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Abuse of Dominant Position, Predation and Effects: Recent French Judgment

By Bartolus

There's been quite a fuss lately at the EU level about Article 82 EC and whether there should be an illicit abuse of a dominant position only when the abusive behavior actually has deleterious effects on the market. The Commission's DG Competition has been doing some homework on this (which does not look as if it is ready to be handed in).

Regulation 1/2003 has conscripted national competition authorities and national courts to apply EU antitrust law. The consequence is that national courts can experiment a little.

The Paris Court of Appeal - one of Europe's most respected jurisdictions - recently handed down a judgment on April 8th 2008 that quashed a finding of the French Competition Council that GlaxoSmithKline had engaged in predatory behavior.

What happened was this. Glaxo faced increasing competition from Flavelab, a generic drug producer, for the cefuroxime sodium market and so lowered the price of its drug Zinnat(r). Glaxo won many calls for tender to supply hospitals and once Flavelab was pushed out of the market, it raised its prices.

The Competition Council took a decision imposing a fine on Glaxo for predatory behavior and abusing its dominant position. It found that Glaxo's strategy put Flavelab out of the market and deterred other producers of cefuroxime sodium from developing other Glaxo generic drugs, such as acyclovir, an antiviral injection sold to hospitals under the brand name Zovirax(r), Glaxo's leading product. Interestingly, it relied on the judgment of the Court of Justice in Case C-62/86 Akzo.

The Paris Court of Appeal quashed the decision of the Competition Council. It distinguished the Akzo case and held that although Glaxo was dominant on one market (for injectable acyclovir) it was not dominant on the market in which behaved in an allegedly predatory manner (the cefuroxime sodium market). It also found that Glaxo's behavior had no effect: there was no link between predation in the non-dominant market and behavior deterring entry into its dominant market.

If this sort of thing happens again, the EU Commission will likely lose its intellectual leadership in this field.

Full post as published by EU Law Blog on May 27, 2008 (boomark / email).