In March 1998 GW adopted new General Sales Conditions, which provided that its medicines would have been sold to Spanish wholesalers at prices differentiated according to the national sickness insurance scheme which would have reimbursed them. In practice, medicines intended to be reimbursed in other Member States of the Community would have been sold at a higher price than those intended to be reimbursed in Spain.
GW notified those General Sales Conditions to the Commission in order to obtain a decision declaring that they were not prohibited by Article 81(1) EC or, failing that, a decision granting them an exemption, as per Article 81(3) EC, as an agreement contributing to promoting technical progress.
On 8 May 2001 the Commission declared the General Sales Conditions illegal and contrary to Article 81(1) EC. Furthermore the Commission rejected the request for an exemption, ex Article 81(3) EC.
With appeal to the Court of First Instance, GSK requested the annulment of the Commission Decision and, in its decision of 26 September 2006, the Court delivered the judgment on the main questions:
1) The existence of an agreement between undertakings.
The Court of First Instance agreed with the Commission that the General Sales Conditions constituted an agreement, since a number of Spanish wholesalers accepted such conditions.
2) The existence of a restriction of competition.
The Court also upheld the Commission’s finding that the General Sales Conditions had the effect of restricting competition, although the Court found that the Commission’s analysis failed to take proper account of the legal and economic context of the highly regulated pharmaceutical market in Spain.
In a general context, parallel trade permits a limited but real reduction in the price and the cost of pharmaceuticals, and in this particular case the General Sales Conditions prevented that advantage from being produced, diminishing the welfare of final consumers. And so it is the reduction in consumer welfare that constitutes the effective restriction of competition.
3) The eligibility for exemption under Article 81 (3) of the EC Treaty.
The Court of First Instance also found that the Commission had failed to examine and substantiate properly whether the General Sales Conditions could be exempted under Article 81(3) EC, in particular since they might constitute an economic progress by contributing to innovation.
The Court annulled the Commission decision in the part that rejects GSK’s request for exemption, compelling a reconsideration of the conditions eligible for exemption under Article 81 (3) EC.
The text of this judgment, together with the other most important decisions on this subject-matter, can be found in the database of the European decisions, in the EU section of the IDI website. An analysis of the European case-law on antitrust rules applicable to agency and distribution contracts is contained in the IDI Antitrust report, that can be downloaded from the Reports section of the website.
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