Generics (UK) Ltd and Others v Competition and Markets Authority.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2020:52
• Docket Number: C-307/18
• Date: 30 January 2020

JUDGMENT OF THE COURT (Fourth Chamber)

30 January 2020 ( *1 )

(Reference for a preliminary ruling — Competition — Pharmaceutical products — Barriers to the entry on the market of generic medicines arising from settlement agreements (relating to disputes concerning process patents) concluded by a manufacturer of originator medicines who is the holder of those patents and manufacturers of generic products — Article 101 TFEU — Potential competition — Restriction by object — Characterisation — Restriction by effect — Assessment of effects — Article 102 TFEU — Relevant market — Inclusion of generic medicines in the relevant market — Abuse of dominant position — Characterisation — Justification)

In Case C‑307/18,

REQUEST for a preliminary ruling under Article 267 TFEU from the Competition Appeal Tribunal (United Kingdom), made by decision of 27 March 2018, received at the Court on 7 May 2018, in the proceedings

Generics (UK) Ltd,

GlaxoSmithKline plc,

Xellia Pharmaceuticals ApS,

Alpharma LLC, formerly Zoetis Products LLC,

Actavis UK Ltd,

Merck KGaA

v

Competition and Markets Authority,

THE COURT (Fourth Chamber),

composed of M. Vilaras, President of the Chamber, S. Rodin, D. Šváby (Rapporteur), K. Jürimäe and N. Piçarra, Judges,

Advocate General: J. Kokott,

Registrar: C. Strömholm, administratror,

having regard to the written procedure and further to the hearing on 19 September 2019,

after considering the observations submitted on behalf of:

– Generics (UK) Ltd, by C. Humpe and S. Kon, Solicitors,

– GlaxoSmithKline plc, by B. Sher, R. Hoare, J. Kontogeorges and R. Bickler, Solicitors, D. Scannell and C. Thomas, Barristers, and J.E. Flynn QC,

– Xellia Pharmaceuticals ApS and Alpharma LLC, by L. Tolaini and B. Jasper, Solicitors, and R. O’Donoghue QC,

– Actavis UK Ltd, by C. Firth, Solicitor, and S. Ford QC,

– Merck KGaA, by S. Smith, A. White and B. Bär-Bouyssière, Solicitors, and R. Kreisberger QC,

– the Competition and Markets Authority, by C. Brannigan, R. Browne, V. Pye and N. Rouse, Solicitors, D. Bailey, Barrister, and J. Turner QC and M. Demetriou QC,

– the European Commission, by F. Castilla Contreras, T. Vecchi, B. Mongin and C. Vollrath, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 22 January 2020,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Articles 101 and 102 TFEU.

2 The request has been made in proceedings where the opposing parties are Generics (UK) Ltd (‘GUK’), GlaxoSmithKline plc (‘GSK’), Xellia Pharmaceuticals ApS, Alpharma LLC, formerly Zoetis Products LLC, Actavis UK Ltd and Merck KGaA, on the one hand, and the Competition and Markets Authority (United Kingdom) (‘the CMA’), on the other, concerning the latter’s decision of 12 February 2016 that those companies had taken part in unlawful agreements and concerted practices, that GSK had abused a dominant position and that financial penalties should be imposed on them (‘the CMA decision’).

Legal context

EU law

3 Paragraphs 17, 20 and 24 of the Commission Notice on the definition of relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5; ‘the notice on market definition’), state: ‘17. The question to be answered is whether the parties’ customers would switch to readily available substitutes or to suppliers located elsewhere in response to a hypothetical small (in the range 5% to 10%) but permanent relative price increase in the products and areas being considered. If substitution were enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes and areas are included in the relevant market. This would be done until the set of products and geographical areas is such that small, permanent increases in relative prices would be profitable. The equivalent analysis is applicable in cases concerning the concentration of buying power, where the starting point would then be the supplier and the price test serves to identify the alternative distribution channels or outlets for the supplier’s products. In the application of these principles, careful account should be taken of certain particular situations as described within paragraphs 56 and 58. … 20. Supply-side substitutability may also be taken into account when defining markets in those situations in which its effects are equivalent to those of demand substitution in terms of effectiveness and immediacy. This means that suppliers are able to switch production to the relevant products and market them in the short term [that is, such a period that does not entail a significant adjustment of existing tangible and intangible assets (see paragraph 23)] without incurring significant additional costs or risks in response to small and permanent changes in relative prices. When these conditions are met, the additional production that is put on the market will have a disciplinary effect on the competitive behaviour of the companies involved. Such an impact in terms of effectiveness and immediacy is equivalent to the demand substitution effect. … 24. The third source of competitive constraint, potential competition, is not taken into account when defining markets, since the conditions under which potential competition will actually represent an effective competitive constraint depend on the analysis of specific factors and circumstances related to the conditions of entry. If required, this analysis is only carried out at a subsequent stage, in general once the position of the companies involved in the relevant market has already been ascertained, and when such position gives rise to concerns from a competition point of view.’

United Kingdom law

4 Part I of the Competition Act 1998 includes Chapters I to V of that act. Within Chapter I, section 2 of that chapter provides: ‘Agreements … preventing, restricting or distorting competition (1) …, agreements between undertakings, decisions by associations of undertakings or concerted practices which: (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited unless they are exempt in accordance with the provisions of this part. (2) Subsection 1 applies, in particular, to agreements, decisions or practices which: … (b) limit or control production, markets, technical development or investment; (c) share markets or sources of supply …’

5 Section 18 of the Competition Act 1998, in Chapter II of Part I of that act, provides: ‘Abuse of dominant position (1) …, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom. (2) Conduct may, in particular, constitute such an abuse if it consists in: … (b) limiting production, markets or technical development to the prejudice of consumers; … …’

6 Section 60 of that act, which is in Chapter V of Part I thereof, states: ‘Principles to be applied in determining questions (1) The purpose of this section is to ensure that so far as is possible (having regard to any relevant differences between the provisions concerned), questions arising under this Part in relation to competition within the United Kingdom are dealt with in a manner which is consistent with the treatment of corresponding questions arising in EU law in relation to competition within the European Union. (2) At any time when the court determines a question arising under this Part, it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between: (a) the principles applied, and decision reached, by the court in determining that question; and (b) the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in EU law. (3) The court must, in addition, have regard to any relevant decision or statement of the Commission. …’

The dispute in the main proceedings and the questions referred for a preliminary ruling

7 Paroxetine is a prescription-only anti-depressant medicine, belonging to the group of medicines known as selective serotonin re-uptake inhibitors (‘SSRIs’). It was marketed in the United Kingdom by GSK, the manufacturer of the originator medicine (‘the originator company’ or ‘the originator’), under the brand name ‘Seroxat’.

8 Following the expiry, in January 1999, of the patent obtained by GSK for the active ingredient of that originator medicine and, in December 2000, of the period of ‘data exclusivity’ in relation to that active ingredient, GSK was faced with the possibility that manufacturers of generic medicines (‘generic companies’ or ‘generics’) would seek a marketing authorisation (‘an MA’) in the United Kingdom, using an abridged procedure, for their own version of that medicine.

9 In that period, GSK obtained a number of ‘secondary’ patents, including patent GB 2297550 (‘the Anhydrate patent’) covering four polymorphs of the active ingredient in question and the process to produce them...