Question: When will a company happily set up another business in competition with it? Answer:When the alternative would be a reference to the Competition Commission.
Intellectual property rights are inherently anti-competitive, though granting exclusive rights to inventors and creators is generally beneficial. The owner of IP rights is, however, placed in a strong position in the market, and what it does with its intellectual property can have a profoundly damaging effect on competition.
This can be the case when two companies merge. When the Tetra Laval Group proposed to acquire majority shareholdings in subsidiaries of Carlisle Process Systems, the Office of Fair Trading considered that there would be a substantial lessening of competition in the market for cheesemaking equipment. It told the parties that it was obliged to refer the matter to the Competition Commission.
Before it did so, the parties came up with an unusual way out of the problem. Tetra offered to grant to a third party a licence that would be exclusive and irrevocable, for the entire EEA, of the intellectual property rights relating to equipment sold under one of Carlisle's brands.
The OFT considered the terms of the licence and of the parties' undertakings, and also the fact that the proposed licensee had the ability to be an effective competitor. It was persuaded that there was no need for a reference to the Competition Commission, the first time it has accepted a licence of intellectual property alone as a merger remedy. It offers a useful way for companies whose merger activities are scrutinised by the authorities – as an increasing number are – to avoid having to undergo the uncertainty of a full-scale investigation.