Earlier this month, AstraZeneca lost its appeal to the Court of Justice of the European Union (CJEU) in relation to findings that it had abused its dominant position in its stomach ulcer treatment Losec.
As previously reported, in 2005 the Commission found that AstraZeneca had committed two abuses of a dominant position and levied fines of Euro 60 million. Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits abuse of a dominant position.
The case concerned the following two key findings of abuse by AstraZeneca:
- Firstly, that it made misleading statements regarding the dates of marketing authorisations to patent offices in Belgium, Denmark, Germany, the Netherlands, the United Kingdom and Norway, as well as before the national courts of Germany and Norway. It was found that this was done in order to acquire an increased protection period through supplementary protection certificates (SPCs) for Losec and thereby delay generic market entry; and
- Secondly, that AstraZeneca requested deregistration of the marketing authorisations for Losec capsules in certain countries including, Denmark, Sweden and Norway, along with the actual withdrawal of Losec capsules from the market. This meant that generic producers were prevented from using the capsule formulation as a reference product. This was done in conjunction with AstraZeneca’s launching of a new Losec tablet.
AstraZeneca appealed the findings and in July 2010 the General Court, while rejecting many of the challenges made by AstraZeneca, reduced the fine to Euro 52.5 million due to the novelty of the findings of abuse for manipulation of regulatory procedures. AstraZeneca then further appealed to the CJEU claiming that the General Court had made a series of errors in law in respect of market definition, analysis of the abuses and the level of the fine.
The grounds of appeal were:
- On market definition, AstraZeneca argued that they would not have been found dominant if the court had considered therapeutic effect because a different class of drugs used to treat gastro-intestinal disease, H2 blockers, would have been in the same market. Instead, the court based the market definition on the product’s mode of action.
- In respect of abuse, AstraZeneca claimed that the General Court should not have judged the “misleading statements” made to patent offices and national courts objectively and that there should be a requirement for a deliberate fraud or deceit in order to prove abuse in circumstances such as these. In respect of marketing authorisations that a company no longer requires, they claimed to not allow a dominant company to withdraw its marketing authorisations and to maintain them when they are redundant would be too encumbering to companies in a dominant position.
- AstraZeneca argued that the level of the fine was too high despite it having been reduced from Euro 60 million to Euro 52.5 million.
Throughout the various proceedings AstraZeneca argued that its behaviour was merely “competition on the merits” and was not abusive and that even if it was, it should be granted a reprieve because of the novelty of the abuses and their minimal effect on competition. Nonetheless, the appeal was rejected on all grounds raised by AstraZeneca and the Euro 52.5 million fine remains.
According to the CJEU the General Court was free to conclude that AstraZeneca had deliberately misled the relevant patent offices (and national courts) with a view to maintaining its position in the market and that this was an abuse of a dominant position. Furthermore, the deregistration of the marketing authorisations with the aim of delaying or hindering the introduction of generic products and parallel imports was also upheld as abusive. On the question of the level of fine, the CJEU explained in a press release dated 6 December 2012 that “...in the absence of mitigating circumstances or special circumstances, the abuses must be characterised as serious infringements, and consequently the amount of the fine cannot be reduced”.
The CJEU has confirmed that the non-exhaustive list of Article 102 TFEU abuses includes abusive manipulation of regulatory processes and, in so doing, has confirmed that it will not strike down Commission decisions merely because they make findings in relation to new categories of abuse. The extent to which the principles established may be applied to different factual situations remains to be seen. However, if the OFT’s action against Reckitt Benckiser in the Gaviscon case is anything to go by, national competition regulators have been encouraged by the AstraZeneca case to bring action against undertaking in respect of their regulatory strategies.