22 January 2019

Australian Competition Regulator Conducting Public Review of Proposed Merger of Listed IP Groups

Maybe On 10 January 2019, the Australian Competition and Consumer Commission (ACCC) commenced a public review of the proposed merger of QANTM IP Limited (ASX:QIP) and Xenith IP Group Limited (ASX:XIP).  As I wrote back in December, the proposed merger was announced on 27 November 2018 and, should it proceed, would see each Xenith share exchanged for 1.22 QANTM shares, with existing QANTM and Xenith shareholders ultimately owning 55% and 45%, respectively, of the merged group.  The group would bring together five Australian specialist IP firms (Davies Collison Cave, FPA Patent Attorneys, Griffith Hack, Shelston IP and Watermark), along with IP valuation, innovation and advisory service provider Glasshouse Advisory (currently owned by Xenith IP) and Malaysian IP firm Advanz Fidelis (which was acquired by QANTM IP in June 2018).

Section 50 of the Australian Competition and Consumer Act 2010 (‘CCA’) prohibits those mergers that ‘would have the effect, or be likely to have the effect, of substantially lessening competition in any market.’  The ACCC thus has a role to play in conducting ‘informal’ reviews of proposed mergers, providing authorisation for proposed mergers, and acting to block mergers from proceeding where it considers that the merger would breach the ‘substantial lessening of competition’ test.  Although merger parties are not legally required to notify the ACCC of a merger, and may proceed without seeking any regulatory consideration, this does not prevent the ACCC from investigating the merger, making public inquiries and/or taking legal action.

The fact that the ACCC is undertaking a public review of the proposed QANTM/Xenith merger does not imply that it has any particular competition concerns.  Over the five years between 2014 and 2018, inclusive, an average of 34 such reviews were commenced each year, and in the overwhelming majority of cases the ACCC concluded that it was not opposed to the mergers proceeding.  As noted by the ACCC: ‘Mergers and acquisitions are important for the efficient functioning of the economy.  They allow firms to achieve efficiencies and diversify risk across a range of activities.’

The ACCC is seeking public input, and information on the review of the proposed QANTM/Xenith merger can be found on the ACCC web site.  A ‘market inquiries letter’ sets out the focus of the review, along with a range of issues that respondents may wish to address in their submissions.  In particular, the letter explains that:

The ACCC’s investigation is focused on the impact on competition in the supply of services relating to Australian IP rights including patents, trade marks, designs and plant breeder’s rights (Australian IP related services). In particular, we are seeking your views on:
  • the extent of competition between QANTM and Xenith
  • the likely impact of the proposed merger on prices and quality of Australian IP related services
  • the extent of future competitive constraints (such as other competitors or new entrant competitors) for the supply of Australian IP related services.

Submissions are due by no later than 5 pm on 31 January 2019.


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