European Competition Law Newsletter – June 2017

June 1, 2017

Table of Contents

  • EU Regulators Open Pharma Pricing Investigations Focusing on Abuse of Dominance
  • Merger Control 101: Do Not Jump the Gun or Provide Incorrect Information
  • Use of Most Favoured Nation Clauses in E-Commerce
  • Major European Commission Report on E-Commerce Flags Further Investigations

EU Regulators Open Pharma Pricing Investigations Focusing on Abuse of Dominance

The European Commission and UK Competition and Markets Authority (CMA) have both opened new investigations into alleged abuses of dominance by pharmaceutical companies. These cases show the continuing focus by competition regulators in the EU on the healthcare sector. They also show once again that customers and competitors of dominant companies may be able to use competition law to protect their businesses against anti-competitive practices.

The Commission announced the opening of its investigation on 15 May 2017. It is concerned that Aspen Pharma may have engaged in abusive excessive pricing concerning five cancer medicines. This is the Commission’s first investigation into concerns about excessive pricing practices in the pharmaceutical industry.

In particular, the Commission will investigate information alleging Aspen has imposed significant and unjustified price increases of up to several hundred percent. For example, the Commission has information alleging that, to impose such price increases, Aspen threatened to withdraw the medicines in question in some EU member states and did so in certain cases.

The CMA announced on 23 May 2017 that it had issued a statement of objections (preliminary statement of case) to the pharmaceutical company Merck Sharp & Dohme Limited (MSD). The CMA alleges that MSD operated an anti-competitive discount plan for its medicine Remicade.

Remicade is the brand name for MSD’s version of a biological medicine called infliximab, which is used primarily in the treatment of patients with gastroenterology and rheumatology conditions such as Crohn’s disease, ulcerative colitis and rheumatoid arthritis. The CMA alleges that the discount plan for Remicade likely restricted competition from “biosimilar” versions of infliximab new to the market.

Merger Control 101: Do Not Jump the Gun or Provide Incorrect Information

On 18 May 2017, the Commission provided two examples of how companies can run into trouble by infringing the merger control rules. One case concerned gun-jumping and the other concerned providing incorrect or misleading information. The same principles apply in most jurisdictions around the world and, given the wide scope of application of the rules in many countries, companies should proceed carefully.

In a case concerning provision of information, the Commission fined Facebook €110 million for providing incorrect or misleading information during the Commission’s 2014 investigation under the EU merger rules of Facebook’s acquisition of WhatsApp. The obligation to provide accurate information applies regardless of whether the information impacted the ultimate outcome of the merger assessment.

When Facebook notified the Commission about the WhatsApp acquisition in 2014, it said it could not establish reliable automated matching between Facebook users’ accounts and WhatsApp users’ accounts. However, in August 2016, WhatsApp announced updates to its terms of service and privacy policy, including the possibility of linking WhatsApp users’ phone numbers with Facebook users’ identities. The Commission investigated and found that the technical possibility of automatically matching Facebook and WhatsApp users’ identities already existed in 2014, and that Facebook staff knew of such a possibility.

In the gun-jumping case, the Commission has sent a statement of objections (preliminary statement of case) alleging that telecommunications company Altice breached EU merger rules by implementing its acquisition of PT Portugal before notification to or approval by the Commission.

In February 2015, Altice notified the Commission of its plans to acquire PT Portugal. The Commission cleared the transaction subject to conditions on 20 April 2015. The Commission alleges that, instead of waiting for clearance as required by the EU merger rules, Altice implemented the acquisition prior to the adoption of the Commission’s clearance decision, and in some instances, prior to its notification to the Commission.

In particular, the Commission considers that the purchase agreement between the two companies put Altice in a position to exercise decisive influence over PT Portugal before notification or clearance of the transaction and that, in certain instances, Altice exercised decisive influence over PT Portugal.

Use of Most Favoured Nation Clauses in E-Commerce

Competition law regulators across the EU continue to focus on online selling. One issue that resulted in numerous investigations is the use of most favoured nation (MFN) clauses.

On 4 May 2017, the Commission adopted a decision accepting commitments from Amazon addressing concerns relating to a number of MFN clauses in Amazon’s distribution agreements with e-book publishers in the EU. Amazon will no longer enforce or introduce the clauses in agreements with publishers.

The clauses required publishers to offer Amazon similar (or better) terms and conditions as those offered to its competitors and/or to inform Amazon about more favourable or alternative terms given to Amazon’s competitors (hence, they were MFN clauses). The clauses covered price and many aspects a competitor can use to differentiate itself from Amazon, such as an alternative business (distribution) model, an innovative e-book or a promotion.

The Commission considered that such clauses could make it more difficult for other e-book platforms to compete with Amazon by reducing publishers’ and competitors’ ability and incentives to develop new and innovative e-books and alternative distribution services.

Major European Commission Report on E-Commerce Flags Further Investigations

On 10 May 2017, the Commission published the final report following the conclusion of its e-commerce sector inquiry.

The Commission launched the e-commerce sector inquiry in May 2015 in the context of its digital single market strategy. During the inquiry, the Commission gathered evidence from nearly 1,900 companies operating in e-commerce of consumer goods and digital content and analysed around 8,000 distribution and license contracts.

In publishing the report, the Commission said the insight gained from the sector inquiry will enable it to target EU competition law enforcement in EU e-commerce markets, which will include opening further investigations. In February 2017, the Commission opened three separate investigations into holiday accommodation, PC video games distribution and consumer electronics pricing practices that may limit competition.

The Commission also name-checked several companies it said had reviewed their commercial practices on their own initiative. This includes companies in the clothing industry and other retail sectors.

The report covers consumer goods and digital content and provides a detailed analysis of practices in these markets and the competition law concerns that may arise. It is essential reading for any company selling via e-commerce in the EU, whether directly or through distributors.

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

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