Major excessive pricing decision just adopted by the UK CMA

A couple of weeks ago, I wrote a post about Commissioner Vestager’s speech regarding exploitative abuses, which triggered questions among practitioners as to whether the Commission would be initiating excessive pricing cases in the future.

I am not aware of any such investigation by the Commission, but the UK Competition and Markets Authority (CMA) has just adopted a decision imposing a record £84.2 million fine on the pharmaceutical manufacturer Pfizer and a £5.2 million fine on the distributor Flynn Pharma after finding that each broke competition law by charging excessive and unfair prices in the UK for phenytoin sodium capsules, an anti-epilepsy drug. The CMA has also ordered the companies to reduce their prices. The decision follows price increases by up to 2,600% after the drug was deliberately de-branded (and thus no longer subject to price regulation) in September 2012. According to the CMA, this significantly impacted the NHS with its expenditures on phenytoin sodium capsules increased from about £2 million a year in 2012 to about £50 million in 2013.

This decision is likely to lead to a massive action in damages against Pfizer and Flynn Pharma as I suspect that the NHS will want to recover the extra sums it had to spend to purchase phenytoin sodium capsules during the infringement period.

 

 

Competition Commissioner Vestager on exploitative abuses

This morning Commission Vestager made a speech entitled “Protecting consumers from exploitation” in which she discusses  whether the Commission should “intervene directly to correct excessively high prices, and other ways that businesses exploit their customers.” It has been a long time since a Commission talked about exploitative abuses and Commission investigations into exploitative prices are very rare. The question for practitioners is whether this signals a renewed Commission interest for running such cases and, if so, whether investigations into exploitative prices are desirable.

Competition practitioners and scholars are generally skeptical about exploitative cases. First, these cases are difficult to run as there is no easy way to determine when a price is exploitative. Second, in most circumstances excessive prices are self-correcting in that they will attract new entry and increased competition will reduce prices. Finally, there is a danger that controlling prices will stifle innovation. The Commissioner is well aware of these challenges and acknowledges them in her speech. Commissioner Vestager’s speech should be read as indicating that while there may be circumstances where the Commission may step in to protect consumers against excessive prices, the Commission should be cautious in its assessment.

From a litigation standpoint, additional Commission decisions finding excessive prices could be a source of class actions. Such actions are still rare in Europe essentially for procedural reasons, but several Member States (the UK, Belgium, France, etc.) have adopted legal regimes making them possible. In this respect, a 19 billion-pound class action lawsuit was initiated in July 2016 against MasterCard Inc., following an ECJ decision that the processing fees the company had charged for cross-border transactions were excessive.

 

 

 

Weird case where Belgian competition authority reviews an arbitral award

I came across the interesting, but rather odd case, involving the Belgian Court of Arbitration for sports and the Belgian Competition Authority.

The facts are as follows. The Belgian football federation has a committee awarding licenses. To obtain a license football clubs need to meet various conditions, including proof of their financial stability for the season to come. The White Star is a Brussels-based football team that won the second division championship in 2015-16 and should therefore have played in the first division in 2016-17. The problem is that its financial situation was so dire that it did not meet the licensing conditions set by the Belgian football federation.

White Star appealed the decision before the Belgian Court of Arbitration for sports, which is the organ of appeal “imposed” by the federation. It rendered its award in May 2016. The award annuled the decision of the license committee of the Belgian federation, but refused to grant the license because the White Star did not meet the condition of financial stability. The White Star then decided to knock on the door of the Belgian Competition Authority to obtain provisional measures that would allow it to play in the first division championship in 2016-17 (and which would therefore effectively annul the award). Specifically, White Star argued that the refusal to grant a license to a football team amounted to a breach of competition law (refusing a license indeed leads to the exclusion of a “competitor”). This new effort proved again to be in vain in that the Competition Authority found that there was no prima facie evidence of a breach of competition law.

The interesting aspect of the case was that the Belgian Competition Authority did not hesitate to look into the validity of the arbitral award despite the submissions made by the Football Federation and Belgian Court of Arbitration for sports, according to which in Belgian law the only means to challenge an arbitral award (in this case the refusal to grant a license) is to initiate annulment proceedings before the Court of First Instance. Hence, the action initiated by White Star was inadmissible. In its decision, which is in French, the Belgian Competition Authority rejected that view finding in the process that the members of the Belgian Court of Arbitration for sports represented “undertakings” within the meaning of competition law (!), although it acknowledged that there was no sufficient evidence to recognize the tribunal arbitral itself was an undertaking or an association of undertakings …

The Authority considered that it is in charge of enforcing “public order” rules (i.e., competition rules) and that Belgian Court of Arbitration for sports was bound by such rules and that it should have applied them ex officio. The Authority therefore considered that it was competent to review the award and to set it aside if it had found that there was prima facie evidence of a breach of competition law, which – as noted above – was not the case here. Hence, the request for preliminary measures requested by White Star was rejected.

Private Antitrust Enforcement: A New Era for Collective Redress?

This paper by Sofia Pais just came out.

Abstract:

It will be argued in this article that the EU Recommendation on common principles for collective redress might have limited impact on the field of competition law due to: several uncertainties regarding the legal standing in class actions; difficulties in their funding; and the risk of forum shopping with cross-border actions. Nevertheless, Belgium and Great Britain have recently introduced class actions into their national legal systems and addressed some of the difficulties which other Member States were experiencing already. It will also be suggested that the Portuguese model – the ‘Popular Action’ – and recent Portuguese practice may be considered an interesting example to follow in order to overcome some of the identified obstacles to private antitrust enforcement.

 

Is Switzerland a good seat for foreign antitrust claims?

Lawyers at Froriep argue here that it is the case. They list the reasons as follows:

  • Antitrust claims are fully-arbitrable under Swiss law (at least when raised defensively, which is generally the case);
  • Switzerland has taken a pro-arbitration stance on the interpretation of arbitration clauses (hence making it likely that antitrust claims will be seen as falling with the scope of such clauses);
  • The Swiss Supreme Court has found that the non-application or incorrect application of a foreign antitrust statute (in that case, EU competition law) does not constitute a breach of Swiss public policy (i.e. Eco-Swiss does not apply);
  • The standard of review applied by the Swiss Supreme Court to petitions for setting aside arbitral awards is limited in scope;
  • Treble/punitive damages are available (which is rarely the case in other continental jurisdictions); and
  • As Switzerland is not part of the EU, the decisions of Swiss arbitral tribunals are not subject to the review of the EU courts and the competition authorities.

ICC YAF: Distribution Law and Arbitration / 4 November 2016

There are many points of contact between competition law and distribution law.

For those interested in distribution law and arbitration, you can find here the programme of an interesting conference jointly organised by the ICC Young Arbitrators Forum (ICC YAF), the University of Turin, the Piedmont and Aosta Valley Section of the Italian Society for International Organization (SIOI) and the Moot Alumni Association Turin (MAAT). It will take place in Torino on 4 November 2016.

Unwired Planet v. Huawei (High Court of England & Wales)

Very interesting trial started last Monday at the High Court in London. This is the FRAND trial part of the patent litigation case between Unwired Planet, a patent assertion entity (PAE) that bought standard-essential patents (SEPs) from Ericsson, and Huawei, a large manufacturer of smartphones and telecommunications infrastructure.

Mr Justice Colin Birss will have to deal with a range of very interesting issues, including whether Unwired Planet:

  • holds a dominant position on one or several markets and thus whether Article 102 TFEU applies.
  • illegally started injunction proceedings without complying with the licensing framework set out in the European Court of Justice in its 2015 Huawei/ZTE judgment.
  • illegally required that Unwired Planet to license its SEP portfolio on a global scale.

In addition, Mr Justice Colin Birss will have to determine whether the royalties asked by Unwired Planet are FRAND.

Google and Samsung settled with Unwired Planet before the beginning of the trial.

If you are interested in the application of EU competition rules to PAEs, you may wish to have a look at my paper here.