European Court of Justice rules on regulatory abuse of dominant position

14/01/13

On 6 December 2012 in Case C-457/10P AstraZeneca v Commission the EU Court of Justice ruled on a dominant undertaking's special responsibility in regulatory matters.

In 2005 the EU Commission fined AstraZeneca EUR 60 million for abusing its dominant position in a pharmaceutical product for treating ulcers (marketed as Losec). The first abuse concerned making misleading statements to Patent Offices to obtain patent extensions ("SPCs"). The second abuse concerned deregistration of the capsule formulation of Losec which was deemed to delay the authorisation of competing products. The General Court largely upheld the Decision but allowed in part an appeal on the second abuse on the grounds that there was no evidence of a tendency to distort competition. The Court of Justice dismissed AZ's appeal and the Commission cross appeal.

The Judgment is noteworthy in four respects.

First, the Court of Justice has upheld the Commission's broad discretion to find a narrow market in the pharmaceutical sector and hence a dominant position. The Court held that the Commission had not made a manifest error by finding that Losec was effectively in its own market notwithstanding (a) the gradual increase of Losec sales over several years (b) doctor inertia and (c) national health authorities' power over pricing.

Second, the Court of Justice ruled that intentionally misleading a regulatory authority was abusive but that innocent misrepresentations would not be unless the undertaking failed to rectify the mistake once it was appreciated. Whether a negligent misrepresentation is sufficient is not expressly considered.

Third, the Court has held that the use of a regulatory procedure that excludes competitors is likely to be abusive unless there is some valid reason for the regulatory act. The mere fact that the undertaking exercises an EU right (here under the pharmaceutical code) is irrelevant. In essence, gaming a regulatory procedure is likely to be abusive if carried out by a dominant undertaking to exclude competitors.

Fourth, the Court in dismissing the Commission cross appeal on the second abuse makes some important observations on the link between abusive conduct and effect on competition. Although the practice of a dominant undertaking cannot be categorised as abusive in the absence of any anti-competitive effect, such an effect does not have to be actual or concrete. It is sufficient to demonstrate that there is a "potential anti-competitive effect." However, the authority cannot simply presume a potential effect, but must adduce tangible evidence of a likelihood of such an effect.

The judgment is here.