Anticompetitive unilateral conduct

Abuse of dominance

In what circumstances is conduct considered to be anticompetitive if carried out by a firm with monopoly or market power?

Originators and patent owners are entitled to protect their invention and thus the dominant position granted by it. However, conduct will be considered anticompetitive if it departs from 'competition on the merits'.

Over the years, the Commission has identified various practices that can be considered abusive under article 102 of the Treaty on the Functioning of the European Union (TFEU) when committed by dominant undertakings. These practices include:

  • Misleading representations before the authority in order to extend patent protection illegitimately (C-457/10 P, AstraZeneca v Commission).
  • Selective deregistration of Marketing Authorisations (MA) with the object and effect of preventing entry by generics and/or parallel traders (C-457/10 P, AstraZeneca v Commission).
  • Settlement agreements with generics to delay their entry into the market (C-307/18, GSK v CMA)
  • Acquisition of alternative non-infringing production technologies and the conclusion of patent settlements as part of 'a single and continuous exclusionary strategy' (T-691/14, Servier).
  • Excessive or unfair pricing (AT.40394, Aspen Pharma (closed by commitments )).

 

The Commission is currently investigating whether Teva has abused its dominant position by:

  • 'artificially' extending the market exclusivity of its patent by strategically filing and withdrawing divisional patents, repeatedly, delaying entry of generics that were forced to file a new legal challenge each time, and
  • implementing a disparaging information campaign with the aim of reducing the use of competing drugs (exclusionary disparagement) (Case AT.40588).
De minimis thresholds

Is there any de minimis threshold for a conduct to be found abusive?

There is no de minimis threshold to establish abuse under article 102 TFEU.

Market definition

Do antitrust authorities approach market definition in the context of unilateral conduct in the same way as in mergers? If not, what are the main differences and what justifies them?

Both in merger cases and in antitrust investigations, the Commission conducts its market definition of relevant pharmaceutical markets according to the methodology set out in the Market Definition Notice. In merger cases, the Commission's start-point is to consider level 3 of the Anatomical Therapeutical Chemical classification system (ATC) to define the relevant market, but it may look more narrowly at ATC level 4, molecule level, or a bespoke definition.

 

In abuse of dominance cases, the Commission tends to define the market at the molecular level. As the General Court held in Servier (T-691/14; currently under appeal), in addition to price competition, non-price competition factors must be considered in the analysis because these affect the choice of treatment by prescribing doctors. Moreover, as the Court of Justice of the EU (CJEU) held in GSK (C-307/18), the Commission must take into account generic versions of a medicine when defining the relevant market, provided that the generic market entry does not meet insurmountable barriers.

Establishing dominance

When is a party likely to be considered dominant or jointly dominant? Can a patent owner be dominant simply on account of the patent that it owns?

The EU courts have defined dominance as 'a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers'. In practice, the Commission considers high market shares (40 per cent or above) maintained over a long period as the main factor to establish dominance. However, it considers other factors, such as the relative market shares of competitors, existence of barriers to entry or expansion, first-mover advantage and incumbency, possession of key technology, economic strength, etc.

 

In the pharmaceutical sector in particular, IP rights are perceived as an important barrier to entry and/or expansion and may in themselves give rise to a dominant position. This is because competitors and potential new entrants may not be able to manufacture or market the same products during the period of protection without infringing the patent. However, as the General Court confirmed in Servier (T-691/14), the Commission must consider other factors, as well as the IP rights, such as potential interchangeability between the relevant molecule and other treatments.

 

Joint dominance is possible where two or more legally independent parties have strong legal, organisational or contractual links such that they are able to adopt a common policy on the market. The Commission may also consider other factors, such as market conditions, level of transparency, barriers to entry, etc.

IP rights

To what extent can an application for the grant or enforcement of a patent or any other IP right (SPC, etc) expose the patent owner to liability for an antitrust violation?

Originators have the right to obtain and enforce patents or other IP rights to protect their invention. However, in exceptional circumstances, the grant or enforcement of IP rights may constitute an abuse of dominance if it forms part of an overall strategy with a clear anticompetitive aim.

 

In a landmark case the Commission found that AstraZeneca's SPC applications before several patent offices constituted an abuse of dominance, as it had submitted incorrect and misleading information in order to obtain the protection and thus prolong its market dominance. The CJEU upheld the decision (C-457/10 P AstraZeneca).

 

The Commission is currently investigating Teva for allegedly pursuing an anticompetitive strategy by strategic filing and withdrawing applications for divisional patents with the sole purpose of delaying market entry by generics, who were forced to file a new legal challenge each time (case AT.40588).

When would life-cycle management strategies expose a patent owner to antitrust liability?

Patent owners have the right to enforce and secure the protection of their inventions for which they have a valid patent. However, various practices may be considered abusive when they result in a deviation from competition on the merits. These abusive practices can take a variety of forms.

 

For example, the Commission found that AstraZeneca had abused its dominant position through selective deregistration of its marketing authorisations (MA) in those countries where generic companies had applied for MAs, thereby preventing the generics from using a simplified procedure to obtain authorisations (C-457/10, P AstraZeneca).

 

The Commission is currently investigating Teva for allegedly pursuing an anticompetitive strategy by strategic filing and withdrawing applications for divisional patents with the sole purpose of delaying market entry by generics, who were forced to file a new legal challenge each time (case AT.40588).

 

National competition authorities have investigated other types of anticompetitive practices in lifecycle management, such as exclusivity rebates offered to hospitals to prevent generic entry, and predatory pricing practices.

Communications

Can communications or recommendations aimed at the public, HCPs or health authorities trigger antitrust liability?

The Commission has concluded that the provision of misleading information to consumers or the medical sector may constitute an abuse of dominance (see C-457/10 P AstraZeneca, and C-179/16 Roche/Novartis).

 

In its current investigation into Teva (AT.40588), the Commission is investigating whether Teva engaged in a communication campaign aimed at reducing the use of competing drugs. The campaign, addressed at healthcare bodies and professionals, would have targeted competing products by creating concerns over the safety of their use, despite their approval by the relevant public health authorities. Generic manufacturers have often complained that such exclusionary disparagement tactics create barriers to market entry for them, making it difficult to compete with originators’ drugs despite patent expiry for the active ingredient.

Authorised generics

Can a patent owner market or license its drug as an authorised generic, or allow a third party to do so, before the expiry of the patent protection on the drug concerned, to gain a head start on the competition?

As provided by article 82(1), second subparagraph, of Regulation (EC) No. 726/2004, a patent owner may submit more than one marketing application with a view to co-marketing a medicine. Gaining a head start on the competition would not be an infringement by the originator. However, if the sole aim of the practice is to prevent or delay the entry of other generics to the market this could constitute an abuse of dominance.

Restrictions on off-label use

Can actions taken by a patent owner to limit off-label use trigger antitrust liability?

Actions taken by a patent owner to limit off-label use can trigger antitrust liability. For example, in Hoffmann-La Roche and Others (C-179/16), the CJEU held that the agreement between Roche and Novartis, intended to disseminate misleading information relating to adverse reactions resulting from the off-label use of a medicine, constituted a restriction of competition 'by object'.

Pricing

When does pricing conduct raise antitrust risks? Can high prices be abusive?

Patent owners are free to set prices provided that, if the company is in a dominant position, it does not foreclose competitors or exploit consumers.

 

Setting predatory prices (ie below costs), may constitute an exclusionary abuse of a dominant position under article 102 TFEU. In AKZO (C-62/86) the CJEU set out a two-step test whereby (1) prices are presumed to be predatory if they are set below average variable costs, and (2) if prices are set below averagely total costs but above variable costs, it will be necessary to prove additional elements to establish an anticompetitive intent. Although the Commission has not to date pursued any cases in the pharmaceutical sector, an exclusivity rebate policy implemented by a patent owner in dominant position could be considered abusive (there have been such cases at a national level, see, for example, in the Netherlands).

 

Excessive pricing may be an abuse of a dominant position. In May 2017 the Commission launched a formal investigation into Aspen's excessive pricing conduct – the first excessive pricing investigation by the Commission in the pharmaceutical sector. It closed the investigation in February 2021 when it accepted legally binding commitments offered by Aspen, which removed its concerns. Under the commitments Aspen agreed to reduce its prices across Europe for each of the drugs involved by an average of 73 per cent, thereby reducing the prices to below 2012 levels, when it acquired the drugs and gradually started to increase prices.

Sector-specific issues

To what extent can the specific features of the pharmaceutical sector provide an objective justification for conduct that would otherwise infringe antitrust rules?

In GlaxoSmithKline (Joined cases C-501/06, C-213/06, C-515/06 and C-519/06), the CJEU held that pricing restrictions on parallel trade in the pharmaceutical sector had as their object the restriction of competition, but that the Commission should have assessed a possible exemption under article 101(3) taking into account the arguments put forward by GSK in relation to the specific nature of competition in the pharma sector. GSK had argued that its pricing strategy did not restrict competition because the price differences between member states resulted from national price regulations. It claimed that there were consumer welfare arguments for justifying a restriction on competition, referring to the losses suffered as a consequence of parallel trade, which affected its R&D budget for developing new and innovative drugs. The Commission should have taken these arguments into account but had failed to do so.