Friday, 24 January 2020

Does an agreement to settle a dispute between a patentee and a generic drug maker breach competition law? AG's opinion

An agreement settling a patent dispute may constitute a restriction of competition by object or by effect and that entering into such an agreement may be an abuse of a dominant position, according to Advocate General Kokott's 276-paragraph, 223-footnote opinion of 22 January in Generics (UK) Ltd e.a. v Competition and Markets Authority (Case C-307/18) ECLI:EU:C:2020:28.

The reference to the Court of Justice came from the Competition Appeal Tribunal, which was hearing an appeal against the Competition and Markets Authority's finding that GlaxoSmithKline, Alpharma Limited and Generics (UK) Limited had breached EU and UK competition law by entering into a series of agreements that had the effect of delaying generic entry of the drug paroxetine. The generic manufacturers concerned undertook, inter alia, not to enter the market with their products for an agreed period: the CMA found the agreements to be akin to market exclusion agreements, prohibited under Chapter 1 of the Competition Act 1998 and by Article 101 TFEU, and an abuse of GSK's dominant position prohibited by Chapter 2. The CAT referred ten questions for a preliminary ruling.

The fact that the validity of the patents, and whether the generic products infringe them, remained uncertain did not mean that the patent holder and generic manufacturers were not potential competitors, according to the Advocate General. The correct question to ask is whether there are real, concrete possibilities to enter the market despite the patents, and this (the Advocate General went on) is a matter for the competition authority to decide taking into account all the relevant factors. She also considered that conduct that can constitute an abuse of a dominant position can only be justified by consumer benefits when it can be shown that those benefits offset an agreement's adverse effects on competition on the relevant market. Where the agreements provide limited benefits, while eliminating competition by removing all sources of potential competition, this condition is unlikely to be satisfied.

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