UK: You Never Give Me Your Money: Competition Law, Damages Actions, And The Healthcare Sector

Last Updated: 28 March 2011
Article by Stephen Whitfield, Natasha Kirk, Louisa Penny and Robert Vidal

Public healthcare bodies that have suffered loss as a result of competition law infringements should consider 'follow on' damages actions as a means of recovering public money. Is this what lies behind the Department of Health's recent claim against Reckitt Benckiser?

Background

In the January 2011 issue of InFocus, we reported on the Office of Fair Trading's recently concluded competition law investigation into an abuse of a dominant market position by Reckitt Benckiser.

Reckitt Benckiser was fined £10.2m in October 2010 for abusing its dominant position in relation to a lifecycle management practice connected with its popular heartburn medicine, Gaviscon. NHS packs of Gaviscon Original had been withdrawn and delisted from the NHS prescription channel by Reckitt Benckiser and replaced with a newer, slightly modified product, Gaviscon Advance. Certain features of the NHS electronic prescription system ensured that generic market entry was prevented as a result of this strategy.

Consequently, it is possible that health authorities continued to pay higher prices than would have been necessary if generic heartburn products had been available for prescription during the time of the infringement.

'Follow on' damages actions in the UK

Persons who have suffered loss as a result of an infringement of UK or EU competition law are entitled to seek damages in order to recover those losses through the UK court system.

'Follow on' damages actions, that is, actions for damages where liability has already been established through an infringement decision issued by a regulator, may be commenced either in the Competition Appeal Tribunal or the High Court, depending on the circumstances of the case.

  • Competition Appeal Tribunal. The advantage of commencing a damages action in the Competition Appeal Tribunal is that it is a specialist competition law tribunal with expert judges and economic advisers; however follow on damages actions cannot usually be brought in the CAT until after the conclusion of any appeals against a regulatory infringement decision.
  • High Court. Although the High Court has fewer specialist competition law judges, it is nevertheless possible to commence competition damages actions and make significant progress with them while the related regulatory investigation continues or any appeals are being heard.

The department of health's claim against Reckitt Benckiser

Last month, it emerged in press reports that the Department of Health, collectively with all 10 Strategic Health Authorities and 144 Primary Care Trusts, had lodged a claim against Reckitt Benckiser in the High Court. The same press reports suggested that the claim relates to an attempt to recover losses suffered as a result of Reckitt's abuse of dominance in the Gaviscon case.

Political significance of the department of health claim

If and when the court documents become a matter of public record, the precise nature of the claim will emerge. However, if there is an underlying competition law damages action in this case, then the political significance of the action could outweigh any technical legal points of interest. In this regard, it is worth noting the following.

  • Duty to recover public money? Public sector bodies are often quick to claim that they consider themselves to have a duty to attempt to recover public money. In cases where public bodies have overpaid for services and medicines as a result of anticompetitive conduct, that laudable civic objective could restore significant sums of money to the public purse. Entities such as the Department of Health, Primary Care Trusts, and Strategic Health Authorities (together with their successors in the imminent NHS reforms) could all benefit from the UK's damages actions regime.
  • Legislative proposals to encourage damages actions. In the face of sometimes strong opposition, in 2012 the European Commission intends to table legislative plans designed to encourage damages actions. The aim is to help small businesses and consumers bring claims against antitrust infringers, but the effect of the reforms should be to liberalise the whole sector.
  • Don't forget about Monitor. The previously unassuming body set up in 2004 to authorise and regulate NHS foundation trusts is intended to become, under the government's NHS reforms, a supercharged competition regulator. Monitor will have the ability to apply UK and EU competition law across the healthcare sector.

An already strong incentive to recover public money, especially at a time of severe budgetary restraint, combined with a dedicated sectoral competition regulator, could mean more investigations, more infringement decisions, and in turn that could result in greater scope for public bodies to make creative use of competition law damages actions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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