Merger review

Powers of competition authority

Does the competition authority have the same authority with respect to reviewing mergers involving IP rights as it does with respect to any other merger?

Yes, the Competition Commission has identical powers with respect to reviewing mergers involving IP rights as it does with respect to any other merger. There is no provision in Swiss law that would exempt certain aspects related to IP rights from an analysis by the Competition Commission. Merger control may also apply to an acquisition of IP rights if, economically assessed, such an acquisition results in the transfer of a whole business entity.

Analysis of the competitive impact of a merger involving IP rights

Does the competition authority’s analysis of the competitive impact of a merger involving IP rights differ from a traditional analysis in which IP rights are not involved? If so, how?

No, there are no special rules applicable to mergers involving IP rights. However, IP rights are an important factor for competitive assessment, as they often strengthen the market position of the involved undertakings. The Competition Commission, therefore, regularly looks at the specific effects of IP rights (eg, foreclosure effects and creation or strengthening of barriers to entry). In merger notification the parties must describe, in relation to each affected market, to what extent they own patents, know-how or other IP rights, and whether these IP rights have an influence on the barriers to entry.

Challenge of a merger

In what circumstances might the competition authority challenge a merger involving the transfer or concentration of IP rights? Does this differ from the circumstances in which the competition authority might challenge a merger in which IP rights were not a focus?

The test for mergers in Switzerland is a qualified dominance test. Switzerland has not introduced the significant impediment of effective competition test.

According to article 10(2) of the Cartel Act, a merger can be prohibited or made subject to conditions or obligations if the following is true:

  • it creates or strengthens a dominant market position;
  • there is a risk that this dominant market position could eliminate effective competition; and
  • the concentration does not lead to an improvement of the competitive conditions in another market that prevails over the disadvantages of the dominant position.

The transfer of important IP rights will be taken into account by the authority and could be regarded as an important reason as to why a specific concentration could eliminate effective competition. Pursuant to the interpretation of the Swiss Federal Supreme Court, the substantive test is very permissive as the competition authority must demonstrate how the merger could actually eliminate effective competition. Only in very rare circumstances is the elimination of effective competition at stake. The Federal Council is currently in the process of developing a proposal for an amendment of the Cartels Act, which aims to align the substantive test with the one applied under the EU merger regulation.

Remedies to address the competitive effects of mergers involving IP

What remedies are available to address competitive effects generated by a merger when those effects revolve around the transfer of IP rights?

The Swiss Competition Commission may make concentrations involving IP rights subject to remedies, such as the obligation to grant a licence to a third party (Glaxo Wellcome and SmithKline Beecham, LPC/RPW 2001/2, page 341) or the divestment of IP rights. Of what the design of such remedies concerns, the Competition Commission has a very broad discretionary power. In some cases, the Competition Commission accepted the same remedies as adopted by the EU Commission.