The Office of Fair Trading (OFT) has accepted undertakings by the Tetra Laval Group to licence intellectual property rights in cheese-making equipment as a suitable merger remedy in lieu of a reference to the Competition Commission under section 73 of the Enterprise Act 2002. The OFT also approved Moody Plc as a suitable purchaser of the intellectual property rights and stated it was satisfied Moody Plc could be an effective competitor to Tetra Laval.

On 10 April 2006 Tetra Laval Group (Tetra Laval) entered into an agreement whereby it would acquire the shares of various subsidiary companies within the Carlisle Group (the Target).

On 20 July 2006 the OFT found that the parties overlap in the supply of cheese vats, cheddaring machines and cheese towers and that the merger would create a monopoly in the UK in all three overlap products.

Tetra Laval offered a package of undertakings to the OFT in order to mitigate the effects of the merger, and as a result the OFT suspended its duty to refer the merger to the Competition Commission under section 33 of the Enterprise Act 2002.

On 17 October 2006 the OFT published the proposed undertakings and invited interested third parties to comment on them. The parties proposed to grant a suitable purchaser an exclusive irrevocable EEA-wide licence of all copyrights (including design drawings), design rights, know-how, manuals and confidential information relating to cheese making equipment sold under the “Wincanton” brand, along with an exclusive irrevocable EEA-wide licence of all intellectual property rights in the name “Wincanton” and the related logo. Tetra Laval also proposed that it would not market Wincanton products or use the brand name “Wincanton” in the UK, Isle of Man or the Republic of Ireland for a period of three years from the date of acceptance of the undertakings. The undertakings also identified Moody Plc as a possible suitable purchaser.

On 20 November 2006 the OFT announced that it had decided to accept the proposed undertakings under section 73 of the Enterprise Act 2002 and would therefore not be referring the case to the Competition Commission. The OFT stated that it was satisfied that Moody’s significant experience as a supplier of equipment to the dairy industry, combined with the licensed intellectual property rights, would make Moody Plc as effective a competitor to Tetra Laval as the Target had been prior to the merger.

This case represents the first time that the OFT has accepted the licensing of intellectual property rights alone as an appropriate merger remedy, without also requiring the divestment of manufacturing assets. This is also the first time that the OFT has approved an “up front” purchaser identified by the parties.

This case further demonstrates the OFT’s flexible approach to merger remedies when the parties engage with the OFT constructively and proactively at an early stage.