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 JFTC has the same authority with respect to reviewing mergers involving IP rights as in any other mergers.

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 standard for review by the JFTC of the competitive impact of a merger is always the same (whether or not the merger ‘may be substantially to restrain competition’), irrespective of whether the mergers involve IP rights. Practically, such a test is whether the party after a merger can increase the price at its own will, and the Herfindahl-Hirschman Index before and after the merger plays an important role in terms of review by the JFTC (although the role of this index has become less significant and limited to the application of safe harbour recently, as shown in some cases where the JFTC did not object despite a very high post-merger figure). IP rights are one of the other relevant factors, and could play a significant role, depending on the case.

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?

For a general analysis, see question 20. We understand that the JFTC has never challenged a merger solely because the parties have IP rights resulting in a strong competitive edge.

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 JFTC may order any measures necessary to eliminate acts in violation of the provisions regarding mergers (AMA, article 17-2, paragraph 1). Therefore, theoretically, compulsory licences may be ordered as a remedy.

In the course of a merger review, sometimes antitrust concerns are dealt with by the parties who promise to take certain measures to alleviate such concerns. Some of these remedies are IP-specific. The Guidelines to Application of the Anti-Monopoly Act Concerning Review of Business Combination (the Merger Guidelines) issued by the JFTC in 2004 provide that parties to business combinations may be able to alleviate antitrust concerns if they grant the licence of their patents to competitors or new entrants on appropriate terms and conditions. In one case, the JFTC refrained from objecting to a merger on the understanding that one of the parties would transfer or license certain rights regarding research and development, manufacturing and sales of overlapping products (in re Kirin Holdings and Kyowa Hakko Kogyo, 19 December 2008).