European Competition Law Newsletter – April 2017

April 3, 2017

Table of Contents

  • Brexit Has Begun; Prepare for the Worst Case
  • Another Pharma Pay-for-Delay Case in the UK
  • UK Investigates Cartel in a Very Small Market
  • UK Implements EU Antitrust Damages Directive
  • Gazprom Agrees to Stop Dividing EU Markets

Brexit Has Begun; Prepare for the Worst Case

On 29 March 2017, the UK government gave formal notice to the other EU member states that the UK is leaving the EU. That started the two-year negotiating period during which the UK government hopes to agree to not only the UK’s withdrawal (“divorce”) agreement, but also a new trading relationship, plus a transitional agreement, with the EU going forward.

This is hugely ambitious, and at this stage, the worst-case scenario — that there will be no trade or transitional arrangement in place with the EU from March 2019 — seems the most likely result. The EU and UK would then trade with each other on the basis of the World Trade Organization rules, with or without UK “schedules” (specific commitments in various areas) in place.

EU and UK competition law continues to apply in the normal way and will do so until the UK actually leaves the EU. Nevertheless, there are various competition-law-related issues to keep in mind pre-Brexit (see our previous alert on this topic).

Another Pharma Pay-for-Delay Case in the UK

The UK Competition and Markets Authority (CMA) announced on 3 March 2017 that it is investigating another alleged breach of competition law arising out of a type of pay-for-delay arrangement in the pharmaceutical sector. 

This follows several pay-for-delay patent settlement cases at EU and UK levels and an important EU General Court (GC) judgment last year. In this new case, the CMA alleges that Concordia (formerly Amdipharm) and Actavis UK (formerly Auden Mckenzie) entered into agreements under which Actavis UK incentivised Concordia not to enter the market with its own competing version of hydrocortisone tablets.

Under the agreements, Actavis UK allegedly instead supplied Concordia with a fixed supply of its own 10 mg tablets for a very low price for Concordia to resell to customers in the UK. Actavis UK remained the sole supplier of the tablets in the UK during most of this period, when the cost of the drug to the NHS rose from £49 to £88 per pack. Concordia was the first potential competitor to Actavis UK to obtain a marketing authorisation for 10 mg hydrocortisone tablets, a necessary step to enter the market and compete with Actavis UK.

Although this may not be a true pay-for-delay patent settlement case, the CMA appears to be focussing on all of the key points developed in the previous cases and to a large extent upheld by the GC. The basic concern is that an originator company provides a value transfer (a reverse payment) to a potential competitor (a generic supplier) which induces it to agree to restrictions on its market entry.

UK Investigates Cartel in a Very Small Market

National competition regulators in the EU regularly investigate very narrow and small markets, not least in the cartel field. The UK CMA provided an example recently when it fined estate agents for implementing a price-fixing arrangement in one small town (Burnham-on-Sea).

Under the arrangement, the companies colluded to set minimum commission rates for residential property sales at 1.5 percent, with a view to denying local homeowners selling their property the chance of securing a better deal. One participant was not fined as it was the first company to confess its participation in the cartel.

The case shows that every company active in the UK needs to consider its competition law compliance arrangements and make sure it has an appropriate policy and training in place. Well-designed arrangements can identify potential wrongdoing and therefore allow the company to self-report wrongdoing and potentially protect itself from fines.

UK Implements EU Antitrust Damages Directive

Private competition (antitrust) litigation continues to develop rapidly in the UK. Cases can either be standalone (not relying on a regulatory decision to prove an infringement of competition law) or follow-on (relying on a regulatory decision). The full range of remedies is available, including injunctions to stop anticompetitive behaviour and damages for demonstrated loss.

The EU Antitrust Damages Directive, which should have been implemented in all EU member states by 27 December 2016, is designed to remove practical obstacles to compensation for all victims of infringements of EU antitrust law. The directive applies to all damages actions, whether individual or collective, which are available in the member states. In some states, the rules applying to date have been very restrictive (for example, in relation to discovery/disclosure of documents from the other parties), and therefore the directive is likely to have a dramatic effect.  

Current UK rules heavily influenced the directive, so the changes in the UK will be less dramatic. Nevertheless, some modifications are required, and on 9 March 2017, the principal implementing rules for the directive were brought into force in the UK by statutory instrument. This is a significant moment in the development of private competition litigation in the UK, in particular since the substantive changes brought into force (such as a presumption of harm to customers arising out of cartel infringements) apply only to cases where the loss was suffered on or after 9 March as a result of an infringement of competition law that took place on or after that day.

Gazprom Agrees to Stop Dividing EU Markets

It is a basic principle of EU competition law that companies should not agree to restrict cross-border EU trade or (if in a dominant position) do this unilaterally. Even the most powerful companies have fallen foul of this rule, as demonstrated by the European Commission’s long-running investigation into Gazprom.

Gazprom is the dominant gas supplier in a number of Central and Eastern European countries. The European Commission (EC) alleged in 2015 that Gazprom had been breaking EU competition rules by pursuing an overall strategy to partition Central and Eastern European gas markets. On 13 March 2017, an important development occurred in this case when the EC announced that Gazprom had agreed to changes in its behaviour.

Gazprom has agreed to remove restrictions on the reselling of natural gas cross-border, so facilitating such cross-border flow of gas in Central and Eastern European gas markets. In addition, natural gas prices in Central and Eastern Europe will now reflect competitive price benchmarks and Gazprom cannot act on any advantages concerning gas infrastructure, which it obtained from customers by having leveraged its market position in gas supply.

It is relatively unusual to hold a dominant position, so that unilateral behaviour can be impacted by competition law, but companies which are customers or competitors of dominant companies should be aware of the possibility to use competition law to protect their own positions.

Additional European competition law news coverage can be found in our news section.

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Matthew Hall