Anticompetitive agreementsAssessment framework
What is the general framework for assessing whether an agreement or concerted practice can be considered anticompetitive?
Article 1(1) of the Spanish Competition Act 15/2007 (SCA) prohibits all agreements, collective decisions or recommendations, or concerted or consciously parallel practices, that have as their object, have, or potentially have the effect of preventing, restricting or distorting competition in all or part of the Spanish market. Agreements that would otherwise be caught by article 1(1) of the SCA may be exempted if they generate efficiencies that benefit consumers, do not impose restrictions that are not indispensable for the attainment of these efficiencies and do not eliminate competition on the relevant market.
Pursuant to the SCA, EU block exemption regulations also apply in the national context (ie, to agreements that do not affect trade between member states). Although article 1 of the SCA closely mirrors article 101 of the TFEU, it differs from the latter in that it explicitly prohibits ‘conscious parallel practices’, a form of concerted practice that has also been developed in the case law of the Court of Justice of the European Union (CJEU). The Spanish competition authority defined this practice in its 2001 decision in Laboratorios Farmacéuticos as ‘a harmonised behaviour by various market participants that is not the result of an express or tacit agreement, but the result of carrying out their respective actions with the purpose of avoiding disharmony’. In the Vaccines case of 1998, the Spanish Competition Authority for Markets and Competition (CNMC) relied on mere incidental evidence for its finding of a concerted bid-rigging practice. In October 2015, the CNMC closed proceedings against several pharmaceutical companies and the Spanish Federation of Health Technology Companies for alleged information exchanges and price-fixing agreements, without deciding on the substance, since the alleged infringements were time barred.
In a decision of 12 January 2016, the CNMC dismissed a complaint by a regional health authority against the Ministry of Health (MoH), Farmaindustria and several pharmaceutical companies, in relation to an alleged concerted practice not to participate in a tender organised by the regional authority to select pharmaceutical products to be dispensed in pharmacies in the case of prescription by active substance and certain measures taken by the MoH against the initiative of that authority. According to the CNMC, the conduct of the MoH fell outside the scope of competition law since the MoH acted as a public authority and the conduct of the pharmaceutical companies could be explained by the legal uncertainty concerning the legality of the tender organised by the regional health authority, the competence of which to organise such a tender had been challenged by the Spanish government before the Constitutional Court. Further to an investigation into alleged market sharing and bid rigging in the supply of medical gases to hospitals, the CNMC concluded in July 2017 that the alleged infringement of article 1 of the SCA had not been established and closed the case.
With regard to collective recommendations, in its 2009 decision Productos Farmacéuticos Genéricos, the CNMC fined four pharmaceutical associations for making collective recommendations in an attempt to harmonise the economic behaviour of pharmacists against Laboratories Davur. However, in a judgment of 24 October 2014, the Supreme Court quashed this decision vis-à-vis one of the associations (it did not grant leave to appeal to the other three associations), holding that the communications sent by the association to pharmacists were not aimed at harmonising their behaviour in relation to certain price cuts announced by Davur, but essentially provided information on the legislation in force and an interpretation of the legal criteria to determine which product pharmacists are required to dispense (not the cheapest product but the one with the lowest price included in Annex 5 to Order 3997/2006).
In a 2009 decision confirmed by judgment of the Supreme Court of March 2015, the CNC found that a regional health authority and the Council of Official Associations of Pharmacists had infringed article 1 of the SCA by agreeing that the Official Associations of Pharmacists would establish which pharmacies would supply, in rotation, public and private medico-social centres, which amounted to market sharing. In monitoring the compliance with the 2009 decision, the CNMC found, in a decision of September 2014, that certain medico-social centres were implementing a system of rotating shifts between the pharmacies supplying them, but held that the implementation of this system was the result of a unilateral decision of the centres, and was therefore outside the scope of article 1 of the SCA. In a decision of November 2016, the CNMC found that there was no evidence of a concerted practice between pharmacies of the Murcia region, through the Official Association of Pharmacists of that region, to establish a similar system of rotating shifts, but also ordered the investigatory body to continue monitoring since other possible forms of coordination between pharmacies had not been analysed during the investigation and the regional legislation in force promoted the adoption of agreements between pharmacies.
In February 2019, the CNMC started infringement proceedings for alleged market sharing, price fixing and exchange of information in the market for radiopharmaceuticals.Technology licensing agreements
To what extent are technology licensing agreements considered anticompetitive?
Technology licensing agreements are assessed under Commission Regulation (EU) No. 316/2014 of 21 March 2014 on the application of article 101(3) of the TFEU to categories of technology transfer agreements (TTBER), which is applicable mutatis mutandis to article 1 of the SCA. The TTBER provides a general exemption for two-party technology transfer agreements involving patents, know-how or software copyrights if the parties’ market share in any relevant product market or technology market does not exceed 20 per cent (combined, for competitors) or 30 per cent (each, for non-competitors). However, the TTBER exemption generally does not apply to agreements that include restrictions on price, limits on output, market-allocation provisions, or restrictions on the licensee’s ability to conduct research or exploit its own technology.Co-promotion and co-marketing agreements
To what extent are co-promotion and co-marketing agreements considered anticompetitive?
There are no precedents of co-promotion and co-marketing agreements being analysed by the CNMC. While co-promotion agreements are less problematic from an antitrust perspective because the parties are usually not competitors in the manufacturing of the product in question, co-marketing agreements may give rise to horizontal price fixing or market sharing and should, therefore, be carefully assessed. Nevertheless, following the Johnson & Johnson/Novartis decision of the EC, co-promotion agreements might be found to infringe article 1 of the SCA or article 101 of the TFEU if they are entered into by an originator and a generic producer to delay generic entry.Other agreements
What other forms of agreement with a competitor are likely to be an issue? How can these issues be resolved?
Of particular concern to the CNMC since the entry into force of a new Competition Act in 2007 have been the activities of industry associations, and many decisions imposing fines have been adopted. They relate to information exchange schemes – which must not lead to an exchange of individual, non-historic data, but rather limit themselves to the exchange of aggregated historical data – collective recommendations, such as those condemned in the Fedifar and Davur decisions (the latter was quashed vis-à-vis one of the associations by the Supreme Court); and codes of conduct, which must not limit competitive behaviour, such as advertising, beyond what is indispensable to achieve legitimate deontological objectives. In a decision of 23 January 2014, the CNMC found that the declarations made by the president of a generic manufacturer association from his personal Twitter account, concerning generic producers who offered aggressive price reductions to the NHS, were not capable of significantly affecting competition, given their limited reach and short duration. The judgment of the Supreme Court in the Davur case, as well as other judgments that annulled decisions of the competition authority on collective recommendations in other sectors, might lead the authority to raise the standard for a finding of an illegal collective recommendation.Issues with vertical agreements
Which aspects of vertical agreements are most likely to raise antitrust concerns?
Any limitation of parallel trade in vertical agreements is likely to raise competition concerns. After GSK notified a dual-pricing scheme to the EC in 1998, the CJEU held on appeal, on the one hand, that any limitations of parallel trade, also in the pharmaceutical industry, were restrictions of competition by object, and, on the other, that the Commission had been wrong to reject the exemption sought by GSK for that restriction under article 101(3) of the TFEU. The litigation at EU level was accompanied by a number of cases before the Spanish competition authority and the administrative courts, which were eventually all decided in favour of GSK.
Following these precedents, pharmaceutical companies started adopting free-pricing systems instead of the usual supply quota systems operated under the Bayer–Adalat case law of the European courts. Under these schemes, the manufacturers only set one free price, which applies to any situation not leading to a reimbursement under the public price intervention scheme described above. Thus, if a medicine is financed by the National Health System (NHS) and dispensed in Spain, the regulated price set by the state will apply, while medicine exports are subject to the (higher) free price set by the manufacturer.
The EAEPC and a Spanish wholesaler complained against this new pricing scheme to the CNC, which dismissed these complaints, holding that there was no dual pricing and therefore no restriction of competition. On appeal, the Spanish National Court quashed these decisions in two judgments of 2011 and 2012, holding that the scheme limited parallel trade and therefore had to be assessed pursuant to the GSK Spain case law of the CJEU, which qualifies agreements restricting parallel trade as restrictions of competition by object. It also held, however, that under the same case law, the agreements might qualify for exemption under article 101(3) of the TFEU, but that the CNMC had to pronounce itself in this respect. The 2011 and 2012 judgments of the Spanish National Court were confirmed by the Supreme Court in two judgments of 3 December 2014 and 4 March 2016. In particular, in the judgment of 3 December 2014, the Supreme Court rejected that there had not been an agreement for the purposes of article 101 of the TFEU between Pfizer and its wholesalers, since Pfizer had concluded supply contracts with each wholesaler, which included the free pricing provisions. According to the Court, these clauses have as their main object to impede or restrict parallel exports of pharmaceuticals into other member states of the EU. The ruling recalls that the judgment of the Spanish National Court rests on the CJEU’s ruling in GSK Spain, where the Court held that the application of different prices to financed medicines dispensed in Spain and higher prices to exported medicines amounted to a restriction of competition contrary to article 101(1) of the TFEU.
Further to the Supreme Court’s judgments of 3 December 2014 and 4 March 2016, in March 2015, the CNMC started infringement proceedings against Pfizer in relation to a possible restrictive practice consisting of establishing supply contracts liable to impair parallel trade, and in March 2017, it started infringement proceedings against several pharmaceutical companies in relation to the possible establishment of distribution systems involving dual pricing and a possible collusive agreement to establish these systems.
In its decision of 19 January 2017 in the first proceedings, the CNMC held that the pricing system established by Pfizer did not infringe article 1 of the SCA. First, the CNMC found that Pfizer did not establish a dual pricing system with the object of restricting parallel trade, but only set a free price, which was then replaced by the regulated price when the requirements for the application of the latter were fulfilled. According to the CNMC, Pfizer’s behaviour was not an autonomous behaviour, owing to state intervention, and could not therefore be deemed to infringe competition law. Second, the CNMC found that the GSK Spain case law could not be applied by analogy to Pfizer’s case, since the applicable legal framework was different. According to the CNMC, the establishment of a dual pricing system by GSK was the result of a voluntary decision by GSK, who made an extensive interpretation of the legislation then in force that required the application of the regulated price to all financed medicines sold in Spain (independently of where they were dispensed). In the new legal framework that entered into force in January 2000 – in which the regulated price no longer applies to all sales of financed medicines in Spain, but only to sales of financed medicines actually dispensed to patients in Spain – the establishment by Pfizer of different prices for the same medicine merely complied with the applicable legislation, which implicitly introduced the existence of two different prices for the same product.
In its decision of 30 August 2018 in the second proceedings, the CNMC reached the same conclusion regarding the legality of the pricing mechanisms implemented by the pharmaceutical companies being investigated and also found that the companies at issue did not collude to establish these mechanisms.
Similarly, in a judgment of 7 December 2015, the Provincial Court of Madrid held that the GSK Spain case law was not applicable to the free-pricing system of a pharmaceutical company, essentially arguing that the legal framework of the Medicines Act had changed since the GSK Spain case and that the scheme did not amount to dual pricing, but rather was the result of a unilateral decision of the pharmaceutical company. In the same judgment, the Provincial Court held that the restructuring of the distribution system of that pharmaceutical company, which resulted in a reduction in the number of wholesalers, was objectively justified since it pursued the objective of increasing efficiency and therefore could not be held abusive, even assuming that the company were dominant. In October 2018, the Supreme Court denied leave to appeal against the judgment of the Provincial Court of Madrid, which has thus become final.
In October 2018, the CNMC decided not to open infringement proceedings against 20 producers of veterinary medicines for alleged resale price maintenance, territorial restrictions and information exchanges with their distributors. In particular, the CNMC found that the information exchanges at issue did not raise competition concerns since they were carried out in the context of a vertical relation and were necessary for pharmaceutical companies to define their competitive strategies vis-à-vis their competitors.Patent dispute settlements
To what extent can the settlement of a patent dispute expose the parties concerned to liability for an antitrust violation?
No cases have yet been decided, but the CNMC is likely to follow EU precedents, including, in particular, the judgments of the CJEU and the General Court in the Generics, Servier and Lundbeck cases to determine whether an agreement whereby an originator company makes payments or gives other benefits to generic companies for delaying the launch of a generic challenging the originator’s patent (reverse payment patent settlement) may be deemed to infringe article 1 of the SCA or article 101 of the TFEU.
In a decision of 18 June 2014 (Citicolina), the CNMC dismissed for lack of evidence an anonymous complaint against a pharmaceutical company for delaying and impairing generic entry by means of, inter alia, payments made to potential competitors in exchange for not entering the market. In the same decision, the CNMC ordered the Competition Directorate to monitor future developments in the market and, in particular, the granting of marketing authorisation of the active substance at issue and the actual marketing of the authorised products.Joint communications and lobbying
To what extent can joint communications or lobbying actions be anticompetitive?
Joint communications in the context of trade associations can be found anticompetitive if they have the object or effect of harmonising the competitive behaviour of their members. In 2009, the CNMC fined four pharmaceutical associations for making collective recommendations (by means of communications sent to their members and published in the press) in an attempt to harmonise the economic behaviour of pharmacists against Laboratories Davur. This decision was quashed by the Supreme Court vis-à-vis one of the associations on the grounds that the communications sent by the association to pharmacists were not aimed at harmonising their behaviour in relation to certain price cuts announced by Davur, but essentially provided information on the legislation in force and an interpretation of the legal criteria to determine which product pharmacists are required to dispense.
As to lobbying actions, the Spanish competition authority found that the mere agreement within a trade association to submit legislative proposals containing restrictive elements to the administration is not, in itself, capable of restricting competition, while at the same time, it recalled that the activity of trade associations is subject to the SCA and conduct aimed at harmonising the competitive behaviour of members may infringe article 1 of the SCA.Public communications
To what extent may public communications constitute an infringement?
The Spanish competition authority has held that public communications by trade associations or their directors, including press statements, may infringe article 1 of the SCA if they are capable of harmonising the behaviour of the members of the association or of third parties. For instance, in a 2012 decision, the CNMC fined the President of the Tourism Council of the Spanish Confederation of Trade Organisations for public statements made at the International Tourism Fair and to the press, encouraging hotels to increase prices, which were deemed by the CNMC to be a collective recommendation in breach of article 1 of the SCA. However, in October 2013, this decision was quashed by the Spanish National Court that held that the statements at issue were made within the scope of freedom of speech and did not amount to a collective recommendation.
In the pharmaceutical sector, the CNMC found, in a 2014 decision, that the declarations made by the president of a generic manufacturer association from his personal Twitter account, concerning generic producers who offered aggressive price reductions to the NHS, were not capable of significantly affecting competition by harmonising the behaviour of pharmacists, given their limited reach and short duration.Exchange of information
Are anticompetitive exchanges of information more likely to occur in the pharmaceutical sector given the increased transparency imposed by measures such as disclosure of relationships with HCPs, clinical trials, etc?
Taking into account, in particular, the type of data to be published, the level of aggregation and the frequency of publication, transparency obligations undertaken by pharmaceutical companies should not raise competition concerns.
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7 June 2020