On 23 January 2018 the European Court of Justice (ECJ) handed down its judgment in Hoffmann-La Roche and Others v AGCM.[1] The ECJ held that it is a restriction of competition “by object” for undertakings marketing competing medical products to disseminate misleading information about one of those products in order to reduce the competitive pressure exerted by that product on the other product. An infringement of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) can be established in these circumstances without any requirement to examine the anti-competitive effects of an arrangement.

The ECJ declined to rule on whether, on the facts of this case, the information disseminated by the parties was misleading. The Court did, however, set out criteria which, if met, would require the relevant national court to find that the information was misleading.

Background

Avastin and Lucentis are both medicines developed by a subsidiary of Hoffmann-La Roche. The licence to commercially exploit Avastin was retained within the Hoffmann-La Roche group, while Novartis was granted a licence to commercially exploit Lucentis. In January 2005 the European Commission granted Avastin a marketing authorisation (MA) in respect of cancer treatment. Two years later, the Commission granted Lucentis an MA for the treatment of eye diseases. However, Avastin was also used for the treatment of eye diseases on an “offlabel” basis, even after the grant of the MA to Lucentis, on account of its lower cost.

On 27 February 2014 the Italian competition authority (AGCM) found that Hoffmann-La Roche and Novartis had put in place an arrangement intended to disseminate information that questioned the safety of using Avastin for ophthalmic purposes in order to discourage the off-label use of Avastin and therefore reduce the level of competition to Lucentis. The AGCM concluded that this constituted a breach of Article 101(1) TFEU and imposed fines totalling €182.5 million on the pharmaceutical companies.

Hoffmann-La Roche and Novartis appealed that decision in Italy, ultimately bringing the matter to the Italian Council of State which in turn referred a number of questions to the ECJ for a preliminary ruling. Essentially, the Council of State sought clarification on (i) whether Avastin and Lucentis may be considered competing products in light of the fact that Avastin’s use for the treatment of eye diseases was not authorised by an MA; (ii) whether the arrangement between the parties in relation to the dissemination of information could be justified as ancillary to the licensing agreement between HoffmannLa Roche and Novartis regarding the commercialisation of Lucentis; and (iii) whether the arrangement constituted a restriction of competition “by object.”

Judgment

Are Avastin and Lucentis competing products?

The ECJ found that the fact Avastin’s MA did not cover its use in the treatment of eye diseases did not preclude classification of Avastin as a product in competition with Lucentis. This is because use of a drug for “off-label” purposes is not per se unlawful. It would only have been appropriate for the AGCM to conclude that Avastin was not a competing product with Lucentis if the national courts or competent authorities had designated the “off-label” use of Avastin as unlawful (which they had not).

Could the arrangement in place between Hoffmann-La Roche and Novartis be justified as “ancillary” to the licensing agreement?

The ECJ held that the arrangement could not be justified as “ancillary” to the licensing agreement between Hoffmann-La Roche and Novartis. This is because rather than seeking to “restrict the commercial autonomy of the parties to the licensing agreement” in a manner “objectively necessary for the implementation of the [licensing] agreement”, the dissemination of allegedly misleading information regarding Avastin was actually intended to “restrict… the conduct of third parties” with the ultimate aim of making Novartis’ exploitation of Lucentis more profitable.[2] The Court did not consider whether this conclusion would be the same if the information disseminated is found not to be misleading. 

Does the arrangement constitute a restriction of competition “by object”?

The ECJ began by noting that the concept of a “by object” restriction of competition must be “interpreted strictly” by limiting it to arrangements involving “a degree of harm to competition that is sufficient for it to be held that there is no need to examine their effects”.[3] Arrangements can be considered to be harmful “by their very nature”.[4] The Court added that in order to establish whether an arrangement amounts to a “by object” restriction “regard must be had  to the content of its provisions, its objectives and the economic and legal context of which it forms part.”[5] 

The Court then considered the purpose of the arrangement put in place and the nature of the information disseminated by Hoffmann-La Roche and Novartis. It concluded that, should the Council of State find the disseminated information to be misleading, then the arrangement – designed to prevent doctors prescribing Avastin to treat eye diseases, thus reducing competitive pressure on Lucentis – would have to be considered “sufficiently harmful to competition” to constitute a “by object” restriction.[6]

It stated that the Council of State must find that the information was misleading if the information was designed to (i) “confuse” the competent authorities, and (ii) heighten “public perception of the risks associated with” the off-label use of the Avastin.7

Comment

The question of what differentiates a “by object” restriction from a “by effect” restriction has been the focus of a number of decisions of the European courts in recent years. The analysis in this case supports the narrower view of what may constitute a “by object” restriction expressed in the 2014 judgment in the Cartes Bancaires case.[7] It repeats that the pre-requisite for determining that an arrangement represents a restriction “by object” is that it contemplates sufficient harm to competition.