“When does a License Become a Merger:” Navigating Antitrust with Creative Solutions

by Ziyaad Parker

Corporate mergers induce growth and innovation but often face regulatory roadblocks if they threaten competition. Regulators like the UK’s Competition and Markets Authority scrutinise mergers to prevent monopolies and protect consumer choice. While some mergers are blocked outright, if done correctly, alternatives like licensing and joint ventures can offer paths forward. Freshfields Partner Allistair Chapman, the firm’s Global Head of Antitrust, posed the question during a recent Spotlight Series event: “When does a license become a merger?” This query underscores the fine line businesses must tread when seeking alternatives to blocked mergers.

This article will examine the viability of licensing agreements and joint ventures as creative solutions to antitrust challenges, especially in cross-border contexts. It will also explore the critical role of mutual trust between lawyer and client in these complex scenarios and conclude with insights into the attributes of a standout trainee associate in the antitrust field, complemented by an exclusive interview I carried out with current Freshfields trainee, Billy Liu.

Licensing: A Flexible Alternative

Licensing allows companies to share assets like intellectual property or technology without fully integrating their operations. For instance, two firms might license complementary technologies to create a joint product offering. In industries like tech or pharmaceuticals, where innovation drives growth, this approach can unlock significant opportunities.

However, the complexity of licensing increases significantly in cross-border transactions. A licensing arrangement that complies with US competition rules may face challenges in jurisdictions like the UK or EU, where stricter competition laws could apply. For example, regulators may assess whether the license’s terms — such as exclusivity or scope — unfairly restrict competition in one region while benefiting another. Companies must carefully tailor licensing agreements to ensure they meet the regulatory expectations of all relevant jurisdictions.

As Chapman pointed out, licensing agreements can come dangerously close to operating like a merger. Regulators will examine whether a licensing deal undermines competition by creating a “de facto merger.” Exclusive arrangements or overly broad licenses can trigger red flags, raising questions about whether the companies have maintained enough independence.

Joint Ventures: Sharing Without Consolidating

Joint ventures (JVs) offer another path. By pooling resources for specific projects or markets, businesses can collaborate without fully merging. Take, for example, two competitors teaming up to develop renewable energy solutions. By sharing R&D costs, they can innovate while still competing independently in other areas.

The key to regulatory approval is ensuring that the JV delivers benefits, such as fostering innovation or reducing costs for consumers, without stifling competition. Regulators will look closely to ensure the arrangement doesn’t mask anti-competitive behaviour like price-fixing or market sharing. The structure must also provide clear independence between the participating companies to avoid the perception of a merged entity operating under the guise of collaboration.

Building Trust: A Two-Way Street

Allistair Chapman & Aaron Hanif (Freshfields antitrust associate) stressed the importance of trust — both between the lawyer and the client. For a client to trust their lawyer, the lawyer must have a deep understanding of the law and the regulatory environment. This technical expertise forms the foundation of trust. At the same time, the lawyer must also trust the client. Nobody knows the intricacies of their business better than the client, and mutual trust ensures both parties are aligned and working toward the same goals. This collaborative relationship is key to accurate data submission to regulators, and being on the same page enables a solutions-driven approach should the merger get blocked.

The Attributes of a Standout Antitrust Trainee

During the Spotlight Series event, Chapman shared his thoughts on what makes an exceptional antitrust trainee. Genuine enthusiasm and an eagerness to go above and beyond in tackling complex challenges were top of his list. According to Chapman, these qualities distinguish those who excel, but they must be built on a foundation of solid technical ability. Technical competence, he emphasised, is non-negotiable and a prerequisite for success in this demanding field.

Billy Liu, a trainee associate at Freshfields, echoed this sentiment, sharing his experience of working on high-level antitrust deals. He highlighted the unique exposure Freshfields offers — trainees are trusted with significant responsibilities early on, providing them with unparalleled opportunities to learn and grow. This blend of high-stakes work and a supportive environment sets Freshfields apart as a training ground for future antitrust superstars.

Freshfields Trainee Interview: Billy Liu

To gain further insight, I reached out to Billy Liu, a trainee associate at Freshfields who also spoke at the event. Billy shared that antitrust law is particularly compelling because it combines technical legal challenges with commercial considerations specific to different industries. He emphasised that trainee associates can get involved in projects as much as they are willing to, allowing them to gain significant exposure early in their careers. Billy himself is looking forward to an upcoming secondment at Freshfields’ Silicon Valley office, where he plans to further develop a tech-orientated practice. His ambitions reflect the diverse opportunities within antitrust law, where legal expertise intersects with evolving global industries like technology.

The Bottom Line

Licensing agreements and joint ventures offer a way for companies to achieve the benefits of a merger without breaking antitrust laws, but they’re not without risks. As Allistair Chapman’s question underscores, businesses need to carefully structure these alternatives to avoid crossing the line into anti-competitive territory.

In today’s fast-moving regulatory landscape, creativity and caution go hand in hand. Firms like Freshfields play a critical role in helping clients find that balance, enabling them to grow while staying firmly on the right side of the law. And the future of this practice will be championed by those exhibiting a genuine interest and willingness to get involved at every oppurtunity. Due to the fascinating technical and commercial intricacies, one can conclude that there will be no shortage of eager prospective trainees ready to take on the responsibility.