LS&HC Horizons 2023 - Flipbook - Page 34
Hogan Lovells | 2023 Life Sciences and Health Care Horizons | Transactions
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Merger control and ‘killer acquisitions’
Concerns among competition authorities
regarding ‘killer acquisitions’, in which
large, established firms acquire small,
entrepreneurial start-ups before they become a
competitive threat, are particularly heightened
in the pharmaceutical industry. Nascent firms
by their nature have little or no turnover and
so tend to fall outside merger control regimes,
many of which have turnover-based thresholds.
Regulators have therefore historically lacked
jurisdiction to assess the competitive impact
of such acquisitions. The potential harm
from these ‘killer acquisitions’ is evident:
incumbents acquire potential competitors,
thereby reinforcing their well-established
positions and removing future innovators
from the market. Addressing this enforcement
gap is now an increasing focus for the EU
and UK competition authorities.
concern that it could limit future innovation
by developers of alternatives to the target’s
downstream product under development.
The UK Competition and Markets
Authority (CMA) already adopts a flexible
approach through its share of supply test.
In Roche/Spark (2019), it found a sufficient
UK nexus through Spark’s UK patents
and employees to assert jurisdiction,
notwithstanding that Spark’s activities were
primarily abroad. The Government has now
proposed certain reforms to the UK regime
which, if enacted, would further strengthen
the CMA's ability to assert jurisdiction in cases
where a target arguably has limited presence
in the UK.
Under the EU Merger Regulation (EUMR),
Member States can ask the European
Commission to review a transaction where
a party’s turnover does not reflect its actual
or future competitive potential and it threatens
to significantly affect competition. The
Commission used this referral mechanism
to block a transaction in 2021, citing a
Angus Coulter
Partner, Dublin, London
Alice Wallace-Wright
Partner, Dublin, London
Juliette Parkinson
Associate, Dublin, London
