The CAT’s Paroxetine decision (Paroxetine GSK v CMA [2018] CAT 4)

This post contains a fairly long discussion, so those who are familiar with the case may want to skip it. This decision – which can be found here – concerns  a pay for delay case and identifies a number of interesting questions regarding this type of conduct – some of which were referred to the Court of Justice of the European Union (CJEU). I do not propose to summarise the decision (it is 180 pages long). Instead, I will merely review the parts that I found most interesting. In particular, the judgment contains a very clear discussion of how the law stands as regards pay-for delay agreements in Europe. It also reviews EU law, particularly in the context of the Tribunal’s decision to make a preliminary reference to the CJEU. These questions flow mostly from the debate, apparent in my earlier posts, regarding whether pay-for-delay agreements should be treated as restrictions by object or by effect under EU law following…

Chris Fonteijn, Ilan Akker and Wolf Sauter  ‘Reconciling competition and IP law: the case of patented pharmaceuticals and dominance abuse’,  in Gabriella Muscolo and Mariaanna Tavassi (eds.) The Interplay between Competition Law and Intellectual Property – An international perspective (Kluwer Law International, Forthcoming)

The paper – a draft of which can be found here – discusses how competition law may be applied with regard to abuses of dominance involving patented pharmaceuticals. It argues that the pay for delay cases in both the US and the EU are only the first step in exploring the application of competition law to such products. The paper then examines abuses of the patent system with the aim to exclude competitors and, second, whether excessive prices can be sanctioned as regards IP-protected pharmaceutical products. The paper is structured as follows: Section II investigates the interaction between IP and competition law. This has been covered extensively in previous emails, so I will merely summarise the basic points. Inasmuch as IP law creates temporary monopolies, this would seem to create a tension with competition law, but this tension is merely apparent. Both competition and IP law ultimately seek to promote consumer welfare, and the protection granted by IP law does not amount…

Elisabetta Maria Lanza and Paola Roberta Sfasciotti ‘Excessive Price Abuses: The Italian Aspen Case’ (2018) Journal of European Competition Law & Practice 9(6) 382

This paper – which can be found here – is of particular interest because the authors were the case handlers in this case, which is one of the (very) few recent cases on excessive pricing. The paper begins with a discussion of why enforcement against excessive pricing is frowned upon by competition agencies (and absolutely discarded in the US). First, there may be a negative impact on investment caused by limits to a company’s freedom to set prices, which may limit its ability to recover capital invested in research. Second, in normal conditions regulatory intervention is unnecessary: the market will self-correct, because excessive prices will stimulate the entry of competitors into the market. Third, as a rule competition authorities seek to avoid having to decide what is the ‘correct’ or ‘fair’ price, since this would require a judgement which is closer to the competences of a sectoral regulator. Fourth, the analysis of situations of excessive pricing faces significant difficulties in…

Margherita Colangelo ‘Reverse Payment Patent Settlements in the Pharmaceutical Sector Under EU and US Competition Laws: A Comparative Analysis’ (2017) World Competition 40(3) 47

As its name indicates, this paper – which can be found here – compares the European and American approaches to pay-for-delay agreements – i.e. those agreements between an originator and a generics manufacturer where the former pays the latter to settle a patent injunction and agrees conditions to delay generic entry into the market. This payment goes against the standard expectation that a defendant in a patent suit would pay an IP-holding plaintiff to settle, but it is nonetheless economically rational for both parties: ‘the profit that the generic entering the market anticipates selling at a significant discount to the price of the brand-name product will be much less than the profit the brand-name drug company loses from the same sales applying the monopolistic price’. Settling the dispute eliminates the potential for competition and allows the parties to share profits that would otherwise be eroded by lower prices. The argument is that, while the case-mix on each side of the…

Sven Gallasch ‘Activating Actavis in Europe – the proposal of a ‘structured effects-based’ analysis for pay for delay agreements’ (2016) Legal Studies 36(4) 683

This article – which can be found here – criticises the adoption of a ‘by-object’ approach in the EU for pay-for-delay agreements, and argues that Europe should instead adopt a test along the lines of the rule of reason approach delineated by the US Supreme Court’s decision in Actavis. This paper is structured as follows: Section 2 compares the EU and US regulatory frameworks. While broadly consistent with the papers above, this paper emphasises two points which merit attention. First, it is pointed out that the existence of a period of exclusivity for the first generic entry can, when coupled with the possibility of the generic supplier settling a patent validity claim with the branded drug originator, skew the incentives of the parties in favour of settlement to the disadvantage of final consumers. Instead of solving the patent dispute in court, the parties settle their dispute. The generic company is nonetheless granted the 180 days of generic exclusivity. The parties…

Eleanor Fox “China, Export Cartels and Vitamin C: America Second?”

This paper, which can be found here, seems to argue that framing the issue in this case – which was described in the post below – as a matter of international comity misunderstands the matters at stake. The question is first, one of jurisdiction under the effects’ doctrine over a cartel implemented abroad, and, following this, about whether the US rules on the foreign sovereign compulsion defence apply. The correct interpretation of Chinese law may be relevant, but only in certain circumstances and only in the course of the normal application of US rules. She begins by pointing out that this is a case of a naked cartel, and that China’s sole role in it is to intervene before US courts in order to free its manufacturers from the consequences of violating the clear and well-known rule of US law forbidding price fixing. As such, the matter is not merely whether China alone can say what Chinese law is, which is…

Danny Crane “The Chinese Vitamins Case: Who Decides Chinese Law?’

This paper – which can be read here – begins by summarising the background to the case. In short, since the 1970s, when China began its transition to a market economy, the Chinese government has maintained export controls in the Vitamin C market in order to maintain a competitive edge over producers from other countries. In part due to the regulatory activities of the Chinese government, Chinese companies control about 60% of the worldwide Vitamin C market. A class of vitamins’ purchasers alleged that the defendant Chinese vitamins companies conspired to fix the price of vitamin C sold to U.S. companies, in violation of Section 1 of the Sherman Act. Rather than contest the facts, the defendants enlisted the aid of the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) which submitted an amicus curiae brief in the district court asserting that defendants’ output reduction agreements were directed by MOFCOM itself and were mandatory. Two main questions arose…

Marek Martyniszyn ‘Foreign State’s Entanglement in Anticompetitive Conduct’ (2017) 40 World Competition, Issue 2, pp. 299–321

This paper – which can be found here – argues that legal scholarship on the extraterritoriality of competition law examines this phenomenon predominantly through two lenses. The first strand of research focuses on defences and doctrines that remove a situation from competition law control due to State involvement (such as foreign State compulsion or the act of state doctrine). The second strand analyses the applicability of domestic competition laws to anticompetitive conduct by state-owned firms. The article seeks to bring these two strands together and to develop a typology of State’s entanglement in conduct causing competitive harm abroad. He holds that competitive harm arising from commercial practices should be subject to competition law regardless of the character of the party involved (i.e. be it a firm or a foreign State), unless there are overriding reasons justifying abstention such as national security or the strategic interests of the State that is exercising jurisdiction over an anticompetitive practice. The paper is structured…

Ioana Marinescu and Herbert Hovenkamp ‘Anticompetitive Mergers in Labour Markets’ (forthcoming) Indiana Law Journal (2018)

The paper – which can be found here – looks at mergers that facilitate anticompetitive wage and salary suppression from an antitrust perspective. It also looks at other potentially anticompetitive practice in labour markets, so the paper’s title is misleading. The paper’s fundamental argument is that that antitrust law is under-enforced as regards mergers affecting employment markets, and that this is important for several reasons. First, the share of the gross domestic product (GDP) going to labour has been declining at an alarming rate, and this seems to be correlated with an increase in market concentration. Second, US antitrust law does not condemn unilateral price setting by dominant firms – including the setting of wages. A second best solution to the problem of suppressed wages can therefore be found in merger law, which can interdict wage-suppressing mergers before they occur. Third, antitrust law is properly directed at all output reducing practices, and there is certainly no principled reason for excluding…

Suresh Naidu, Eric A. Posner, and E. Glen Weyl ‘Antitrust Remedies for Labor Market Power’ Harvard Law Review (forthcoming)

The paper – which can be found here –  criticises the historic imbalance between product and labour market antitrust enforcement, which has no basis in economic theory: from an economic standpoint, the dangers to public welfare posed by product and labour market power are exactly the same. It is argued that antitrust agencies should take more seriously the danger that mergers may lead to labour market power as well as product market power. The paper is organised as follows: The introduction tries to explain why antitrust has traditionally ignored labour markets. Four explanations are advanced: (i) while economic theory treats product and labour markets similarly, legal theory has placed more emphasis on product markets as a result of a focus on consumer welfare; (ii) it was assumed that labour markets are reasonably competitive, and that labour market power was not an important social problem; (iii) the traditional legal approach to protecting workers, which took place “outside” antitrust law, may have…