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OFT abuse case: Reckitt Benckiser early resolution agreement

14/12/2010

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In February 2010, the Office of Fair Trading ("OFT") issued Reckitt Benckiser ("RB") with a Statement of Objections alleging abuse of a dominant position in the market for the NHS supply of alginate and antacid heartburn medicines (see On the Pulse April 2010 issue). The OFT announced on 15 October 2010 that RB have admitted to the abuse and co-operated with the investigation as part of an early resolution agreement.[1] As a result RB's fine has been reduced from £12 million to £10.2 million. 

The OFT alleged that RB had excluded rivals from the market by deliberately delisting its "Gaviscon Original Liquid" medicine from the NHS prescription channel shortly before a "generic name" had been assigned to it.  If the medicine had not been withdrawn then, following patent expiry, NHS doctors could have searched for the branded name "Gaviscon" and written an open prescription allowing pharmacists to prescribe the branded product or a generic.  Due to the de-listing, when a doctor searched for "Gaviscon" only a second newer, patent-protected product, "Gaviscon Advance Liquid", would appear on the computer system reducing the likelihood that prescriptions for the generic versions of the original medicine would be written.

The RB settlement came not long after the General Court's judgment upholding the Commission's AstraZeneca ("AZ") Decision in July this year [2]. The RB case bears many similarities to the AZ case, where marketing authorisations were held to have been withdrawn to impede generic entry following patent expiry.  It is notable that in both cases the alleged abuses do not involve the direct exploitation of the dominant firm's economic power, but rather exploitation of quirks in regulatory procedures or IT systems.  Effectively, it appears competition authorities are developing a law of "unfair competition" which applies only to dominant firms.  This can be contrasted with the position in certain other jurisdictions, such as Australia, where exploitation of economic power is a prerequisite for an abuse. 

The RB case is part of a growing trend of cases which result in early settlement.  Competition authorities are keen to relieve the burden on their resources caused by lengthy and complex investigations. Early settlement twinned with co-operation greatly facilitates this objective.  RB obtained a £1.8 million reduction in its fine and has avoided the expense and uncertainty of years of further investigation and appeals.  Although such settlements shed light on the competition authorities' enforcement priorities in these 'grey areas' of competition law, there is a risk that the development of the law will be hindered and that undertakings will be pressured into accepting liability for acts which may do no harm to competition.  Legal uncertainty will persist until further authoritative guidance is given by the courts.

Competition authorities remain positive about the enforcement of competition law in the Pharma sector.  In July the Commission published a follow-up study to the Pharmaceutical Sector Inquiry Report and announced that it considered the number of problematic patent litigation settlement agreements had significantly declined.  Joaqui­n Almunia, Commission Vice President in charge of Competition Policy, took the opportunity to announce that "the Commission will remain attentive to ensure that the sale of safe, affordable medicines is not delayed by unfair practices" [3].



[1]
http://www.oft.gov.uk/news-and-updates/press/2010/106-10

[2] Case T-321/05 AstraZeneca v Commission [2010] OJ C 221/33

[3]http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/887&format=HTML&aged=0&language=EN&guiLanguage=en

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