Joined Cases C‑468/06 to C‑478/06: Judgment of the Court of the European Union on Article 82 EC and a Pharmaceutical Company’s refusal to supply wholesalers engaging in parallel exports - Calavros Law Firm - Filios - Kloukinas

Joined Cases C‑468/06 to C‑478/06: Judgment of the Court of the European Union on Article 82 EC and a Pharmaceutical Company’s refusal to supply wholesalers engaging in parallel exports

Sot. Lelos kai Sia EE (C‑468/06), Farmakemporiki AE Emporias kai Dianomis Farmakeftikon Proionton (C‑469/06), Konstantinos Xidias kai Sia OE (C-470/06), Farmakemporiki AE Emporias kai Dianomis Farmakeftikon Proionton (C‑471/06), Ionas Stroumsas EPE (C‑472/06), Ionas Stroumsas EPE (C‑473/06), Farmakapothiki Farma-Group Messinias AE (C‑474/06), K.P. Marinopoulos AE Emporias kai Dianomis Farmakeftikon Proionton (C‑475/06), K.P. Marinopoulos AE Emporias kai Dianomis Farmakeftikon Proionton (C‑476/06), Kokkoris D. Tsanas K. EPE and Others (C-477/06), Kokkoris D. Tsanas K. EPE and Others (C-478/06), v GlaxoSmithKline AEVE Farmakeftikon Proionton, formerly Glaxowellcome AEVE

The ECJ found that Article 82 EC must be interpreted as meaning that an undertaking occupying a dominant position on the relevant market for medicinal products which, in order to put a stop to parallel exports carried out by certain wholesalers from one Member State to other Member States, refuses to meet ordinary orders from those wholesalers, is abusing its dominant position. It is for the national court to ascertain whether the orders are ordinary in the light of both the size of those orders in relation to the requirements of the market in the first Member State and the previous business relations between that undertaking and the wholesalers concerned.

The ECJ in essence addressed whether parallel imports and their effects on pharmaceutical companies can justify a refusal to supply, or in this case, a limitation of supply. The ECJ recognised that GSK AEVE aim was to limit parallel exports by wholesalers to the markets of other Member States in which the selling prices of the medicinal products in dispute were higher. Furthermore, the ECJ ascertained that parallel imports enjoy a certain amount of protection in Community law because they encourage trade and help reinforce competition. The ECJ maintained that the refusal by an undertaking in a dominant position to supply medicinal products to wholesalers with the aim of restricting parallel trade does not constitute in principle an abuse of a dominant position within the meaning of Article 82 EC. A producer of pharmaceutical products must be in a position to protect its own commercial interests if it is confronted with orders that are out of the ordinary in terms of quantity. Thus, a company could refuse supply to wholesalers involved in parallel trade, so long as that refusal to supply was to counter in a reasonable and proportionate way the threat to its own commercial interests potentially posed by the activities of an undertaking which wishes to be supplied in the first Member State with significant quantities of product that are essentially destined for parallel export. To determine whether a refusal to supply is a reasonable and proportionate measure, the ECJ found that “it must be ascertained whether the orders of the wholesalers are out of the ordinary”. What is “out of the ordinary” in terms of quantity in a specific case must be ascertained in the light of previous business relations between the pharmaceutical company holding a dominant position and the wholesaler while assessing the orders placed by the wholesaler in relation to the requirements of the market in the member State concerned. In other words, the previous business relations between the pharmaceutical company and the wholesaler constitute the starting point of the assessment which will be then further defined by the requirements of the market in the Member State. Thus, the ordinary character of the size of the orders placed by a wholesaler could even be distinguished from the previous business relations of the companies, as these could be out-of-the ordinary themselves. Thus, the size of the orders of a specific wholesaler shall be evidently defined in relation and in comparison to the requirements of the national market that the said wholesaler meets and not in relation to the whole amount of products the pharmaceutical company puts in the specific market. Then, it will be on the wholesaler to prove that his orders placed traditionally to the dominant pharmaceutical company are ‘”ordinary” for his Greek market needs (burden of proof). It is in these circumstances that the defence mechanism for the pharmaceutical company will be triggered for it to protect its commercial interests

Even if not completely unambiguous, the decision of the ECJ reaffirmed that there is no per se infringement of competition law in case of a dominant company’s refusal to supply. Abuse according to the ECJ should now be filtered via the “ordinary sales” concept which shall be further assessed by national courts. It is noted that the Greek Competition Commission, which ruled on the same issue prior to the said decision of the ECJ, had found in its 318/V/2006 Decision that refusal to supply, even if its absolute and general, is not abusive per se but abuse should be assessed in light of the proportionality principle. It had taken account of the criteria mentioned by the ECJ, in order to assess GSK’s behavior as abusive or not and thus, whether objective reasons justifying refusal to supply apply in the case at hand.