EU/UK Competition Law Newsletter – February 2011

February 1, 2011

European Commission Continues Focusing on Pharmaceutical Companies

The European Commission (EC) has addressed information requests to selected originator and generic pharmaceutical companies, asking them to submit copies of their patent settlement agreements concluded in the European Economic Area (EEA) in 2010. This is the second monitoring exercise following the EC’s competition sector inquiry of 2009 that pointed to significant risks for European consumers stemming from certain types of patent settlements.

Since the inquiry, the EC has also opened two formal investigations under EU competition law into particular companies looking at practices that may inhibit the entry of generic drugs. Most recently, in November 2010, it conducted dawn raids at various companies due to suspicions that they may have acted to delay generic entry for a particular medicine. There will no doubt be further competition law developments during 2011 affecting this sector.

UK OFT Finds Possible Illegal Information Exchange from Use of Software Product

On Jan. 13, 2011, the UK Office of Fair Trading (OFT) announced that seven insurance companies and two IT software and service providers had provisionally agreed to limit the data they exchange between them after the OFT raised competition law concerns. This followed an OFT investigation which identified an increased risk of price coordination among motor insurers using a specialist market analysis tool called “Whatif? Private Motor.” The tool allowed insurers to access not only the pricing information they themselves provided to brokers, but also pricing information supplied by other competing insurers.

The companies now propose, by way of a settlement with the OFT and without admitting liability, to exchange pricing information through the analysis tool, only if that information meets certain principles agreed with the OFT. These would require the pricing information to be anonymous and aggregated across at least five insurers and already “live” in broker-sold policies. To the extent that similar tools are used in the insurance or any other industry in the UK or elsewhere in the EU, the same competition law concerns could arise.

Another Warning about Information Exchange – Be Careful With Whom You Speak

On Jan. 20, 2011, the UK OFT issued a formal decision that Royal Bank of Scotland (RBS) and Barclays engaged in anticompetitive practices in relation to the pricing of loan products to large professional services firms, and imposed a fine of GBP28.59 million on RBS. Barclays brought the matter to the OFT’s attention, and under the OFT’s leniency policy, was not fined. RBS admitted to certain breaches of competition law, and agreed to cooperate with the OFT, in return for a reduction in its fine.

The specific breaches were the disclosure by individuals in RBS’s Professional Practices Coverage Team of generic as well as specific confidential and commercially sensitive future pricing information to their counterparts at Barclays. The disclosures took place through a number of contacts on the fringes of social, client or industry events or through telephone conversations. The case is a reminder of the ease with which companies can exchange confidential information and run into trouble as a result.

ECJ Confirms Parent Company is Responsible for Subsidiaries’ Actions

The issue of parental responsibility under competition law for the actions of a subsidiary was the subject of the European Court of Justice’s (ECJ) Jan. 20, 2011, judgment in the General Química case. The ECJ confirmed once again that, for the purposes of EU competition law, a 100% shareholding in a subsidiary (even if this is indirect through another wholly owned subsidiary) gives rise to a presumption that the parent directs the subsidiary and accordingly is responsible for its actions. The presumption is in theory rebuttable. However, this is difficult, and as shown by this case, normal delegation of managerial and administrative functions to the subsidiary will not be enough to rebut the presumption.

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

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