EU/UK Competition Law Newsletter – May 2013

May 1, 2013

Not Just Because You Say So; EU General Court Guidance on Proving Parallel Behaviour Is Not Independent

An EU General Court (GC) judgment has considered the difficult issue of independent parallel behaviour by competitors under EU competition law, and in particular when this strays into a “concerted practice”. This issue is important since an illegal anticompetitive agreement (such as a cartel) can arise under EU law not only when there is a true agreement or understanding between parties, but also simply on the basis of a “concerted practice”.

The judgment, handed down on 12 April 2013, concerned an appeal against a 2008 European Commission (EC) decision concerning 24 European collecting societies (which manage copyright relating to musical and other works in individual countries). One part of the decision found a concerted practice between the collecting societies, under which each collecting society limited, in its reciprocal representation agreements with other collecting societies, the licence granted to another society to the territory of that other society.

The GC found that the EC did not have documents proving the existence of concertation between the collecting societies as regards the territorial scope of the mandates which they granted each other. Further, the EC had not shown that it was implausible that the parallel conduct of the collecting societies was due to the need to fight effectively against unauthorized musical works, as opposed to being due to concertation.

The judgment therefore confirms once again that genuine unilateral decision making does not raise competition law concerns, even where competitors take the same approach. In order for apparently independent behaviour to become potentially problematic on the basis that it amounts to a concerted practice, the EC (or other competition regulators) must provide evidence of concertation or at least show that the explanations provided by the parties under investigation are implausible and that the only reasonable explanation is concertation.

UK Court Awards Damages for Abuse of Dominance

On 28 March 2013, in a very unusual case, the UK Competition Appeal Tribunal (CAT) awarded damages in a private claim relating to an abuse of dominance. The claim was based on the finding, also made by the CAT, that water company Dŵr Cymru had infringed the UK prohibition on abuse of dominance (it was therefore a “follow-on” claim). This earlier finding of the CAT was that the price at which Dŵr Cymru was prepared to offer third-party Albion Water a common carriage service to carry water through its pipes amounted to an abuse by Dŵr Cymru of its dominant position in that it (i) imposed on Albion a “margin squeeze” (not allowing a sufficient margin between the wholesale and Dŵr Cymru’s own retail price so as to allow Albion to make a profit on its retail services) and (ii) was anyway excessive and unfair.

Albion contended that it had suffered various types of loss and damage by reason of these abuses. The CAT agreed and awarded Albion total damages of around GBP1.9 million, plus interest. A claim for exemplary damages was dismissed.

This important judgment marks the second time that the CAT has awarded damages in a follow-on case and shows again that private competition law litigation in the UK continues to develop apace.

UK Office of Fair Trading Moves on Pharma Pay for Delay

On 19 April 2013, the UK Office of Fair Trading (OFT) announced that it had issued a Statement of Objections (preliminary statement of case) to a number of pharmaceutical companies alleging that they acted to delay effective competition in the UK supply of paroxetine, a prominent antidepressant medicine. The allegations concern so-called ‘pay for delay’ agreements, where a manufacturer of branded pharmaceuticals makes payments (or other transfers of value) to a generic company in return for that generic company’s agreeing to delay its independent entry into the market.

The generic companies (Alpharma, Generics (UK) and Norton Healthcare) were each attempting to supply a generic paroxetine product in competition to the originator’s (GlaxoSmithKline [GSK]) branded paroxetine product. However, in each case, GSK challenged the generic companies with allegations that their products would infringe its patents. To resolve these disputes, each of the generic companies concluded one or more agreements with GSK.

The OFT’s provisional view is that these agreements included substantial payments to the generic companies in return for their commitment to delay their plans to supply paroxetine independently. This could, in the OFT’s view, amount to a breach of the EU and UK bans on anticompetitive agreements and an illegal abuse by GSK of its dominant position. 

This case is similar to several at EU level and shows the continued interest by EU competition regulators in the issue of settlement agreements in the pharmaceutical sector. In principle, there is no reason why similar issues in other industries would not also raise similar issues.

Compliance Warning: Trade Associations Should Stick to Their Remit

The OFT announced on 26 March 2013 that the UK Asbestos Training Association (UKATA) had, following discussions with the OFT, ended an arrangement that appeared to recommend the prices at which its members provide training services.

As a general rule, pricing recommendations made by trade associations to their members may raise serious competition concerns where they result in those members not competing with each other on the merits. This is a type of price fixing and therefore trade associations (and their members) need to be very careful when discussions or activities stray into this area. Emphasising this, the OFT commented: “[This] announcement sends out a wider message to trade associations that they should not undertake initiatives that could result in reduced price competition between their members. The OFT will continue to prioritise investigating such suspected arrangements in the future.”

As part of the agreement between UKATA and the OFT, UKATA also confirmed that it will ensure that its members compete on the price of asbestos awareness training services, that it will not enter into any similar arrangements and that it will provide further guidance to its members on the importance of complying with competition law.

Although it might have been able to do so, the OFT did not impose a fine but instead closed its file on the basis of the agreement reached with UKATA. This was because the arrangement was of short duration, it had not yet had a significant impact on purchasers of the training services and UKATA had taken comprehensive and swift action to ensure compliance with competition law.

This is not a new concern of the OFT; a recent case in which the OFT scrutinised a price recommendation by a trade association resulted in the publication by the OFT of an unusual opinion on how various interested parties can collaborate together to speed up rural broadband roll-out in the UK.

Additional EU/UK competition law news coverage can be found in our news section.

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