Mergers: EC approves Dentsply acquisition of dental equipment supplier Sirona, subject to conditions
The European Commission has approved under the EU Merger Regulation the proposed acquisition of dental equipment supplier Sirona by Dentsply, both of the US, subject to conditions.
The decision is conditional in particular upon the extension of licensing agreements between Sirona and its current suppliers of CAD/CAM ("computer-aided design and computer-aided manufacturing") blocks used in its chairside CAD/CAM systems. These systems are used by dentists to manufacture dental prosthetics such as crowns, bridges, veneers and inlays out of the CAD/CAM blocks
The Commission's investigation
The Commission's investigation focused on the main product areas where both Dentsply and Sirona are active, namely CAD/CAM materials, small dental equipment, dental imaging systems and dental implant systems.
Sirona is also the leading supplier of chairside CAD/CAM systems with a very strong position in several Member States, as well as at European Economic Area (EEA) level.
Based on its investigation, the Commission concluded that the transaction, as initially notified, would potentially give the merged entity the ability and incentives to exclude competitors by closing Sirona's chairside CAD/CAM system to other block providers to favour its own blocks. Currently Denstply's offer in chairside CAD/CAM blocks is limited but the investigation showed that it could be expanded in the near future to replace other CAD/CAM blocks suppliers.
This could lead to higher prices for CAD/CAM blocks, which would be paid by dentists and ultimately result in higher costs for patients in need of dental restoration work.
In order to address the Commission's concerns, the parties offered to ensure the compatibility of Sirona's chairside CAD/CAM systems with the CAD/CAM blocks of competitors through:
- an extension of the existing licensing agreements with the competing chairside CAD/CAM block suppliers by 10 years, i.e. until 1 March 2026;
- technical and legal safeguards for competing CAD/CAM block suppliers for the duration of their licensing agreements. This includes providing the necessary know-how to these suppliers, protecting confidential commercial and technical information and refraining from taking measures that could limit the usability of the competitors' CAD/CAM blocks; and
- a fast track arbitration procedure for dispute settlement.
The Commission found that these commitments addressed its competition concerns. The decision to approve the transaction is conditional upon full compliance with the commitments.
Companies and products
Dentsply is a US based company that designs, develops, manufactures and markets a broad range of consumable dental products for the professional dental market. Dentsply also manufactures and markets other consumable medical devices.
Sirona is a US based global manufacturer of dental equipment and is focused on developing, manufacturing and marketing innovative solutions for dentists.
The case was notified to the European Commission on 7 January 2016.
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). This deadline is extended to 35 working days in case remedies are submitted by the Parties, such as in this case.
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