Competition Appeal Tribunal overturns CMA’s Prochlorperazine decision

24/05/24

The Competition Appeal Tribunal has upheld the appeals of various companies alleged by the CMA to have entered into an unlawful ‘pay-for-delay’ agreement, and refused to grant associated directors’ disqualification applications.

By a decision dated 3 February 2022, the CMA found that two undertakings (Alliance and Lexon) entered into a market exclusion agreement concerning the drug Prochlorperazine. The CMA found that they gave effect to this market exclusion agreement by entering into a distribution agreement with a third undertaking, Focus, and that Focus had thereby participated in the unlawful market exclusion agreement. A further undertaking, Medreich, which had partnered with Lexon, was also found to have participated. The CMA imposed large fines for infringement of competition law on all of the companies involved, together with the former parent company of Focus, Cinven. The fines totalled £35.3m.

The Prochlorperazine decision was appealed to the Competition Appeal Tribunal, which exercises a merits jurisdiction in determining whether to uphold infringement decisions of the CMA. The appeals were heard alongside directors’ disqualification applications brought by the CMA in respect of various personnel involved on the part of the affected companies. The trial took place in June-August 2023.

The trial of the Prochlorperazine merits appeals was the third in a trio of trials arising from appeals of CMA decisions in respect of alleged anticompetitive behaviour in relation to pharmaceuticals (the other two being Liothyronine and Hydrocortisone).

The Tribunal (chaired by Lord Ericht) has now handed down its judgment, upholding the appeals and therefore quashing the findings of infringement and the penalties in full (save in respect of Medreich which did not appeal), and finding against the CMA in relation to the directors’ disqualification applications. The Tribunal found that the CMA had made material errors in its assessment of the factual evidence, and that when the documentary and witness evidence was looked at in the round, it did not demonstrate on the balance of probabilities that there was a market exclusion agreement. In particular, the Tribunal found that certain correspondence was exculpatory and was unconvinced by the CMA’s explanations of it, and that the witnesses were credible.

The judgment is an important reminder of the significance of the burden of proof and of the ability to hear witness evidence in the context of the Tribunal’s merits jurisdiction.

The judgment is here.