France: Competition Newsletter March 2018

Last Updated: 26 March 2018
Article by Emmanuelle van den Broucke and Alexia Delaunay

A concerted practice between two pharmaceutical groups aiming to reduce the use of a medicinal product for treatments not covered by its marketing authorization and increasing the use of another competing medicine is likely to constitute a restriction of competition 'by object'

The Roche group produces two medicinal products: Avastin which, according to its marketing authorization (MA), is prescribed for the treatment of tumorous pathologies, and Lucentis, which is intended for the treatment of eye diseases and whose commercialization is entrusted to the Novartis group through a license agreement. In practice, Avastin, whose price is lower than that of Lucentis, is also used without an MA for the treatment of eye diseases.

The Italian Competition Authority imposed two fines worth approx. €90 million each to Roche and Novartis for concluding an agreement that was contrary to Article 101 of the Treaty of the Functioning of the European Union (TFEU) which aimed to obtain an artificial differentiation between the Avastin and Lucentis medicines. The agreement would have consisted, in a context of scientific uncertainty, in regarding the security of Avastin's ophthalmic use. Following the rejection of the two pharmaceutical laboratories' appeals against this decision, the latter brought the matter before the highest Italian administrative jurisdiction that referred five preliminary questions to the Court of Justice of the European Union.

Two of these questions concern the possibility of considering that these two medicines belong to the same market while, according to the parties, Avastin was sold without an MA and under conditions that did not comply with the pharmaceutical regulations. The Court of Justice answered that one medicine used without an MA can belong to the same market as a medicine with an MA if the prescribing doctors consider them interchangeable, as long as the products are produced and sold legitimately. In this case, the Court considered that the state of uncertainty regarding the lawfulness of the repackaging and prescription conditions of Avastin for the treatment of ocular pathologies did not prevent the Italian authority from considering that it belonged to the same market as Lucentis.

The question was also raised as to whether the competition restrictions for which the companies were criticized could escape the application of Article 101 paragraph 1 of the TFUE since they were ancillary to the license agreement concluded between Roche and Norvatis and strictly necessary to its performance. The Court considers that such provisions concerned the behavior of third parties to this agreement (prescribing doctors) and therefore could not be considered ancillary to said agreement. The two laboratories indeed agreed to raise, in a context of scientific uncertainty, concerns regarding the security of a medicine used for treatments not covered by its MA in order to reduce competitive pressure on the medicine with this indication in its MA. In this regard, the Court considers that this represents a restriction of competition 'by object' and believes that the degree of harm of such practice makes the analysis of its effects superfluous.

Lastly, the Court excludes the benefit of individual exemption as the restriction in issue cannot be qualified as essential.

Following the recent conviction of Janssen Cilag in France in December 2017 for having constrained the development of a generic medicine by interventions with health authorities and through a smear campaign directed at doctors, laboratories are once again reminded that all approaches aimed at limiting the use of products by raising unjustified concerns among users on the risks they present are serious restrictions of competition.

The Competition Authority reminds that the conditions of membership to an interbranch organization whose access is an essential condition for the practice of the activity must be transparent and non-discriminatory

On February 21, 2018, the Competition Authority approved the commitments of the interbranch association of Martinique for meat, livestock and milk (AMIV) which were proposed following a complaint by the Madras agricultural cooperative (SICA Madras) and the association Producteurs Agricoles et de la Mer Associés (PRAMA) whose requests to join the AMIV were rejected without any reason.

In May 2017, SICA Madras and PRAMA lodged a claim on the merits with the Competition Authority, and provisional measures in July, to contest the membership conditions to the AMIV. The case handlers considered that the criteria, as well as the membership procedure to the interbranch organization, which is deemed crucial in order to benefit from European aid that is essential for the practice of the activity and opportunities further downstream, were indeed likely to raise competition concerns, as they were neither objective nor transparent, and were likely to be discriminatory. After having undertaken a market test and requested the improvement of the commitments initially proposed by the AMIV, the Competition Authority considered that the commitments taken by the latter were likely to respond to the competition concerns raised by the case handlers.

In substance, the AMIV proposed a series of firm commitments consisting, firstly, in modifying the membership procedure of the organization to frame it within deadlines, to hear the candidates in the membership procedure and to provide a reason in case of a refusal. Regarding the membership criteria themselves, the AMIV undertook, for more transparency, to enter all the criteria in the internal rules and to modify the appreciation of the criteria related to representativeness, actual activity and specialization to make their application objective. Lastly, as a conditional commitment, the AMIV created a new temporary status of "associate member" with a simplified access procedure compared to the status of full member (no obligation to participate in inter-profession works). This status of associate member makes it possible to benefit from European aid without having to meet the access conditions of the full status, which are deemed disproportionate to benefit simply from such aid.

This decision recalls the need to guarantee objective and transparent access conditions and membership procedure to organizations, trade unions and other professional associations. The fact that the membership to the organization was in the case at hand essential to the practice of the activity was a determining factor in the Authority's analysis.

Formalistic approach by the Court of Cassation of the franchisor's pre-contractual disclosure obligation

By its decree dated January 10, 2018, the French Supreme Court does not fail to surprise by adopting a formalistic approach of the franchisor's pre-contractual disclosure obligation. It seemed rather established by case law that the franchise agreement (or, more specifically, any agreement providing a person with a trade name, brand or sign, and requiring from the latter an exclusivity or near-exclusivity obligation to practice their activity), could be canceled for failure of the franchisor to its pre-contractual disclosure obligation, only if the franchisee managed to establish that the missing information of the pre-contractual disclosure document (that has to be handed in 20 days prior to the signature of the agreement) had vitiated the latter's consent. However, in the case at hand, the Supreme Court censored the Bordeaux Court of Appeal because it did not verify if the pre-contractual disclosure document contained the information required by the Commercial Code. The Court of Appeal indeed settled to note that it follows from the facts of the case that the franchisee knew the concept of the franchise and its functioning and that it declared in the franchise agreement that it had received all the necessary information. As such, it did not answer the franchisee that reproached the franchisor of the absence of information regarding the liquidation of companies formerly managed by it and by former franchisees, the absence of a test site, of an operational handbook, of reliable information on the state of the market and of a credible forecast regarding development opportunities and the activity's results. The Supreme Court therefore overturns the decision of the Court of Appeal and refers the matter before another Court. This tougher approach from the Supreme Court must be taken into account seriously by the franchisors due to the significant consequences that a lack of information can raise: the invalidity of the agreement and its potential contagion effect on the entire network

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