CUTS Centre for Competition, Investment & Economic Regulation (CUTS C-CIER)

The European Commission has published the results of its pharmaceutical sector inquiry, finding that large companies often abuse their dominance to block or delay cheaper drugs from entering the market.

The commission identified a series of tactics used by dominant pharmaceutical companies to disadvantage manufacturers of generic drugs. They include filing multiple patent applications for the same medicine, initiating disputes and litigation, negotiating patent settlements that constrain generic drug manufacturers from entering the market, and intervening when rivals seek regulatory approval.

According to DG Comp, these practices cost around €3 billion between 2000 and 2007, and have reduced the incentive for companies to innovate.

The report is the result of an extensive inquiry, launched in January 2008 with dawn raids on sector participants. The commission made substantial requests for information and has uncovered documents laying out detailed plans on how best to hinder generic-drugs companies.

DG Comp confirmed that it raided "several" European pharmaceutical manufacturers on 24 November, but declined to say which companies had been raided. Sources say further cases could be brought on the back of the information gathered during the sector inquiry, which may also prompt changes in legislation.

Greece fines oil companies
Global Competition Review, November 27, 2008

Greece's Competition Commission has fined BP and Royal Dutch Shell a combined €49.6 million for allegedly colluding to fix prices.

The commission announced it had fined BP €30 million and Shell €19.6 million on 25 November.

The commission met on 20 November to vote on the case. It claims the companies colluded in setting discount policies for Greece's petrol stations, which it says amounted to price-fixing.

"The companies had no intention of competing against each other and converged their net wholesale prices through proportionally adjusted discounts," the commission says.

But one source says the theories the commission used to come to its decision were inaccurate. "The way the commission defined the geographical area and analysed the alleged price-fixing did not give a correct measure of the competition in the market," says the source. "Out of the 10 committee members who voted on this case, all three economists on the panel voted against the fines."

BP has already appealed against the fine, and recently took out an advert in several Greek newspapers highlighting why it believes the decision to be wrong.

Lawyers say that Shell is also likely to appeal the decision.

Review of Modern Trade Channel
International Law Office, November 06, 2008

In September 2008 the Office of Competition and Consumer Protection conditionally cleared the acquisition of Plus Discount by Jerónimo Martins Dystrybucja SA.

Both parties are active in the retail sector. Jeronimo Martins Dystrybucja, a subsidiary of Portuguese company Jerónimo Martins Dystrybucja SA, owns over 1,000 discount stores operating throughout Poland under the Biedronka brand. Plus Discount operates a national network of over 200 discount outlets. The transaction, which was announced in December 2007, is one of the largest consolidations in the Polish retail sector.

In defining the relevant product market, the regulator concluded that the parties are active in the 'modern trade' channel, which includes hypermarkets, supermarkets and discount stores, and found that retail sales of fast-moving consumer goods in such outlets constituted a separate product market. Although this approach was consistent with two recent decisions by the Polish authorities in merger cases involving consolidations of hypermarket and supermarket chains, the regulator has previously analyzed consolidations from a general retail market perspective, regardless of the type of retail outlet.

The regulator thus disagreed with the position presented by the notifying party, which argued that a concentration involving two discount stores should be assessed as part of a more broadly defined market due to chain of substitution considerations.

The regulator decided to make clearance conditional on Jeronimo Martins Dystrybucja's divestment of 13 Biedronka stores and 25 Plus Discount stores. Jeronimo Martins Dystrybucja was also required to lease a portion of its sales space in three further outlets to independent retailers. This is the first time that the regulator has presented conditions relating to a reduction of sales space.

The decision seems to demonstrate that the regulator is reluctant to deviate from its established view of the modern trade channel as a single and distinct market. It remains to be seen whether the growing importance of smaller formats (eg, convenience stores) and their ongoing consolidation, including vertical integration with wholesalers, will affect competition policy in future.

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