ECJ rules on pay for delay
In a wide ranging and important
judgment the European Court of Justice (ECJ) has ruled on various questions
referred to it by the UK Competition Appeal Tribunal.
The ruling arises out of an
appeal against a decision of the Competition and Markets Authority finding
that GlaxoSmithKline, Alpharma Limited and Generics (UK) Limited infringed EU
and UK competition law through patent settlement agreements that it found
delayed the generic entry of paroxetine.
As to the question of whether manufacturers of generic drugs who had not
yet entered the market were potential competitors, the ECJ ruled that it was
necessary to consider whether the manufacturer of generic medicines has
a firm intention and an inherent ability to enter the market, having regard to
barriers to entry. Patent rights of
themselves do not constitute an unsurmountable barrier to entry.
As to the question of restrictions of competition by object, the ECJ
ruled that patent settlements whereby a generic manufacturer agrees not to enter
the market or challenge a patent in return for a transfer of value have the
object of restricting competition if it is clear that this can have no explanation
other than the commercial interest in the parties not competing.
As to the question of restriction of competition by effect, the ECJ
ruled that it is necessary to determine how the market will probably operate in
the absence of the practice.
As to abuse of dominance, the ECJ ruled that a set of settlement
agreements which have, at the least, the effect of keeping potential
competitors temporarily outside the market constitutes an abuse, provided that the
strategy has the capacity to restrict competition.
Case C-307/18 , Generics (UK) Ltd e.a. v Competition and Markets
Authority ECLI:EU:C:2020:52
The Competition and Markets Authority (CMA) has withdrawn is second stage inquiry into the proposed acquisition by Illumina, Inc. of Pacific Biosciences of California, Inc.
The reference was made on 27 June 2019. On 24 October the CMA provisionally found that the merger may be expected to give rise to a substantial lessening of competition in the market for the supply of next generation DNA sequencing in the UK.
The CMA invited views on possible remedies including divestment or licensing of IP.
The review period was extended to 5 February 2020 but the CMA reported on 3 January that the parties have abandoned their merger. The CMA therefore cancelled its reference.
Meanwhile the US Federal Trade Commission (FTC) was investigating the transaction and in December 2019 proposed to block it. The CMA confirmed that it was cooperating with the FTC in its investigation.
The parties have announced that they are disappointed not to have completed their deal. Sometimes the weight of regulatory scrutiny on both sides of the Atlantic cannot be overcome through remedies that would still keep intact the commercial rationale of a transaction.