Short Reads

General Court upholds Commission's decision that reverse payment settlements constitute a 'by object' infringement

General Court upholds Commission's decision that reverse payment settlements constitute a 'by object' infringement

General Court upholds Commission's decision that reverse payment settlements constitute a 'by object' infringement

03.10.2016 NL law

On 8 September 2016, the General Court ("GC") dismissed in their entirety the appeals brought by Lundbeck and the generic companies Alpharma, Merck KGa, Generics UK, Arrow and Ranbaxy against the European Commission's "reverse payment settlements" decision.

On the basis of these settlements, the generic companies, in exchange for a value transfer, could not launch a generic version of Lundbeck's branded citalopram for the duration of the agreements. The settlements were in part motivated by the fact that – whilst Lundbeck's initial patents had expired – it still had patents in place covering the product's manufacturing process. The GC judgments constitute the first EU court decisions ruling on the qualification of reverse payment settlements under EU antitrust law.

First, the GC confirmed that the Commission was correct to establish that Lundbeck and the generic companies were potential competitors when signing these settlements. The GC rejected Lundbeck's claim that the generic companies should not be considered as potential competitors, since its process patents were presumed to be valid under EU law as a result of which legal market entry was precluded. The GC found that the generic companies had real concrete possibilities to enter the market at the time that the agreements were concluded. The steps taken by the generic companies, such as obtaining or applying for a market authorization, demonstrated this possibility. Those factual circumstances trump any presumption of validity of intellectual property, according to the GC. 

The GC also agreed with the Commission that the settlements constitute a restriction of competition by object. In reaching this conclusion the Commission took several factors into account, such as the disproportionate nature of the reverse payments and the absence of provisions that would allow the generic companies to enter the market after the termination of the agreements, without having to fear infringement actions brought by Lundbeck. The GC found, contrary to Lundbeck's claim,  that the Commission correctly considered the value transfers as problematic, as they broadly corresponded to the profits that the generic companies could have made when entering the market or to the damages they would have obtained if they had successfully challenged Lundbeck's patents. As a result, they were high enough to remove the generic companies' incentive to enter the market and thus eliminated the competitive pressure. Consequently, the GC concluded that the settlements were comparable to market exclusion agreements and as such they constituted a restriction of competition by object.

Moreover, the GC rejected claims that the Commission should have applied the "scope of the patent" test and taken into account that the contractual restrictions did not exceed the scope of Lundbeck's process patents. The GC noted that the concept of restriction of competition by object does not include or allow for a "scope of the patent" test. The GC found that even if the restrictions imposed through the settlements potentially fell within the scope of Lundbeck's patents, these restrictions were not objectively necessary to protect the patents, as they could have been achieved through other paths, such as litigation. Finally, the GC rejected arguments relating to the alleged efficiencies brought by the settlements and errors in the calculation of the fines.

In view of the controversial nature of a significant part of the information included in the GC's decision, we believe that appeals will be lodged in the near future.

 

This article was published in the Competition Law Newsletter of October 2016. Other articles in this newsletter:

  1. Court of Justice ends Pilkington's fight against fine in the car glass cartel
  2. General Court upholds Commission's decision that reverse payment settlements constitute a 'by object' infringement
  3. European Commission puts price signalling on the agenda
  4. European Commission orders Ireland to recover illegal tax benefits worth up to €13 billion from Apple
  5. Commission publishes Preliminary Report on the e-commerce sector inquiry
  6. Brussels Court of Appeal confirms interim measures against exclusive TV broadcasting rights

Team

Related news

03.08.2022 EU law
Gotta catch ‘em all? Upward referral of ‘killer acquisitions’ upheld

Short Reads - Companies involved in intended or completed M&A transactions falling below EU and national merger notification thresholds should beware that their deals may still catch the European Commission’s eye. The General Court has upheld the Commission’s decision to accept a national referral request regarding Illumina’s acquisition of Grail: a transaction not triggering any of the notification thresholds within the EEA.

Read more

06.07.2022 NL law
Highest Dutch court: the postman may still ring twice?

Short Reads - The Dutch Minister of Economic Affairs and Climate Policy was wrong to unblock the ACM’s prohibited merger between postal operators PostNL and Sandd on grounds of public interest. According to the Trade and Industry Appeals Tribunal (CBb), the Minister cannot substitute the ACM’s assessment for its own when considering public interest reasons. Since the Minister did do so in this particular case, the CBb annulled the Minister’s merger clearance.

Read more

28.07.2022 NL law
Purely commercial interest also a legitimate interest? Council of State leaves the question unanswered.

Short Reads - On 27 July 2022, the Council of State confirmed that the Dutch Data Protection Authority wrongly imposed a €575,000 fine on VoetbalTV. But the Council did not answer the question whether the AP rightly or wrongly believes that a purely commercial interest cannot be a legitimate interest within the meaning of the General Data Protection Regulation.

Read more

06.07.2022 NL law
Foreign Subsidies Regulation crosses the finish line

Short Reads - On 30 June 2022, the European Parliament and the European Council reached agreement on the final text of the Foreign Subsidies Regulation. Adding to the regulatory burdens, this Regulation creates a notification obligation for companies that receive subsidies from non-EU governments in transactions or public procurement procedures. 

Read more

28.07.2022 NL law
Zuiver commercieel belang ook gerechtvaardigd belang: Raad van State laat zich er niet over uit

Short Reads - Op 27 juli 2022 heeft de Raad van State bevestigd dat de Autoriteit Persoonsgegevens onterecht een boete van € 575.000 aan VoetbalTV heeft opgelegd. De hoop bestond dat de Afdeling antwoord zou geven op de vraag of de AP terecht of onterecht meent dat een zuiver commercieel belang géén gerechtvaardigd belang kan zijn in de zin van de Algemene Verordening Gegevensbescherming. Het antwoord op deze vraag blijft echter uit.  

Read more

06.07.2022 NL law
Take note(s): Qualcomm’s EUR 1 billion dominance abuse fine quashed

Short Reads - The General Court annulled the Commission’s EUR 1 billion fine imposed on Qualcomm for abuse of dominance on the LTE chipsets market. In addition to finding fault with the Commission’s foreclosure analysis of Qualcomm’s alleged exclusivity payments, the General Court found that the Commission’s procedural irregularities alone would have sufficed to set the Commission’s decision aside.

Read more