We have written on a number of occasions in the past (examples here) about the ways in which antitrust grapples with the potential for product innovations to have adverse effects on competition. Generally, such effects are felt by a number of competitors, which may be a small price to pay for the benefit of genuine product innovation which, taken overall, benefits consumers.

Today’s topic relates to a different subject, which is the role that future innovation plays in merger control. Merger control is of course prospective. Antitrust reviews have, by contrast, the advantage of being able to consider actual market developments (even if they also display a worrying tendency to look for likely effects even in cases where actual market developments can be assessed – see the ‘pay-for-delay’ cases, for example…). Merger analysis on the other hand has to take a view of the likely impacts of acquisitions both on existing products and product pipelines. The full text of the Dow-DuPont merger decision is not yet available, but it appears that the Commission has been looking ever further into future, by considering not only defined future products (as is not uncommon in pharma merger cases – think Novartis/GSK (oncology) or Teva/Allergan), but also more speculative research poles. The Commission’s factual investigation extended to comparisons of early stage patent filings and use of the esoteric art of ‘forward citation analysis’ (essentially looking at how many other patents cite a particular prior patent to assess its importance) to determine potential future overlaps.

This week the Commission issued three Statements of Objections (SO) to companies which in some way failed to comply with merger filing requirements, either by providing misleading information or by ‘jumping the gun’ in their implementation of a transaction. Of note in this context is the SO sent to Merck and Sigma-Aldrich. The companies had merged in 2015, and as part of the deal were required to sell off certain Sigma-Aldrich assets relating to certain laboratory chemicals. The Commission’s allegation now is that the parties failed to tell it about “an important R&D project” which should have been addressed in the commitments package. While the decision to issue these SOs perhaps says more about the Commission seeking to maintain the integrity of its merger review process, the importance placed on the protection of future competition should not be under-estimated. We plan to report further on the Commission’s analysis in Dow-DuPont once the decision is available.