - On 7 June 2018, the Belgian Court of Cassation, ruled that a decision of the Pharmacists Association Appeals Council (Appeals Council) prohibiting pharmacists from using Google Adwords to offer over-the-counter (OTC) products violated Belgian competition law because the Appeals Council did not sufficiently justify why such a prohibition was necessary for health reasons. The Appeals Council must now issue a new decision.

Read more

01.08.2018 EU law
General Court underlines importance of Commission's duty to state reasons

Short Reads - On 13 July 2018, the General Court annulled the EUR 1.13 million fine imposed on Stührk Delikatessen Import GmbH & Co. KG (Stührk) by the European Commission in 2013 for Stührk's participation in the shrimp cartel. The Court ruled that the Commission had failed to adequately state reasons in the contested decision as to why the cartel participants were granted divergent fine reductions.

Read more

01.08.2018 EU law
Court of Appeal in the Netherlands decides to appoint independent economic experts in TenneT v ABB

Short Reads - On 20 July 2018, the Court of Appeal of Gelderland published another interim judgment in the ongoing proceedings between TenneT, the grid operator in the Netherlands, and ABB in relation to the gas insulated switchgear (GIS) infringement. After the Dutch Supreme Court had confirmed in a judgment of 8 July 2016 [see our August 2016 Newsletter] that the passing-on defence is available under Dutch law, the Court of Appeal of Gelderland decided to appoint independent economic experts to provide input on the calculation of overcharge and the existence of pass-on.

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 – en cookieverklaring