On 13 August 2010, the proposed acquisition of Alcon, Inc
(Alcon) by Novartis AG (Novartis)
was approved by the Ministry of Commerce (MOFCOM),
with conditions. MOFCOM's public announcement in relation to
this acquisition is located
here. This is the 6th merger that has been approved with
conditions, since the enactment of the Anti-Monopoly Law
(AML) in 2008.1
Novartis and Alcon (the parties) are global
suppliers of pharmaceutical products. Post-acquisition, Novartis
would become the majority shareholder in Alcon. This transaction is
worth approximately US$28 billion.
King & Wood acted as the sole Chinese legal counsel in
respect of the antitrust aspects (including the antitrust filing)
of this transaction.
During consultations with Novartis, Alcon and other
stakeholders, MOFCOM was of the view that there were antitrust
concerns in the following relevant markets: (a) the market for
ophthalmic anti-inflammatory and anti-infective combination
products; and (b) the market for lens care products.
MOFCOM was concerned about the impact of the acquisition on the
markets described in (a) and (b) above (in light of Novartis'
and Alcon's market shares in the relevant markets both globally
and in China).
Ophthalmic anti-inflammatory and anti-infective combination
MOFCOM noted that the combined global shares of the parties in
relation to ophthalmic anti-inflammatory and anti-infective
combination products was over 55%. The parties' combined shares
for the same product market in China was over 60% (Alcon's
share is over 60%; whereas Novartis' share is less than
In its antitrust submission to MOFCOM, Novartis articulated that
it had planned to cease manufacturing and supplying its ophthalmic
anti-inflammatory and anti-infective product known as
"Infectoflam" (both in China and globally).
As a condition of clearance, MOFCOM made it mandatory that
Novartis cease to supply Infectoflam in China by the end of
2010.3 MOFCOM stipulated that Novartis was not to supply
Infectoflam in China for a period of 5 years. In addition, Novartis
is also not to supply a different version or type of product like
Infectoflam under a different brand-name in China.
Lens care products
The parties' combined global shares in relation to lens care
product is almost 60%. In addition, the parties' combined
shares for the same product market in China is almost 20%.
Post-acquisition, the parties would become the second largest
supplier of lens care products in China.
MOFCOM noted that one of Novartis' subsidiaries (Shanghai
Ciba Vision Trading Co., Ltd) (Shanghai CV) has in
place a distribution agreement with Haichang Contact Lens Co., Ltd
(Haichang) to distribute lens care products in
China. Haicheng is currently the largest manufacturer and supplier
of lens care products in China (its share in China is over
MOFCOM was concerned that the parties would be able to collude
on pricing and other issues with Haichang (via the distribution
agreement), post-acquisition. According to MOFCOM, such collusion
would restrict or exclude competition in the lens care product
market in China. In light of this concern, MOFCOM stipulated that
Novartis terminate its distribution agreement with Haichang, within
12 months after closing.
In its public announcement, MOFCOM did not take a stand as to
whether the relevant geographic markets for the ophthalmic
anti-inflammatory and anti-infective combination product market as
well as for the lens care product market was global or China-wide.
However, it appears that MOFCOM might have taken the parties'
shares in both the global context as well as in the China context
into consideration, in determining whether the acquisition would
eliminate or restrict competition in China.
The Novartis and Alcon transaction is a cross-border or global
deal. The parties have filed merger review applications in some 19
jurisdictions. Currently, the acquisition has been cleared by
antitrust authorities in most of these jurisdictions.
1. The first 5 mergers that were approved with conditions
were: (a) the acquisition of Lucite International Group Limited by
Mitsubishi Rayon Co; (b) the acquisition of Anheuser Busch
Companies Inc by InBev NV/SA; (c) the acquisition of Delphi Corp by
General Motors Company; (d) the acquisition of Wyeth Corp by Pfizer
Inc; and (e) the acquisition of SANYO Electric by Panasonic
2. In their announcement dated 13 August 2010, MOFCOM did
not stipulate whether the relevant geographic market was global or
limited to China only.
3. Note that MOFCOM did not explain in their announcement
how this restriction would assist in reducing any anti-competitive
or harmful effect of the acquisition in the global or China-wide
ophthalmic anti-inflammatory and anti-infective combination product
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guide to the subject matter. Specialist advice should be sought
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