European Court of Justice, Decision of 30 January 2020 in Case C-307/18
14 February 2020 – The European Court of Justice (CJEU) decided on the interpretation of art. 101 and art. 102 of the Treaty on the Functioning of the European Union (“TFEU”) in a preliminary ruling procedure. The reference submitted by the Competition Appeal Tribunal of the United Kingdom concerned the legality of amicable settlement agreements. GlaxoSmithKline plc (“GSK”) held a process patent for an antidepressant. When the patent expired in 1999, several companies were considering entering the market with generics. This resulted in a legal dispute, which was finally settled amicably by agreements.
The CJEU first pointed out that an agreement between undertakings is covered by the prohibition in art. 101 para. 1 TFEU only if it appreciably restricts competition within the internal market. This presupposes that the undertakings concerned are at least potential competitors. In this respect, it has to be examined whether the manufacturer of generics in question has in fact a firm intention and an inherent ability to enter the market, and that its market entry does not meet barriers that are insurmountable. Further, a settlement agreement whereby a manufacturer of generic medicines undertakes not to enter the market and not to pursue its action for the revocation of a patent for the duration of that agreement, in return for transfers of value in its favor by the manufacturer, “constitutes an agreement which has as its object the prevention, restriction or distortion of competition:
- if it is clear from all the information available that the net gain from the transfers of value by the manufacturer of originator medicines in favor of the manufacturer of generic medicines can have no explanation other than the commercial interest of the parties to the agreement not to engage in competition on the merits;
- unless the settlement agreement concerned is accompanied by proven pro-competitive effects capable of giving rise to a reasonable doubt that it causes a sufficient degree of harm to competition.”
With regard to an abuse of a dominant position, the CJEU first of all stated that in case of a medicinal product whose manufacturing process is still protected by a patent, generic products must also be included in the product market if they can provide a serious counterbalance. Secondly, the identification of an abuse requires an intervention in the competitive structure, which goes beyond the specific effects of the individual agreements prohibited by art. 101 TFEU. As they may also have restrictive effects on competition in their entirety, their conclusion may have a significant foreclosing effect on the market.
For the full decision, see here.