The repercussions of the Commission’s Pharmaceutical Sector Inquiry (see previous updates) continue to be felt. In addition the Commission has completed the consultation phase in relation to a draft revised Regulation and set of Guidelines on the application of Article 81(3) of the Treaty to vertical restraints.

The Pharmaceutical Inquiry - As well as continuing to open investigations into particular companies, the Commission confirmed on 12 January that it had made requests for information to a number of pharmaceutical companies asking them to submit copies of their patent settlement agreements. These requests covered EU patent settlement agreements concluded between originator and generic pharmaceutical companies between 1 July 2008 and 31 December 2009. The Commission is in particular interested in patent settlements where the originator company pays off a generic competitor in return for delayed market entry of a generic drug.

New Vertical Agreements Block Exemption - The Commission has completed the consultation phase in relation to a draft revised Regulation and set of Guidelines on the application of Article 81(3) of the Treaty to vertical restraints. These should be finalized in the coming months prior to May 2010, when the current block exemption and guidelines expire.

The Commission has particularly highlighted two developments in the last ten years which it is seeking to address in the new legislation namely the increase of buyers' market power and restrictions on online sales;

  • It is proposed to extend the current 30% market share threshold set for the exemption to apply to the purchaser as well as the supplier. It is proposed that where substantial investments by Distributor X to start up and/or develop a new market are necessary, restrictions of passive sales by other distributors into Distributor X’s territory or customer group would generally fall outside Article 81(1) during the first two years that Distributor X sells the contract goods or services.
  • The Commission also considers that restrictions relating to internet sales in distribution networks should generally be considered as hardcore restrictions prohibited by EU competition rules.