European Union: EU General Court Dismisses Parallel Trade Group's Dual-Pricing Complaint Against GSK

On September 26, 2018, the EU General Court1 (the Court) upheld the European Commission's refusal to reinvestigate GlaxoSmithKline SA's (GSK) Spanish "dual-pricing" distribution arrangements, 20 years after the alleged conduct to which the complaint related.

This long-running case had culminated in the EU Court of Justice's 2009 verdict faulting the Commission's original case for not properly evaluating potential efficiencies from limiting parallel trade. On remittal, the Commission concluded in 2014 that the case was no longer a priority and declined to reinvestigate.

Notably, in its September 2018 decision, the Court confirmed that the Commission was right to drop the case, notwithstanding allegations by parallel traders that "dual-pricing" schemes — which purportedly discourage cross-border trade — proliferated in the aftermath of GSK's practices. Such allegations normally would have been expected to attract Commission interest.

The Court found the Commission lawfully deprioritized the case, because GSK's conduct had long since ceased; national authorities or courts might address allegations of unlawful conduct at a local level; and there was no evidence other dual-pricing schemes were linked to GSK's conduct — rather, 2006 changes to Spanish pharmaceutical pricing legislation likely contributed to the proliferation.

In parallel, the Spanish authorities have rejected similar complaints at a national level and approved pharmaceutical companies' pricing arrangements. The parallel traders association is considering an appeal in the case before the European Court of Justice and also has been an active complainant before the Spanish authorities.

Pharmaceutical companies can take comfort that these types of pricing programs have been approved by national authorities, and the Commission has deprioritized further inquiry. But while complainants remain active, pricing programs will continue to require careful legal review.

Background of the Case

In March 1998, GSK notified the Commission of its new general sales conditions to authorized wholesalers in Spain. The agreement included a "dual-pricing" mechanism, which involved GSK charging parallel traders more than those who sold on the domestic market in Spain. In 1999, the European Association of Euro-Pharmaceutical Companies (EAEPC) lodged a complaint with the Commission concerning GSK's dual-pricing policy, requesting that the Commission refuse to grant GSK the negative clearance or exemption it sought.

In 2001, the Commission found that GSK's system infringed competition law. The decision was partially annulled by the General Court in 2006 on the ground that the Commission had not carried out an adequate examination of whether the conditions for exemption laid down in Article 101(3) of the Treaty on the Functioning of the European Union (TFEU) had been fulfilled.2 The Court of Justice upheld the relevant General Court judgments.3 Based on the Court of Justice's rulings, GSK formally withdrew its application for an exemption.

In May 2014, the Commission rejected the EAEPC's 1999 complaint,4 which had undergone multiple revisions. The Commission rejected the complaint based on lack of European Union interest in continuing the investigation due to (i) the cessation of the conduct at issue in October 1998, (ii) the absence of persisting effects, and (iii) the fact that the national courts and authorities were well-placed to handle the issues raised.

Ruling of the General Court

The General Court upheld the Commission's decision rejecting the EAEPC's 1999 complaint, finding that the Commission correctly examined whether the European Union had an interest in continuing the investigation and correctly concluded it did not. In particular, the General Court determined that the pervasiveness of dual-pricing practices in Spain could not be attributed to the system that GSK briefly implemented in 1998. The Court concluded that the Commission did not make any error of assessment in finding that "the purchase prices and volumes that Spanish wholesalers currently face in order to export those 82 medicines are determined by today's market dynamics rather than by GSK's conduct," which had ceased in 1998.5 In this regard, the Commission had concluded in its 2014 decision that the widespread use of dual-pricing systems was linked to, among other factors, national regulation that entered in force in 2006 in Spain.

Conclusion

As the GSK Spain dual-pricing saga may continue, the application of the conditions for exemption set out in Article 101(3) TFEU for dual-pricing systems remains unclear. The EU has not pursued any other dual-pricing case since 2001, apart from the investigation it opened into alleged dual-pricing practices in Spain shortly before rejecting the EAEPC complaint.6 At the member state level, similar complaints were rejected in relation to pharmaceutical distribution agreements in Spain. In 2017, the Spanish competition authority (CNMC) approved a pharmaceutical company's distribution arrangements on the basis that it only set one price for its goods, with another price fixed by Spanish regulation. The CNMC also recently concluded an investigation into the potential establishment of a dual-pricing distribution system among pharmaceutical companies, including notably Merck Sharp & Dohme de España SA, Novartis Farmacéutica SA, Lilly SA, Sanofi-Aventis SA and Johnson & Johnson unit Janssen-Cilag SA. The CNMC decision, published in September 2018, concluded that there was no collusion on the dual-pricing, as coordination on the timing of contract modifications could be explained by the entry into force of the 2006 regulation.7 Although there will likely be further appeals, the cases confirm that the Spanish authorities take the view that pharmaceutical companies may lawfully implement these pricing arrangements. Careful legal review, however, is essential to assess the legality of the arrangements in the context of national pharmaceutical pricing and regulatory laws.

Footnotes

1 Case T-574/14, EAEPC v Commission.

2 Case T-168/01, GlaxoSmithKline Services v Commission.

3 Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P, GlaxoSmithKline Services and Others v Commission and Others.

4 Case COMP/AT.36957 — Glaxo Wellcome.

5 Case T-574/14, EAEPC v Commission, para. 117.

6 AT.39973 — Pricing schemes for distribution of medicines in Spain.

7 S/DC/0608/17: EAEPC vs Laboratorios Farmacéuticos.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions