Under EU and UK competition law, dominant companies have a special responsibility not to engage in certain types of behaviour (the “abuse” of a dominant position). Companies which are or may be dominant in the EU or which trade with such companies should be aware of the scope of these rules.
The categories are not closed and there are a wide range of potential abuses. In addition to facing enforcement action from regulators, companies which infringe the law can be the target of private damages claims from affected third parties.
One of the types of abuse of a dominant position is excessive pricing. Although there are relatively few examples of this being investigated, recent months have seen two cases in the UK.
On 7 December 2016, the CMA imposed a record GBP84.2 million fine on the pharmaceutical manufacturer Pfizer, and a GBP5.2 million fine on the distributor Flynn Pharma, after finding that both broke competition law by charging excessive and unfair prices in the UK for phenytoin sodium capsules, an anti-epilepsy drug. The CMA also ordered the companies to reduce their prices. Both companies will continue to be able to charge prices which are profitable, but their prices must not be “excessive and unfair.”
The fines follow prices increasing by up to 2,600 percent overnight after the drug was deliberately de-branded in September 2012. The prices of the drug in the UK have also been many times higher than Pfizer’s prices for the same drug in any other European country. De-branded (genericised) drugs are not subject to price regulation in the UK, which was the reason for the de-branding.
In the second case, the CMA announced on 16 December 2016 that it has provisionally found that Actavis UK has broken competition law by allegedly charging excessive prices for hydrocortisone tablets. Following de-branding (or genericising), the company allegedly increased the price of 10 mg hydrocortisone tablets by over 12,000 percent in 2016 compared to the branded version of the drug which was sold by a different company prior to April 2008.
These cases show not only the continuing focus of the CMA on healthcare markets, but also that even relatively unusual types of abuse of a dominant position are at risk of enforcement. In addition, in this case, the purchaser (the UK National Health Service) is likely to bring private damages claims against the companies in order to recover its overpayments.