Meaning and determination

2016 CLD 402 COMPETITION COMMISSION OF PAKISTAN Judicial Precedent

Ss. 11 & 2(e)Competition (Merger Control) Regulations, 2007, Reglns. 5 & 6Pre-merger application, acceptance ofApproval of mergerFactors for determination of substantial lessening of competitionMerger which substantially lessens competition by creating or strengthening a dominant position in relevant marketDetermination"Dominant position"Meaning and determination

Pharmaceutical company, pursuant to share and business sale agreement, submitted application seeking clearance for acquisition of global vaccines business in market of meningococcal (ACWY) vaccines from another pharmaceutical company

Only one product from each of the merging parties was substitutable with each other which they had marketed in Pakistan

Market for medicine of other company was no longer a duopolistic market as there was new entrant in the relevant market

Competition Commission identified competition concerns regarding proposed acquisition

Market concentration data of relevant year proposed that transaction would result in only two players in market for the medicine in question in Pakistan

Applicant company, who was already a dominant player, would further strengthen its dominant position in relevant market and thereby increase its market power

Herfindahl Hirshman Index (HHI) calculation based on sales (value) for the relevant year was above 2000, which meant that relevant market was highly concentrated

As per Merger Guidelines, Competition Commission was likely to find horizontal competition concerns in market with post-merger HHI of above 2000 and delta above 250

After consummation of proposed acquisition, applicant company would own and control the product

Other product which was priced higher was used for long term effects for ages under fifty-five years

Applicant company might be able to escalate price of 'product', which would harm end users that were hospital, clinics and pharmacies

Merger parties were particularly close competitors in relevant market with a third company, which was the only other company supplying those products in Pakistan

Merging company would cease to compete independently of applicant company and thereby remove or lessen competition of applicant company with its two significant competitors

Proposed acquisition would weaken competitive constraints on remaining suppliers or distributors, which might offer them with increased incentive or ability to raise prices and/or offer lower levels of service

New entry or expansion in relation to the product required substantial investment in research and development

For same reason, new entrant took many years in entering relevant market in Pakistan

Given effectiveness of each product program which differs in terms of age usage and duration of protection, it was important to have all the products available in market

Applicant company proposed and committed to implement certain commitments to alleviate said competition concerns undertaking to divest its global business; in addition to those commitments, Competition Commission observed that purchaser with respect to divestment must establish presence in distribution channels used in business in Pakistan

Pre-merger application for merger was allowed in circumstances.