Well the news flow about the proposed merger between QANTM IP and Xenith IP just keeps on coming. On 10 January, the Australian Competition and Consumer Commission (ACCC) commenced a public review of the merger. See https://www.accc.gov.au/public-registers/mergers-registers/public-informal-merger-reviews/qantm-intellectual-property-ltd-xenith-ip-group-ltd. Responses are due by 31 January 2019. The provisional date for an announcement is 21 March 2019. This timeline ties in with the date of the vote of Xenith shareholders to accept the merger which is expected to be in late March.
In essence, this is a review to identify any anti-trust issues.
Before I touch on the ACCC review, however, you will be pleased to know that I have come up with a name for the merged entity. QUIXOTIC IP. It incorporates the most distinctive elements of QANTM and Xenith’s names, ie the Q and the X respectively, as well as incorporating the capitalisation of every letter that is the hallmark of QANTM. I couldn’t bring myself to remove the “U” from quixotic although the QANTM marketing team might do this for consistency. Let’s see whether this name flies.
Ok, back to ACCC review. This is an important step in the merger. If the ACCC decides that the merger will result in a “substantial lessening of competition in the market” then it can rule that the merger cannot proceed or require that one or both entities divest some elements of their business in order for the merger to proceed.
Let’s see what the competition landscape looks like (at least from QANTM’s perspective). In the Investor Presentation of 27 November 2018, http://qantmip.com/wp-content/uploads/2018/11/181127-QANTM-ASX-Investor-Presentation-Proposed-Merger-of-QANTM-and-Xenith.pdf, page 8 sets out the Australian market share of the merged entity vis a vis its “listed peer” (obviously IPH, they are the only other listed peer) and the rest of the market.
As you can see, the merged entity has 31% of Australian Patent Applications, 28% of PCT applications, 21% of Australian Trade Mark applications and 24% of Registered Designs. This compares with 24%, 14%, 15%, and 18% respectively for the only remaining listed peer – IPH. The entities responsible for the remaining filings have not been identified. This section has simply been labelled as “Other”. Presumably, the remaining percentages consist of filings from the other patent and trademark firms that exist in Australia (such as FB Rice, Phillips Ormonde Fitzpatrick, and Wrays) as well as companies and institutions that do their own filings.
So, at least on these metrics, the merged entity will be the biggest patent attorney firm in Australia. Does that mean the merger will result in a substantial lessening of competition? I have chatted to some competition lawyers about this and what factors are relevant to the test. I am not going to pretend any particular expertise in this area but, in a nutshell, the percentages while high, do not in and of themselves mean that the merger would result in a substantial lessening of competition. If IPH and QANTM were to merge, ie the No. 1 and No. 2 in the field, then there might be a more compelling argument for a substantial lessening of competition.
The consensus view from my straw poll was that the merger is highly unlikely to be viewed as resulting in a substantial lessening of competition. However, this view has been come to without the benefit of reviewing the submissions that are to be made to the ACCC. We wait with bated breath.
Until next time…