les Nouvelles - December 2006

CFI Opens The Door To Justifying Restrictions On Parallel Trade

Alec Burnside

Linklaters, Brussels, Belgium

On 27 September 2006, the European Court of First Instance (CFI) partially annulled the European Commission Decision condemning GlaxoSmithKline’s policy of charging higher prices for Spanish products destined for export.

The judgement marks another step in the pro¬longed debate between antitrust authorities and pharmaceutical companies on the legitimacy of inhibiting parallel trade. The CFI ruled that the Commission had failed adequately to assess whether “dual pricing” could have benefited research and development and therefore have been eligible for exemption from EU antitrust rules. The CFI further concluded that the Commission was incorrect in its assessment that the scheme was by its very nature restrictive of competition, and criticised the Com¬mission for failing to take sufficient account of “the specific nature of the pharmaceuticals sector,” in particular the potential benefits to consumers from R&D expenditure. It also accepted, as asserted during the court case by GSK, that “it cannot be presumed that parallel trade tends to reduce prices.” However, the CFI did confirm that the Commission had been correct to conclude that in the specific circumstances of this case, the dual pricing had the effect of restrict¬ing competition.

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