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 Japan Fair Trade Commission (JFTC) has the same authority with respect to reviewing mergers involving IP rights as in any other merger.

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 merger involves IP rights. We have observed in horizontal cases that the role of IP may be limited given that factors such as the result of the Herfindahl-Hirschman Index before and after the merger and whether the party after a merger can increase the price at its own will are likely to carry more practical importance for the review. IP rights could play a significant role in vertical and conglomerate cases. The JFTC explicitly confirmed this when it revised its Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination (the Merger Guidelines) in 2019, in relation to mergers that involve a party that has certain important assets for competition, including IP.

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?

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 (the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (No. 54 of 1947) (the Anti-Monopoly Act), article 17-2, paragraph 1). Therefore, theoretically, compulsory licences may be ordered as a remedy.

In the course of a merger review, antitrust concerns are sometimes dealt with by the parties that promise to take certain measures to alleviate such concerns. Some of these remedies are IP-specific. When the JFTC revised the Merger Guidelines in 2019 to address potential input foreclosure concerns in vertical and conglomerate mergers that may be caused by a merging party in the upstream market holding important data that would be used in the downstream market (or in one of the markets holding important data that would be used in the other market), it explicitly said that its approach to data that can be traded in the market would also be applicable to input goods such as IP rights that are important for competition purposes. While there has not yet been a case directly applicable to IP rights, in a recent vertical and conglomerate merger case involving the potential input foreclosure of data, the JFTC investigated a consummated merger (share acquisition) that was non-reportable and cleared the case, with conditions based on the remedies proposed by the parties, where they would continue provision of such data to competitors and refrain from discriminatory treatment of their competitors in terms of the prices and other trade terms concerning such data for an indefinite period of time (in re Acquisition by M3, Inc of the Shares in Nihon Ultmarc Inc, 24 October 2019). This case could be of reference for future mergers involving IP.