The Court of Justice of the EU (ECJ) has dismissed AstraZeneca's appeal against the Commission's and General Court's findings that the company abused its dominant position under Article 102 TFEU by misusing the patent system and pharmaceutical marketing procedures in order to exclude generic competitors to its ulcer drug Losec from the market and to restrict parallel imports of the drug (Case C-457/10P).  The ruling fully supports the Commission's analysis in respect of two novel abuses, which have now firmly been added to the non-exhaustive list of abuses of Article 102 TFEU.

Commercial implications

This is the first case in which abuse of regulatory process was held to be an abuse of a dominant position under EU competition law.  Confirmation of this approach by the ECJ can be expected to result in more cases of this nature being brought, not necessarily limited to the pharmaceutical sector.

National competition authorities have already followed suit.  In the UK, the OFT investigated Reckitt Benckiser in respect of its drug Gaviscon and held that the company had abused its dominant position by withdrawing Gaviscon Original Liquid from the NHS prescription channel with the intention of limiting pharmacy choice and hindering competition from generics.  The Italian competition authority has also imposed a fine on Pfizer for delaying generic competition by unduly extending patent protection through the use of SPCs (this decision was subsequently overturned by the regional administrative tribunal for failure by the competition authority to prove sufficient intent).

Companies in IP-dependent industry sectors will often find themselves in a dominant position thanks to their IP rights, and they will need to take great care in ensuring that their IP filing and enforcement strategies are not perceived as abusive by the regulatory authorities.  They will need to be careful when applying for IP rights not to mislead the examining authorities (viewed objectively) and, when taking a possibly contentious interpretation of a provision, make this clear to the authorities and provide a basis for that interpretation.

Background

In June 2005 the EU Commission fined AstraZeneca €60 million for having abused its dominant position under Article 102 TFEU on the market for proton pump inhibitors (PPIs) used for gastro-intestinal diseases.  The Commission identified two separate abuses, which were seen as part of a strategy on behalf of AstraZeneca to exclude generic competitors to its ulcer drug Losec and to restrict parallel imports of the drug.

The first abuse consisted of providing misleading representations to national patent offices which prevented them from being able to correctly identify the date of first marketing authorisation.  This resulted in supplementary protection certificates (SPCs) to which AstraZeneca was either not entitled or only entitled for a shorter duration and caused uncertainty, delays and disruption of generic firms' preparations for market entry for generic products.

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

AstraZeneca appealed the Commission's decision before the General Court, seeking annulment of the decision, but the General Court upheld the majority of the Commission's findings (see our e-bulletin of 2 July 2010).  AstraZeneca subsequently appealed the General Court's ruling before the ECJ, arguing that the General Court had made a series of errors of law, both in respect of the relevant market definition and in its assessment of the two abuses.  It also challenged the level of the fine, which it considered as excessive given that these abuses were novel.

Earlier this year, Advocate General Mazak suggested that the ECJ dismiss all appeals in this case (see our e-bulletin of 17 May 2012).  

The ECJ's analysis

Definition of the relevant product market

AstraZeneca challenged the Commission's approach to market definition, which had been based on the product's mode of action (ATC classification 4) as opposed to the therapeutic indications of the drug (ATC classification 3).  AstraZeneca would not have been dominant if the Commission had adopted the therapeutic approach, as another class of drugs used for the treatment of gastro-intestinal disease, H2 blockers, would have been in the same market.

In its appeal before the ECJ, AstraZeneca argued that the General Court had erred in law by failing to examine properly the relevance of the gradual nature of the increase in the use of PPIs at the expense of H2 blockers as well as the inertia of doctors prescribing PPIs, and had therefore not taken into account the significant competitive restraint of H2 blockers.

The Court, whilst recognising the importance of a correct and detailed analysis of the competitive relationship between the different products, dismissed this ground of appeal as unfounded.  According to the ECJ the General Court had properly examined the competitive interaction between PPIs and H2 blockers throughout the period at issue and had not committed any error of law in that examination.

The first abuse – providing misleading information to national patent offices

AstraZeneca claimed that the General Court was wrong, in assessing whether its representations to the patent offices were objectively misleading, to have dismissed as irrelevant the reasonableness and bona fides of AstraZeneca's understanding of its legal rights to a supplementary protection certificate.

AstraZeneca argued that a lack of transparency cannot be sufficient for there to be an abuse, and that to accept such a position is likely to impede and delay applications for intellectual property rights in Europe. According to AstraZeneca, there are compelling reasons why deliberate fraud or deceit should be a requirement for a finding of abuse in circumstances such as this alleged abuse, and it referred in this context to the US regime under which only patents that are obtained fraudulently can be challenged under competition law, in order not to stifle patent applications.

The ECJ concluded that the General Court was fully entitled to find that AstraZeneca's consistent and linear conduct, characterised by the notification to the patent offices of highly misleading representations and by a lack of transparency, by which it deliberately attempted to mislead the patent offices in order to keep for as long as possible its monopoly on the PPI market, clearly fell outside the scope of competition on the merits.

Abuse of dominance is an objective concept and must be assessed on objective factors, and proof of the deliberate nature of the conduct and of the bad faith of the dominant undertaking is not required in order to identify an abuse of a dominant position.  According to the ECJ, this by no means implies that dominant companies must be infallible in their dealings with regulatory authorities and that each objectively wrong representation made will constitute an abuse.  The assessment of whether representations made to public authorities for the purpose of improperly obtaining exclusive rights are misleading, must be made taking into account the circumstances of each case and will vary according to those specific circumstances.

As for the requirement that the conduct has an effect on competition for there to be a breach of Article 102 TFEU, the ECJ referred to previous case law which establishes that, although the practice of an undertaking in a dominant position cannot be characterised as abusive in the absence of any anti-competitive effect on the market, such an effect does not necessarily have to be concrete, and it is sufficient to demonstrate that there is a potential anti-competitive effect.

The second abuse – selective deregistration of marketing authorisations

AstraZeneca argued that the General Court had misinterpreted the concept of 'competition on the merits', where it held that AstraZeneca's request for withdrawal of certain marketing authorisations was in breach of the competition rules.  The existence of a marketing authorisation entails strict pharmacovigilance obligations and costs and the relevant EU legislation allows companies to surrender a marketing authorisation they no longer require.  To deprive a dominant company of this right of withdrawal and force it to maintain an authorisation it no longer requires would stretch the special responsibility of companies in a dominant position too far.

The ECJ supports the General Court's assessment that the central feature of the abuse concerned AstraZeneca's selective requests for deregistration in Denmark, Norway and Sweden combined with the switch from Losec capsules to Losec MUPS tablets.  It was the context in which the deregistration took place rather than the simple act of deregistration which made it an abuse.

Referring to the 'special responsibility' of companies that hold a dominant position, the Court held that, without objective justification,  AstraZeneca could not use regulatory procedures in such a way as to prevent or hinder the introduction of generic products or parallel imports.  

The level of fine

The ECJ also dismissed AstraZeneca's claim that the fine imposed on it was excessive and should have been reduced due to the novelty of the infringements and their minimal effects on competition.  Although the General Court had held that the abuses were novel as regards the means used, it had correctly concluded that the actual substance of the abuses was not novel at all and that they clearly constituted serious infringements.  As for the argument that they had only had a minimal effect on competition, the General Court was right to find that these were highly anti-competitive abuses that were capable of having a significant effect on competition