The European Commission has cleared under the EU Merger Regulation the proposed acquisition of part of Cegedim S.A.'s customer relationship management and strategic data business (the target) by IMS Health. The decision is conditional upon IMS' commitment to divest parts of its primary market research business and to grant third party access to the structure underlying its sales tracking data, the so-called “brick structure”.
The Commission had concerns that the proposed transaction could lead to less choice and higher prices for customers of standardised primary market research services. Furthermore, the Commission had concerns that IMS Health could refuse to give access to its "brick structure" to its competitors. This would have prevented IMS Health's competitors from competing effectively on the market. The commitments address these concerns.
IMS Health is a US based company listed on the New York stock exchange. Cegedim is based in France. IMS Health and the target provide companies in the pharmaceutical, biotech, life sciences and healthcare sectors with solutions to measure and improve their performance. IMS Health is market leader in the European Economic Area (EEA) for tracking sales of prescription drugs by which pharmaceutical companies measure their performance (so-called “sales tracking data”). The target offers one of the largest databases of doctors' contact details in Europe on which pharmaceutical companies rely to target their sales efforts. The target is also an important provider of customer relationship management software to pharmaceutical companies in the EEA.
The Commission's investigation indicated that the proposed transaction would reduce competition on the market for standardised primary market research, because the merged entity would face insufficient competitive constraint from the few small remaining players in the EEA. Standardised primary market research consists of studies and reports compiled on a regular basis by market research providers based on information and data gathered from panels of physicians. These reports are provided to pharmaceutical companies with a view to allowing them to assess the success of their marketing and sales efforts.
The Commission also had concerns that IMS Health would shut out the target's competitors from access to its “brick structure” since this is an important input for these players to be able to operate in the market. Indeed, given IMS Health’ leading position in sales tracking data in the EEA, pharmaceutical companies typically expect that also providers of other data and services, such as doctors’ contact details and software products, are able to deliver their data based on the same structure or to use it in their software solutions.
To dispel these concerns, IMS Health offered to divest its standardised primary market research business and to grant the target's competitors access to the brick structure for ten years.
These commitments adequately address the competition concerns identified by the Commission. The Commission therefore concluded that the proposed transaction, as modified by the commitments, would raise no competition concerns. This decision is conditional upon full compliance with the commitments.
The Commission also examined the competitive effects of the proposed acquisition on the markets for customer relationship management software, business intelligence solutions, consulting services and so-called “Real World Evidence”, where the companies' activities overlap. Real World Evidence is information provided to pharmaceutical companies regarding the “real life” performance of their drugs. The Commission concluded that the transaction would raise no competition concerns on these markets, because there will remain on the market a sufficient number of competitors.
The Commission also found that the transaction does not raise competition concerns regarding a number of vertical and conglomerate relationships between the different products offered by the companies. This is mainly because the merger will not bring about any significant changes on these markets. Moreover, any possible tying or bundling practice by IMS Health is unlikely to have anticompetitive effects, because alternative providers will continue to compete effectively on the markets concerned.
The transaction was notified to the Commission on 4 November 2014.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).