This Judgement Will Have An Impact On European Competition Law Going Forward
The long-awaited judgment of the ECJ in the GSK/Syfait quota policy case was handed down on 16 September 2008. The ECJ was asked to rule on whether GSK's refusal to deliver the whole of wholesalers' orders could constitute an abuse of dominant position. The judgment does not go as far as one would wish, for several reasons:
What Is The Impact Of This Ruling?
- As suggested by Advocate General Damaso Ruiz-Jarabo Colomer, in his Opinion of 1st April 2008, the ECJ refused to accept GSK's argument that parallel trade does not benefit patients. The ECJ indicated that even if the price of medicines is regulated and the consumer in the country into which the products are imported cannot benefit from a price as low as that in the country from which the products are exported (because the exporter retains a part as profit), the ECJ was of the opinion that parallel trade creates pressure on prices. Moreover, these are capable of benefitting social security systems and patients, while increasing the choice of medicines offered to patients. In addition, the ECJ underlined the importance of this residual pressure on prices between the manufacturer and its distributors or between the distributors and parallel traders, as this is the only form of competition which can exist while the medicine is protected by patent.
- The ECJ gave a non-committal response to the question whether the regulation of prices in the pharmaceutical industry could justify pharmaceutical companies taking measures to combat parallel trade. While confirming that the intense level of regulation does not allow the exclusion of the application of the competition rules to the pharmaceutical sector, the ECJ recognised that State intervention on prices cannot be ignored as one of the factors creating parallel trade. The ECJ concluded that if pharmaceutical companies are excluded from protecting their interests by refusing to supply the national market where prices are lower, they should not be prevented from taking measures limiting parallel trade, on condition that these measures are reasonable and proportionate to defend their interests.
- The ECJ therefore recognised the right of a pharmaceutical
company in a dominant position, in order to defend its own
commercial interests, not to honour the whole of an order from a
wholesaler who wished to export a substantial part of the
quantities delivered, but the ECJ left it to the national
jurisdictions to determine in which cases a dominant undertaking
abusively restricts parallel trade. The ECJ indicated that it was
for the court which referred the case to the ECJ, to determine
whether GSK had abused its position in refusing to honour the whole
of an order. The court was to do this by examining whether the
order was abnormal, in light of the preceding commercial dealings
with the wholesaler and the quantity ordered, as compared to the
needs of the market of the Member State in question. In other
words, the dominant undertaking could object to a sudden increase
in orders from wholesalers if this increase did not correspond to
the growth in demand of the medicine in question.
The question therefore turns on what constitutes a "normal" order. It is possible that wholesalers will take this opportunity to claim increased quantities of medicines
under quota, in particular if they can establish that their share of the national market which is used as the basis for the quota is less than their actual sales of the product under quota. - One last, frustrating, point: the ECJ gives no clarification on the appropriate way in which to define the product market for the pharmaceutical sector, when examining the legality of quota measures. The same uncertainty remains therefore as to whether the traditional approach in defining the product market according to its therapeutic usage remains in place, or whether the pharmaceutical company's position on the market for supply of wholesalers should be taken into account, as has been suggested by the French Competition Council.
In Summary
The ECJ, by this judgment, has not ended the debate of these questions. The fact that the French Competition Council has already validated the majority of the quota systems implemented by numerous pharmaceutical companies should give them a degree of comfort when faced with the possible requests from wholesalers to increase their purchases.
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