Japanese companies that enjoy a dominant position in a particular market in Europe are likely to be aware that they are subject to high standards of competitive behaviour, and must not abuse their dominant position lest they be deemed to have infringed Article 102 of the Treaty on the Functioning of the European Union ("TFEU").  

A recent opinion by the Advocate General ("AG") concerning the actions of pharmaceutical company AstraZeneca indicates that strategies involving the misuse of the patent system and pharmaceutical marketing procedures in order to exclude generic competitors and restrict parallel importations can constitute an abuse of a dominant position.1

In his opinion, the AG supported the findings of the General Court in this matter, which itself upheld the EU Commission's original decision. The General Court decision was the first case in which an abuse of regulatory process was held to be an abuse of a dominant position under EU competition law. AstraZeneca has now appealed the matter to the Court of Justice of the European Union ("CJEU"). Although the AG's opinion is not binding on the CJEU, it is followed in the majority of cases, and if it is, the CJEU will uphold the findings of the General Court and the fine of EUR60 million levied by the EU Commission.  

Article 102 TFEU

Article 102 provides that:  

"any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States."

Japanese companies in IP-dependent industry sectors often find themselves in a dominant position as a result of their IP rights. In such a case, they must avoid actions that constitute an abuse of that position; Article 102 provides a non-exhaustive list of examples of such impermissible actions, including limiting production, markets or technical development to the prejudice of customers, and directly or indirectly imposing unfair purchase or selling prices.

If the CJEU's final judgment follows the recommendations of the Advocate General, the abuse of regulatory procedures as an abuse of a dominant position will become firmly entrenched under EU competition law (as is already the case in the US), with two new types of abuse added to this non-exhaustive list.  

The first abuse – providing misleading information to national patent offices

The EU Commission identified two separate abuses by AstraZeneca of its dominant position on the market for proton pump inhibitors ("PPIs") for gastro-intestinal diseases. These abuses were seen as part of AstraZeneca's strategy to exclude generic competitors to its ulcer drug Losec and to restrict parallel imports of the drug.  

The first abuse concerned AstraZeneca's Supplementary Protection Certificates ("SPCs"). We discussed SPCs in our recent March 2012 newsletter (available here). In summary, SPCs allow companies to enjoy an additional five-year monopoly that comes into force after expiry of the patent upon which it is based. SPCs are offered in order to encourage innovation by compensating for the lengthy time needed to obtain regulatory approval for certain products, such as pharmaceuticals. SPC may only be granted in respect of a product if the product is:

  1. protected by a basic patent in force; and
  2. subject of a valid marketing authorisation, that is, an authorisation to place the product on the market.  

The Commission considered that AstraZeneca provided misleading representations to national patent offices that did not allow them to identify correctly the date of first marketing authorisation. This resulted in AstraZeneca being awarded SPCs to which it was either not entitled or entitled for a shorter duration. Importantly, this caused uncertainty, delays and disruption of generic firms' preparations for market entry for generic products.  

In its appeal, AstraZeneca asserted that it had acted on the basis of a reasonable bona fide understanding of its legal rights, and that the General Court was wrong to dismiss this as irrelevant. However, the AG opined that the General Court was correct in finding that an undertaking in a dominant position "may not make objectively misleading representations to public authorities to obtain a right, irrespective of whether that undertaking believes it is entitled to that right". The intention of this finding was, the AG noted, to "curtail abuse of dominance resulting from highly misleading representations made to patent, or other intellectual property authorities".  

A company's actual conduct, rather than its subjective belief, is therefore what is relevant for assessing whether the conduct is misleading. In addition, the conduct must have had an effect on competition for there to be a breach of Article 102 TFEU, and AstraZeneca's SPCs were in some countries revoked or would only come into force several years later. In this regard, the AG concluded that it was sufficient that the SPC applications had the potential to restrict competition at the time they were made, because of their exclusionary effect in relation to generic products.  

The second abuse – selective deregistration of marketing authorisations

The second abuse consisted of the selective deregistration by AstraZeneca of marketing authorisations for its product in those countries in which generic companies had applied for marketing authorisations for generic versions of Losec. By doing so, AstraZeneca prevented the generic companies from using a simplified procedure to obtain their authorisation that was faster and less burdensome.  

The EU Commission, the General Court and the AG considered that the context in which this selective deregistration took place rendered it an abuse of a dominant position. The denial of this simplified procedure to the generic companies concerned had an "effect on competition" even in the light of the fact that the generics did have other, more burdensome, alternatives available to obtain marketing authorisations.  

AstraZeneca argued in its appeal that requiring a dominant company to refrain from surrendering a marketing authorisation it no longer requires, and forcing it to bear the strict pharmacovigilance obligations2 and costs associated with an unneeded marketing authorisation, would unduly stretch its responsibilities. However, the AG considered that the obligations associated with maintaining the authorisations were not so burdensome as to constitute an objective justification for AstraZeneca's withdrawal.  

The definition of the relevant market and the level of the fine

The AG also disagreed with AstraZeneca's challenge to the Commission's approach to the definition of the relevant market. The AG opined that the Commission had properly recognised both the legal relevance of gradual developments in the relevant markets and the degree of inertia of prescribing doctors when it concluded that another product (H2 blockers) did not competitively constrain PPIs such that they should be treated as being in the same market.

The AG also dismissed AstraZeneca's claim that the fine imposed was excessive and should have been reduced due to the novelty of the infringements and their minimal effects on competition. The AG agreed with the General Court, which had found that although the means may have been novel, the substance of the abuse was not; indeed, AstraZeneca's actions constituted a highly anti-competitive abuse capable of having a significant effect on competition.  


If AstraZeneca is unsuccessful in its appeal before the CJEU later this year, we can expect more cases concerning the abuse of regulatory procedures as an abuse of a dominant position, and they will not necessarily be limited to the pharmaceutical sector.  

As such, Japanese companies in dominant positions will need to take great care to ensure that their IP filing and enforcement strategies are not perceived as abusive by the regulatory authorities. In particular, such companies should be careful when applying for IP rights not to make objectively misleading representations to the examining authorities.