EU/UK Competition Law Newsletter – August 2010

August 2, 2010

Court Confirms Misuse of Regulatory Procedures May be Abuse of Dominant Position

On July 1, 2010, the EU General Court upheld on appeal the principal points of a European Commission decision from 2005 in a case concerning AstraZeneca (AZ). The commission found that AZ had misused the patent system and the procedures for marketing pharmaceutical products to prevent or delay the market entry of generic products which competed with the anti-ulcer drug Losec, and to prevent parallel imports of Losec. These were abuses of the company’s dominant position in various countries in the EU for so-called proton pump inhibitors (of which Losec was the first).

The court agreed that AZ had misled the patent offices of several countries for the purpose of obtaining Supplementary Protection Certificates (SPCs), which grant extended patent protection, to which it was not entitled or to which it was entitled but for a shorter period. So far as concerns marketing procedures, the court found that a key purpose of the company’s deregistration of market authorizations of Losec granted by national medicines agencies in certain countries was to exclude competition from generics firms and parallel traders. Neither activity was in keeping with “the special responsibility of dominant companies not to impair, by methods falling outside the scope of competition on the merits, genuine undistorted competition.”

This case is significant generally for dominant companies dealing with regulators, and specifically in the context of the commission’s continuing investigation of actions taken by originator companies to delay or prevent the marketing of generics following its 2009 report on competition in the pharmaceutical sector.

Commission’s Analysis of Acquisition of Minority Stake Upheld but Case Isn’t What it Seems

On July 6, 2010, the EU General Court upheld on appeal two European Commission decisions, which both arose out of the attempted takeover of airline Aer Lingus by Ryanair. This transaction was blocked by the commission in June 2007, under the EU Merger Regulation (EUMR) due to overlaps on routes to and from Ireland. In a separate October 2007 decision, the commission concluded that it had no jurisdiction under the EUMR to require Ryanair to divest its (at the time) 25.17% stake in Aer Lingus, since this did not give Ryanair control over Aer Lingus.

It is the judgment in the appeal of this October 2007 decision which is of general interest, but the particular facts of the case are crucial. The court agreed that the stake did not give Ryanair effective control over Aer Lingus. Despite the transaction having been blocked, the commission therefore could not force the sale of this stake under the EUMR on the basis that the acquisition had nevertheless taken place.

However, the key point is that the court distinguished the Ryanair/Aer Lingus situation, concerning whether a blocked transaction had nevertheless been implemented in breach of the EUMR, from the ban on implementation of a transaction prior to clearance (gun-jumping). The judgment therefore does not provide a precedent for early acquisitions of such minority stakes under the EUMR (or similar national rules) prior to clearance of the full acquisition.

ESA Finds Abusive Exclusivity Agreements and Imposes First Competition Law Fine

In a little-noticed case, on July 14, 2010, the EFTA Surveillance Authority, the equivalent of the European Commission for Norway, Iceland and Liechtenstein, handed down its first ever competition law fine. The case provides a reminder that a network of exclusivity agreements can give rise to an abuse of a dominant position.

The case concerned exclusivity agreements entered into by Posten Norge, the national postal operator in Norway and a leading provider of parcel delivery services, under which it had established parcel collection points at various third-party retail outlets. These agreements made it difficult for competing suppliers of parcel delivery services to establish their own networks, giving rise to an abuse for which Posten Norge was fined EUR13 million.

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

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