Press releases

The ECJ today gave Judgment in the appeal from the CFI on GSK's dual pricing policy.  The CFI had held that, in prohibiting GSK's policy, the Commission had failed properly to consider GSK's arguments about the pro-competitive benefits that the scheme would bring about. The CFI had ordered the Commission to re-open its decision proceeding and to review those arguments fully. The Commission asked the ECJ to overturn this ruling and to let the original decision stand.

Summary

The ECJ has upheld the earlier CFI Judgment on the critical issue that the Commission must revisit its earlier decision and consider whether GSK's dual pricing scheme could be pro-competitive. The outcome of that further review will be fascinating.

Legal Issues

In many ways this is a rather technical judgment which deals with small (albeit important) legal distinctions rather than major points of principle. In essence, the debate was about the difference in legal treatment of agreements that are regarded as having the object of restricting competition and those that have the effect of restricting competition.

The ECJ held that agreements that have the object of restricting competition will be regarded as infringing Article 81(1), even if no adverse effect on competition or consumers is shown.

However, even agreements that are restrictive by object can be exempted if they can be justified by pro-competitive benefits. It is for the party arguing for exemption to put forward evidence of those benefits, but the Commission (or any other body considering the compliance of the agreement) must properly analyse and consider that evidence.

Context

This was an appeal to the ECJ of an earlier decision by the CFI.  The roles of the ECJ and CFI are rather different. The CFI (as the first instance appellate body) has a broad scope of review over the decisions of the Commission. The ECJ, on the other hand, is restricted largely to reviewing CFI judgments and to reversing them only when the CFI has committed an error of law.

In this case, the CFI had already decided that the Commission had been wrong to prohibit GSK's dual pricing scheme. It had decided that the Commission had not properly considered all of GSK's arguments that the scheme gave rise to significant benefits and should be allowed. As the CFI could not carry out a full analysis itself, it ordered the Commission to analyse GSK's arguments in their entirety and to reconsider its decision.

The principal purpose of the Commission's appeal was to persuade the ECJ that the CFI had been wrong to order the Commission to reopen its decision and that the original decision should stand.  In essence, the ECJ did no more than uphold the CFI's original Judgment that the Commission should re-visit its earlier analysis and consider whether GSK had shown that its dual pricing scheme was capable of giving rise to such significant benefits ("efficiencies") that it should be permitted, even though it also had anti-competitive elements.

Significance

The practical and legal significance of the case can be summarised as follows:

• The Commission is now obliged to consider GSK's arguments about the special nature of the pharma industry and to give detailed reasons as to whether or not those arguments are sustainable. This will be of real interest to others in the Pharma sector and may ultimately give them more flexibility in their pricing policies.
• The ECJ has held that agreements which tend to impede trade between EU member states are to be regarded as agreements which have the object of restricting competition.
• It then goes on to hold that such agreements will automatically be prohibited by the competition rules and it is not necessary to show that they will result in adverse effect for consumers before they are held to infringe.
• In technical terms this means that agreements impeding parallel trade will be prohibited under Article 81(1) of the Treaty unless they can benefit from an "exemption" under Article 81(3)
• As a result, the only way in which agreements affecting parallel trade will be permissible will be if they can be shown to produce clear benefits. A large part of the Judgment deals with technical debate about how those benefits can be shown and how significant they need to be.
• It is now very clear that it is for a party who argues that its agreement gives rise to benefits justifying an exemption to put forward clear and cogent evidence.
• However, it is also clear that the Commission must properly and fully consider that evidence and that even agreements that are "restrictive by object" can be exempted in certain circumstances.