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

06.02.2020 NL law
Pay-for-delay: brightened lines between object and effect restrictions

Short Reads - In its first pay-for-delay case, the ECJ has clarified the criteria determining whether settlement agreements between a patent holder of a pharmaceutical product and a generic manufacturer may have as their object or effect to restrict EU competition law. The judgment confirms the General Court’s earlier rulings in Lundbeck and Servier (see our October 2016 and December 2018 newsletters) in which it was held that pay-for-delay agreements (in these cases) constituted a restriction ‘by object’.

Read more

06.02.2020 NL law
Consumers and Sustainability: 2020 competition enforcement buzzwords

Short Reads - The ACM will include the effects of mergers on labour conditions in its review. It will also investigate excessive pricing of prescription drugs. As well as these topics, the ACM has designated the digital economy and energy transition as its 2020 focus areas. Companies can therefore expect increased enforcement to protect online consumers, and active probing of algorithms.

Read more

06.02.2020 NL law
The ACM may cast the net wide in cartel investigations

Short Reads - Companies beware: the ACM may not need to specify the scope of its investigation into suspected cartel infringements in as much detail as expected. On 14 January 2020, the Dutch Trade and Industry Appeals Tribunal upheld the ACM’s appeal against judgments of the Rotterdam District Court, which had quashed cartel fines imposed on cold storage operators. The operators had argued that the ACM was time-barred from pursuing a case against them, because the ACM had not suspended the prescription period by beginning investigative actions specifically related to the alleged infringements.

Read more

06.02.2020 NL law
Den Bosch Court of Appeal revives damages claims in Dutch prestressing steel litigation

Short Reads - On 28 January 2020, the Court of Appeal of Den Bosch issued a ruling in the Dutch prestressing steel litigation. In its ruling, the Court of Appeal overturned a 2016 judgment of the District Court of Limburg, in which it was held that civil damages claims brought by Deutsche Bahn were time-barred under German law (see our January 2017 newsletter).

Read more

06.02.2020 NL law
CDC/Kemira: Amsterdam Court of Appeal applies European principle of effectiveness to limitation periods

Short Reads - In a private enforcement case brought by CDC against Kemira, the Amsterdam Court of Appeal applies the European principle of effectiveness and rules that claims are not time-barred under Spanish, Finnish and Swedish law. With reference to the Cogeco judgment of the ECJ, the Court considers that claimants must be able to await the outcome of any administrative appeal against an infringement decision, even in relation to respondents who themselves have not filed appeals against the infringement decision.

Read more

This website uses cookies. Some of these cookies are essential for the technical functioning of our website and you cannot disable these cookies if you want to read our website. We also use functional cookies to ensure the website functions properly and analytical cookies to personalise content and to analyse our traffic. You can either accept or refuse these functional and analytical cookies.

Privacy – en cookieverklaring