In GlaxoSmithKleine Services Unlimited v Commission and Others, (Joined Cases C-501/06 P and others), Advocate General Verica Trstenjak delivered an Opinion which states that the mere existence of an anticompetitive object is sufficient to trigger Article 81(1) EC without any further determination of harm to the final consumers. At the same time, the Opinion stresses the Commission's obligation to pay due regard to any economic evidence presented by the parties in support of the Article 81(3) EC exemption.

Comment

The Opinion of the Advocate General sends a clear signal that an agreement which has an object of restricting competition will be caught by Article 81(1) EC. At the same time, the Advocate General agreed with the CFI that the Commission had not carried out an adequate examination of the exemption criteria. It is the latter point that should be particularly important to pharmaceutical companies, which have long been trying to convince the Commission and European Courts that special characteristics of the industry may be sufficient to justify an exemption. It is interesting to put the present Opinion in the context of the last year's ECJ Syfait II judgment, which, although it dealt with Article 82 EC, shows the increasing acceptance by the European Courts of special characteristics of the pharmaceutical industry and the growing pressure on the Commission to justify its position. The Opinion of the Advocate General is not binding upon the ECJ, so it remains to be seen whether the Judges in the ECJ will follow it.

Background

In 1998, GSK adopted a set of new sales conditions for its Spanish wholesalers, which provided that the wholesalers would have to pay higher prices for products which they export than for products which they resell for consumption on the domestic market. These conditions were an attempt to limit parallel trade in medicines within the EU originating in Spain, where the health administration sets lower maximum prices than the rest of the EU. GSK notified its arrangements to the Commission and applied for negative clearance or exemption under Article 81(3) EC. GSK argued that its pricing system did not restrict competition because the price differences between Member States result from national price regulations, and that in any event there were consumer welfare arguments for justifying any restriction on competition, referring to the losses suffered as a consequence of parallel trade which seriously affect its R&D budget for developing new and innovative drugs.

Commission's decision – May 2001

The Commission adopted a decision that GSK had infringed Article 81 EC by concluding an anti-competitive agreement with its wholesalers having both the object and effect of restricting competition and rejected its request for an exemption under Article 81(3) EC on the basis that it had not proved to the Commission that the exemption criteria had been met. The Commission ordered GSK to end its dual pricing system with immediate effect. GSK appealed that decision before the CFI.

Court of First Instance judgment – October 2006

The Court of First Instance ("CFI") agreed that the Commission had erred in concluding, without assessing the effects of the agreement, that the sales conditions infringed Article 81(1) EC by virtue of their object of restricting competition. The CFI found however that GSK had not succeeded in calling into question the Commission's subsidiary conclusion that the dual pricing provision had the effect of depriving final consumers of the advantage they would have derived from price reduction, if parallel trade had been allowed to take place. GSK's argument that the dual pricing was justified by virtue of the regulatory conditions on the market was not accepted, and the CFI upheld the Commission's conclusion that the sales conditions constituted an agreement which had the effect of restricting competition contrary to Article 81(1) EC.

With reference to the Commission's analysis of the agreement under Article 81(3) EC, in order to establish whether the agreement did merit an exemption, the CFI concluded that the Commission did not carry out an adequate examination balancing the advantages of the agreement against the disadvantages for competition. Although it is up to a person relying on Article 81(3) EC to demonstrate that each of the four cumulative conditions are satisfied, the Commission must adequately examine the arguments and evidence presented to it in order to determine whether they satisfy those conditions. In this case the Commission's decision focused on the first of the Article 81(3) EC conditions, finding that the agreement did not contribute to improving the production or distribution of the goods in question, or to promoting technical or economic progress. The Commission did not find it necessary to examine the other conditions in great detail. In particular, the question whether the agreement may give rise to an economic advantage by contributing to innovation, which plays a central role in the pharmaceutical sector, was not examined with sufficient thoroughness.

The CFI concluded that the decision was "vitiated by a failure to carry out a proper examination" and annulled that part of the Commission's decision in which it rejects GSK' request for an exemption.

AG Opinion – 30 June 2009

The Advocate General proposed that that Court of Justice should uphold the appealed judgment of the Court of First Instance in so far as the judgment requires the Commission to conduct a fresh examination as to whether the restrictive sales condition can be exempted under Article 81(3) EC. Nevertheless, the Advocate General stated that the grounds of the CFI judgment need to be replaced to the effect that the Commission was correct in stating that the agreements were restrictive of competition by object. As a result, the GSK appeal, which related to the effect of the agreements on the final consumer, is irrelevant.

The Advocate General observed that the CFI made an error of law as it did not regard the object of restricting parallel trade as a sufficient basis for finding a restriction of competition by object under Article 81(1) EC but required the additional determination of whether such restriction by object resulted in a restriction of competition detrimental to the final consumer. The Advocate General stated that such a two-step approach would be practically ineffective as it would necessitate a detailed market analysis of potential adverse effects on the final consumer, which can be very time consuming and onerous in the context of, for example, a restriction which takes place on an upstream market. However, the Advocate General stressed that such an approach to agreements which are restrictive by object does not result in a per se prohibition as it does not prevent the company from presenting a wide range of evidence showing benefit to the final consumer in the context of Article 81(3) EC.

In the context of Article 81(3) EC, the Advocate General stated that even thought the burden of presenting convincing evidence relating to Article 81(3) EC is entirely on the undertaking, the Commission is under an obligation to review any such evidence in a sufficiently detailed manner, assessing each of the conditions listed within Article 81(3) EC.

Advocate Generals' opinions are not binding on the Court, although in the majority of cases they are followed by the judges. The final judgment in this case is expected to be published before the end of the year.