Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Case C-501/06 P, GSK v. Commission

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Road Runner caught?

The ECJ has handed down its much awaited judgment in the ‘Glaxo Spain’ case, yet another case on the EC competition law assessment of practices aimed at curbing parallel trade in pharmaceuticals.

In a nutshell:

– The ECJ reaffirms its traditional stance regarding the fact that an agreement aimed at limiting parallel trade shall be considered as restrictive of competition ‘by its object’.

The Court thus holds that the CFI committed an error of law when it asserted that such agreements could only be regarded as restrictions ‘by object’ provided that their object or effect was shown to be the restriction of competition ‘to the detriment of the final consumer’ (which, in a way, was paradoxically akin to saying that those agreements would be a restriction by object only after having determined they constitute a restriction by effect).

– The judgment upholds the CFI’s finding that the Commission failed to carry out a sufficient assessment of the possible efficiencies derived from the agreements in the light of Article 81(3).

Now, from a pure “policy” standpoint: big pharmas have welcomed this judgment as a resounding victory. In this context, can it be assumed that, from now on, parallel traders will no longer escape the panoply of obstacles devised by pharmaceutical companies? I don’t see it that way.

The CFI’s Judgment explicitly accepted the contention that the pharma industry exhibited special and specific features which deserve a somewhat particular treatment, and lambasted the Commission for having failed to take proper account of those peculiarities.

By contrast, the ECJ’s reasoning is much less sector-specific driven. It stresses the Commission’s failure to thoroughly deal with the arguments and evidence put forward by parties claiming an exemption under Article 81(3), regardless of the particular sector at stake. In this sense, the ECJ Judgment could be read within the stream of case law having raised the standard of proof incumbent upon the Commission in other areas of competition law enforcement.

Therefore, I don’t view this ECJ judgment as providing definitive support for any of the arguments regarding the alleged specificities of the pharmaceutical sector, but rather as requiring a stronger reasoning if the Commission wishes to rebut those arguments. Interestingly, the  specific features of the pharma industry were recently examined – and found of little particular relevance – by the ECJ and by AG Ruiz Jarabo in the Lelos (Glaxo Greece) case. In light of this, I would thus say that nothing precludes the Commission from adopting and reflecting in its Decision a stricter effects assessment and reaching the same outcome it reached in 1998.

One last note:  I don’t view the judgment as bearing the potential to have an  incidence on the way the Commission currently undertakes 81(3) assessments. This case referred to agreements which had been notified to the Commission pursuant to Regulation 17/62, and since the passing away of the notification system the Commission arguably undertakes a more detailed assessment of the cases it decides to initiate on its own motion. Would a similar judgment have come out when the Commission was still entrusted with reviewing hundreds of agreements per year?

Unrelated: thanks to Nicolas for the invitation, and I hope you enjoy the blog.

(Image possibly subject to copyrights)

Written by Alfonso Lamadrid

9 October 2009 at 5:23 am

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