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?

The CCI has the same rights and authority while reviewing a merger involving IP rights as it does with respect to any other merger. Section 62 of the Competition Act makes it clear its provisions are in addition to and not in derogation of other existing laws and therefore the factum of there being IP rights involved does not affect the analysis of the CCI.

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?

The Competition Act prohibits an acquisition, merger or amalgamation that would cause an appreciable adverse effect on competition within the relevant market in India and renders it void. There is no special consideration given to IP rights in the present case, except perhaps when defining the relevant market.

Nothing in the Act stipulates a different threshold or standard for the analysis of the competitive impact of a merger involving IP rights.

However, in Competition Commission of India (Procedure in regard to the transaction of the business relating to combinations) Regulations 2011, we find special mention of patents and IP rights (11.10). It puts an obligation to inform if ‘any restriction is created by the existence of patents, know-how and other intellectual property rights in these markets and any restriction created by licensing such rights (provide details information separately for each combining party); [and] provide details of IPRs that have been developed and registered by the parties to the combinations in the last five years[.] With reference to the relevant market(s), provide details of the IPRs that are held by each of the parties to the combination’.

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 CCI would challenge an IP-related merger on the same principles as it would challenge any non-IP related merger.

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 remedies available to address competitive effects generated by a merger involving IP rights are no different from other mergers and include the following:

  • an order prohibiting the combination; and
  • an order modifying the combination to eliminate the adverse effect.

In mergers involving IP, thus far, the CCI has mandated that those brands owned by either parties to a merger, which would cause anticompetitive effects in the relevant market, must be divested, namely, assigned, licensed or transferred such that parties have no direct or indirect interest in the same, thereinafter. This was one of the conditions that the CCI imposed in one of its decisions, before approving a merger between Indian pharmaceutical giants Sun Pharmaceuticals and Ranbaxy Laboratories, in its order dated 5 December 2014.