The Advocate General’s opinion, issued on 28 October 2004, states that a phamaceutical company with a dominant market position is not automatically breaking competition law if it refuses to fill all the orders of its customers as a way of restricting parallel trade.
The opinion is connected to the specific circumstances of the EU pharmaceutical market where differences in the prices of medicines is the result of government intervention.
The case C-53/03 was between Greek pharmaceutical wholesalers and the Greek subsidiary of GlaxoSmithKline (GSK).
Facts
Greece has some of the lowest drug prices in Europe. A significant proportion of drugs supplied by GSK to the Greek pharmaceutical wholesalers was exported to other markets where the prices are much higher. GSK’s subsidiary initially stopped and then partially restored the supplies but only in quantities sufficient for the local market rather than for export. The case was referred to the ECJ by the Competition Commission because for at least one of the drugs in question, GSK enjoys market dominance.
Findings
Advocate General Jacobs stated that restricting the supply of products does not automatically constitute an abuse of a dominant position merely because the dominant undertaking intends to restrict parallel trade.
Normal competition conditions do not exist in the European pharmaceutical sector because of a high degree of national regulation.
A requirement to supply would not necessarily promote either free movement or competition.
Parallel trade does not always produce any benefit for the consumer, or the Member State as primary purchaser.
The opinion of the Advocate General is not binding on the ECJ, which will issue judgement later on this case. But the Advocate’s opinions are upheld in approximately 80 % of cases.
**Update** ECJ rules on case
The ECJ presented a mixed verdict in this eight year long saga on 16 September 2008. The top EU court ruled that if GSK was failing to meet "ordinary" orders in order to prevent parallel trade then it was indeed, in breach of EU competition law. If the orders of drugs were beyond what was necessary then GSK had every right to "counter in a reasonable and proportionate way"
However the court could not state whether it was in fact in breach or not, only that it must be referred back to the Greek courts for a final ruling on whether the orders placed by Greek wholesalers where reasonable.
Many see this as a victory for dominant drug companies as the ruling permits the manufacturers to protect their interests by placing ’reasonable’ restrictions on the wholesalers. however some commentators feel that the concept of ’ordinary orders’ introduced by the ECJ will contribute further uncertainty.
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