Schering-Plough Corporation - s.87B undertaking

On 14 October 2009 the ACCC accepted the undertaking of Merck & Co Inc (Merck) and Schering-Plough Corporation (Schering-Plough) in relation to the ACCC’s decision not to oppose Schering-Plough’s proposed acquisition of Merck.

Schering-Plough operates its animal health business in Australia through its subsidiary, Intervet Australia Pty Ltd. Until recently, Merck, with sanofi-aventis, jointly owned the animal health company Merial Limited (Merial).

On 17 September 2009 Merck sold its interest in Merial to sanofi-aventis.

Prior to Merck’s sale of its interest in Merial, the ACCC had expressed concerns that Schering-Plough’s acquisition of Merck may result, or be likely to result in a substantial lessening of competition in an animal health market in Australia.

Following consultation with market participants, the ACCC concluded that, as a  result of Merck’s sale of its interest in Merial, there was minimal overlap between the parties’ animal health products and the merged entity would continue to be constrained by existing competitors.

However, Merck, sanofi-aventis and Schering-Plough have entered into a call option agreement which gives sanofi-aventis the option to combine Merial with Schering Plough’s global animal health business.

This call option is not exercisable until after Schering-Plough completes its acquisition of Merck.

The ACCC considers that the exercise of this call option may raise similar competition concerns in relation to animal health to those raised by Schering-Plough’s proposed acquisition of Merck (prior to Merck selling its interest in Merial), and wants to review such a transaction comprehensively before it can be completed.

On this basis, Merck and Schering-Plough have offered a court enforceable undertaking that they will not complete the call option transaction until the ACCC is satisfied that the transaction will not raise competition concerns in Australia and informs the parties that it will not intervene in the transaction pursuant to the Trade Practices Act 1974.

The ACCC is satisfied that the undertaking offered by Merck and Schering-Plough will give the ACCC sufficient opportunity to review the transaction if and when sanofi-aventis chooses to exercises the call option.