Case T‑472/13

H. Lundbeck A/S

and

Lundbeck Ltd

v

European Commission

(Competition — Agreements, decisions and concerted practices — Market for antidepressant medicinal products containing the active pharmaceutical ingredient citalopram — Concept of restriction of competition ‘by object’ — Potential competition — Generic medicinal products — Barriers to market entry resulting from the existence of patents — Agreements concluded between a patent holder and generic undertakings — Article 101(1) and (3) TFEU — Errors of law and of assessment — Obligation to state reasons — Rights of defence — Legal certainty — Fines)

Summary — Judgment of the General Court (Ninth Chamber), 8 September 2016

1.      Agreements, decisions and concerted practices — Adverse effect on competition — Potential competition — Real and concrete possibility of a generic medicinal products undertakings entering the market at risk in the presence of medicinal products protected by patents — Agreement between the patent holder and generic medicinal products undertakings likely to prevent such entry — Restriction of potential competition

(Art. 101(1) TFEU)

2.      Competition — Administrative procedure — Commission decision finding an infringement — Burden of proving the infringement and its duration on the Commission — Extent of the burden of proof — Degree of precision required of the evidence used by the Commission — Body of evidence — Presumption of innocence — Applicability — Evidential obligations of undertakings disputing the reality of the infringement — Judicial review — Scope

(Arts 101(1) TFEU and 263 TFEU; Council Regulation No 1/2003, Art. 2)

3.      Agreements, decisions and concerted practices — Prohibition — Infringements — Amicable agreements on patents — Agreement between an originator company and a generic medicinal products undertaking — Reverse payments disproportionate in character and combined with an exclusion of competitors from the market — Not permissible

(Art. 101(1) TFEU)

4.      Actions for annulment — Jurisdiction of the EU judicature — Interpretation of the national law of a Member State — Question of fact — Included

(Art. 263 TFEU)

5.      Agreements, decisions and concerted practices — Adverse effect on competition — Criteria for assessment — Content and objective of a cartel and economic and legal context of its development — Distinction between infringements by object and infringements by effect — Intention of the parties to an agreement to restrict competition — Not a necessary criterion — Infringement by subject-matter — Whether sufficiently damaging — Criteria for assessment

(Art. 101(1) TFEU)

6.      Agreements, decisions and concerted practices — Adverse effect on competition — Amicable agreements on patents — Agreement between an originator company and a generic medicinal products undertaking — Most profitable or least risky solution for the undertakings in question — Objective of mitigating the effects of excessively unfavourable legal rules — Irrelevant to the unlawful character of those agreements

(Art. 101(1) TFEU)

7.      Agreements, decisions and concerted practices — Adverse effect on competition — Ancillary restriction — Concept — Objective and proportionate nature — Restriction having made the main operation more difficult or less profitable — Amicable agreements on patents — Agreement between an originator company and a generic medicinal products undertaking — Clauses restricting competition ancillary to the protection of an intellectual property right — No objectively necessary restriction

(Art. 101(1) TFEU)

8.      Competition — EU rules — Substantive scope — Amicable agreements on patents — Included — Agreement between an originator company and a generic medicinal products undertaking — Application of the criterion of the scope of the patent — Test not relevant — Infringement by subject-matter

(Art. 101(1) TFEU)

9.      Act of the institutions — Statement of reasons — Obligation — Scope — Decision to apply competition rules — Judicial review — Scope

(Arts 101 TFEU, 261 TFEU and 296(2) TFEU; Council Regulation No 1/2003, Art. 31)

10.    Actions for annulment — Grounds — Lack of or inadequate statement of reasons — Separate ground from the one concerning substantive legality

(Arts 263 TFEU and 296 TFEU)

11.    Agreements, decisions and concerted practices — Prohibition — Exemption — Conditions — Burden of proof — Scope

(Art. 101(3) TFEU; Council Regulation No 1/2003, Art. 2)

12.    Competition — Administrative procedure — Statement of objections — Provisional character — Necessary content — Limits

(Art. 101 TFEU; Charter of Fundamental Rights of the European Union, Art. 41(2)(a); Council Regulation No 1/2003, Art. 27(1))

13.    Competition — Administrative procedure — Statement of objections — Non-disclosure to undertakings of certain data — Commission’s final decision based in part on those data — Infringement of the rights of the defence — Validity of the final decision as a whole — Examination by the General Court whether the decision well-founded — Account taken of the disputed data — Precluded

(Art. 101 TFEU; Council Regulation No 1/2003, Art. 27(1))

14.    Competition — EU rules — Infringements — Committed intentionally or negligently — Concept — Undertaking not capable of being unaware of the anti-competitive nature of its conduct — Agreement between an originator company and a generic medicinal products undertaking — Reverse payments disproportionate in character and combined with an exclusion of competitors from the market — Inclusion

(Art. 101 TFEU; Charter of Fundamental Rights of the European Union, Art. 47; Council Regulation No 1/2003, Arts 5 and 23(2))

15.    Competition — Fines — Amount — Determination — Commission not obliged to abide by its previous decision-making practice — Raising of the general level of fines — Lawfulness

(Art. 101 TFEU; Council Regulation No 1/2003, Art. 23(2))

16.    Competition — Fines — Amount — Determination — Determination of the base amount — Gravity of the infringement — Criteria for assessment — Determination of the value of sales — Compliance with the principle of proportionality

(Art. 101 TFEU; Council Regulation No 1/2003, Art. 23(2) and (3); Commission Notice 2006/C 210/02, points 21 and 22)

17.    Competition — Fines — Amount — Determination — Deterrent effect

(Art. 101 TFEU; Council Regulation No 1/2003, Art. 23(2) and (3); Commission Notice 2006/C 210/02, point 25)

18.    Competition — Fines — Amount — Determination — Adjustment of the basic amount — Mitigating circumstances — Indicative character of circumstances figuring in the Guidelines — First time competition rules applied in a given sector — No mitigating circumstance

(Art. 101 TFEU; Council Regulation No 1/2003, Art. 23(2); Commission Notice 2006/C 210/02, point 29)

19.    Competition — Fines — Amount — Determination — Adjustment of the basic amount — Mitigating circumstances — Infringement committed by negligence — No need to take account separately of each of the mitigating circumstances listed in the Guidelines — Overall assessment

(Art. 101 TFEU; Council Regulation No 1/2003, Art. 23(2); Commission Notice 2006/C 210/02, point 29)

1.      Article 101(1) TFEU applies only in sectors open to competition. In that regard, the examination of conditions of competition on a given market must be based not only on existing competition between undertakings already present on the relevant market but also on potential competition, in order to ascertain whether, in the light of the structure of the market and the economic and legal context within which it functions, there are real concrete possibilities for the undertakings concerned to compete among themselves or for a new competitor to enter the relevant market and compete with established undertakings. Moreover, the very fact that an undertaking already present on the market seeks to conclude agreements or to establish information exchange mechanisms with other undertakings which are not present on the market provides a strong indication that the market in question is not impenetrable.

In the market for medicinal products, process patents of the originator company do not necessarily constitute insurmountable barriers for the generic undertakings, if, generally speaking, there are ways which constitute concrete and realistic possibilities for the latter to enter the market. Those possibilities include, in particular, launching the generic product ‘at risk’, and potentially facing infringement actions brought by the originator company. Such a possibility represents an expression of potential competition, in a situation where the original patents of the originating company have expired and there are other procedures enabling generic products to be produced and which are not demonstrated to infringe other patents of that originator company. Moreover, the steps and investments made by the generic undertakings with a view to entering the market for the originating product before concluding with the said originator company restrictive agreements concerning that entry demonstrate that, at the time of those agreements, they were ready to enter the market and take the risks involved in such entry.

Moreover, the presumption of validity of patents cannot be equated with a presumption of illegality of generic products validly placed on the market which the patent holder deems to be infringing the patent. It is for the holder of the patent to prove before the national courts, in the event that generics have entered the market, that those generics infringe one of their process patents, since an ‘at risk’ entry is not unlawful in itself. Moreover, in the context of an infringement action brought by the patent holder against generic undertakings, it is possible for those undertakings to challenge the validity of the patent on which that holder relies by raising a counter-claim. Such claims occur frequently in patent litigation and lead, in numerous cases, to a declaration of invalidity of the process patent relied on by the patent holder. In order to establish the legitimate exercise of real and potential competition, it merely has to be demonstrated that the generic undertakings have real and concrete possibilities and the capacity to enter the market, which is certainly the case where the latter have made significant investments in order to enter the market, have already obtained marketing authorisations, or have taken the steps necessary to obtain one within a reasonable time.

As regards the entry of generic undertakings to the market, in order to conclude that they represent potential competition, it is necessary only to establish that that entry took place within a reasonable time, especially since, in the pharmaceutical sector in particular, potential competition may manifest itself even before the expiry of a patent.

Finally, potential competition includes, inter alia, the activities of generic undertakings seeking to obtain the necessary marketing authorisations, as well as all the administrative and commercial steps required in order to prepare for entry to the market. That potential competition is protected by Article 101 TFEU. If it were possible, without infringing competition law, to pay undertakings taking the necessary steps to prepare for the launch of a generic medicinal product, including obtaining a marketing authorisation, and which have made significant investments to that end, to cease or merely slow that process, effective competition would never take place, or would suffer significant delays, at the expense of consumers, that is to say, in the present case, patients or national health insurance schemes.

(see paras 98-104, 121-124, 128-132, 144, 157, 160, 163, 164, 171, 180, 181, 202, 203, 317, 426, 471-474)

2.      See the text of the decision.

(see paras 105-113, 138, 139, 141, 165, 166)

3.      The application of Article 101(1) TFEU to settlement agreements that may be concluded in relation to patents is in no way excluded. In that regard, whilst it is not for the Commission to determine the scope of a patent, it cannot refrain from all action when the scope of a patent is relevant for the purpose of determining whether there has been an infringement of Articles 101 TFEU and 102 TFEU.

In that context, the fact that restrictions contained in agreements restricting competition were obtained through significant reverse payments is decisive for the legal assessment of those agreements. The existence of a reverse payment in the context of a patent settlement is not always problematic, particularly when (i) that payment is linked to the strength of the patent, as perceived by each of the parties, (ii) it is necessary in order to find an acceptable and legitimate solution in the eyes of the two parties and (iii) it is not accompanied by restrictions intended to delay the market entry of generics. However, where a reverse payment is combined with an exclusion of competitors from the market or a limitation of the incentives to seek market entry, it is possible to consider that such a limitation does not arise exclusively from the parties’ assessments of the strength of the patents but rather was obtained by means of that payment, constituting, therefore, a buying-off of competition.

The disproportionate nature of such payments, combined with several other factors, such as the fact that the amounts of those payments seem to correspond at least to the profit anticipated by the generic undertakings if they had entered the market, the absence of provisions allowing the generic undertakings to launch their product on the market upon the expiry of the agreement without having to fear infringement actions brought by patent holders, or the presence, in those agreements, of restrictions going beyond the scope of the patents of that holder permit the conclusion that such agreements have as their object the restriction of competition, within the meaning of Article 101(1) TFEU.

Where it is shown that generic undertakings have real chances of success in the event of litigation with process patent holders, by concluding agreements restricting competition, the holders of those patents exchange that uncertainty for the certainty that the generic undertakings will not enter the market, in exchange for significant reverse payments, thereby eliminating all competition, even potential competition, on the market, for the duration of the latter.

(see paras 117-119, 140, 349, 350, 352-354, 363, 369, 379, 399, 401, 414, 427, 429, 431, 460, 486-489, 500, 526, 573)

4.      See the text of the decision.

(see paras 258, 625)

5.      As regards anti-competitive conduct caught by Article 101 TFEU, certain types of coordination between undertakings reveal, by their very nature, a sufficient degree of harm to the proper functioning of normal competition that it may be found that there is no need to examine their effects.

In that regard, the exclusion of competitors from the market constitutes an extreme form of market sharing and of limitation of production. There is moreover no requirement for the same type of agreement to have been found unlawful by the Commission in order for them to be considered restrictive of competition by subject-matter. Furthermore, the fact that in the past the Commission did not take the view that a certain kind of agreement was, by its very object, restrictive of competition cannot, in itself, prevent it from doing so in the future following an individual, detailed examination of the measures at issue in the light of their content, purpose and context.

Finally, there is no requirement that an agreement be considered to be prima facie or undoubtedly sufficiently harmful to competition, without a detailed examination of its content, purpose, legal and economic context, in order to be regarded as a restriction on competition by object within the meaning of that provision.

(see paras 338-344, 428, 434-438, 472, 523, 539, 752, 774, 775)

6.      In the context of amicable agreements in the market for medicinal products, the fact that the adoption of anti-competitive behaviour may be the most cost-effective or least risky course of action for an undertaking in no way excludes the application of Article 101 TFEU, particularly if that behaviour consists in paying actual or potential competitors not to enter the market and sharing with those competitors the profits resulting from the monopoly rent, to the detriment of consumers.

It cannot be accepted that, by the conclusion of agreements between undertakings holding patents over original medicinal products and generic medicinal product undertakings, providing for a transfer of value, by the patent holders, linked to the acceptance by the generic undertakings of limitations on entry to the market, and, in particular, an undertaking not to sell the generic medicinal product for the duration of those agreements, the patent holder undertakings might protect themselves against an irreversible price fall which, according to their own assertions, could not have been avoided even if they had been successful in infringement actions brought before the national courts. They could therefore, by concluding such agreements, maintain higher prices for their products, to the detriment of consumers and the healthcare budgets of States, even though such an outcome could not have been obtained if the national courts had confirmed the validity of their patents and the products of the generic undertakings had been held to be infringing. Such an outcome would be manifestly contrary to the objectives of the treaty provisions on competition, which are intended inter alia to protect consumers from unjustified price increases resulting from collusion between competitors. There is no reason to suppose that such collusion would be lawful, under the pretext that certain process patents are in dispute, when the defence of those patents before the national courts could not, even in the most favourable scenario for the applicants, have led to the same negative consequences for competition and, in particular, for consumers. It is unacceptable for undertakings to attempt to mitigate the effects of legal rules which they consider excessively unfavourable by entering into restrictive arrangements intended to offset those disadvantages on the pretext that those rules have created an imbalance detrimental to them.

(see paras 380, 386, 387, 427, 459)

7.      Where it is a matter of determining whether an anticompetitive restriction can escape the prohibition laid down in Article 101(1) TFEU because it is ancillary to a main operation that is not anticompetitive in nature, it is necessary to inquire whether that operation would be impossible to carry out in the absence of the restriction in question.

As for the necessity for a restriction, it requires a double examination. It is necessary to establish, first, whether the restriction is objectively necessary for the implementation of the main operation and, secondly, whether it is proportionate to it.

As regards the examination of the objective necessity of a restriction, inasmuch as the existence of a rule of reason in EU competition law cannot be upheld, the requirement for objective necessity cannot be interpreted as implying a need to weigh the pro- and anti-competitive effects of an agreement.

In the case of an agreement concluded in the pharmaceutical sector between an originator company and a generic medicinal products undertaking, the restrictions on competition set out in such an agreement are not objectively necessary in order to protect the intellectual property rights of the patent holder if there are other ways of protection those rights or settling a patent dispute without agreeing to restrictions on the market entry of generic undertakings.

(see paras 453-455, 458)

8.      Although the Commission may not refrain from all action when the scope of the patent is relevant for the purposes of determining whether there has been an infringement of Articles 101 TFEU and 102 TFEU, it is not competent to determine the scope of a patent. In the light of that consideration, and of the inherent objectives of Article 101 TFEU, which require, inter alia, that each economic operator must determine independently the policy which it intends to adopt on the market in order to protect consumers from unjustified price increases resulting from collusion between competitors, application of the ‘scope of the patent’ test in order to evaluate the agreements at issue in the light of Article 101(1) TFEU cannot be accepted.

That criterion is problematic from the point of view of competition law in several respects. First, it leads to a presumption that a generic medicinal product infringes the originator undertaking’s patent and thus allows the generic medicinal product to be excluded on that basis, when the question whether it infringes any patents is an unresolved issue. Secondly, it is based on the premiss that any patent invoked in the context of a settlement agreement will be held valid if its validity is challenged, although there is no basis in law or in practice for that outcome. Whether or not a restriction falls within the scope of a patent is a conclusion that follows from an examination of the scope and validity of that patent and not the starting point of such an examination.

(see paras 489-493, 499, 512, 515)

9.      See the text of the decision.

(see paras 507, 509, 791-794)

10.    See the text of the decision.

(see para. 508)

11.    See the text of the decision.

(see paras 708-711)

12.    See the text of the decision.

(see paras 726-729, 732, 741)

13.    See the text of the decision.

(see paras 745, 746, 748, 752, 834)

14.    With regard to the question whether infringements of the completion rules have been committed intentionally or negligently, and can therefore be punished by a fine under Article 23(2) of Regulation No 1/2003, that condition is satisfied where the undertaking concerned cannot be unaware of the anti-competitive nature of its conduct, whether or not it was aware that it was infringing the competition rules of the Treaty.

Moreover, the principle of legal certainty and the principle that penalties must have a proper legal basis, laid down by Article 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, and Article 49 of the Charter of Fundamental Rights of the European Union, cannot be interpreted as prohibiting the gradual clarification of the rules of liability but may preclude the retroactive application of a new interpretation of a rule establishing an offence.

In that context, it is not unforeseeable that agreements by which the originator company was able to remove potential competitors from the market for a specified period, by means of significant reverse payments, might be contrary to Article 101(1) TFEU, whether or not they went beyond the scope of that company’s patents. In that regard, a literal reading of Article 101(1) TFEU makes it clear that agreements between competitors for the exclusion of some of them from the market are illegal. Market-sharing or exclusion agreements are among the most serious restrictions of competition expressly referred to in Article 101(1) TFEU.

(see paras 761-767, 832)

15.    See the text of the decision.

(see paras 773, 810)

16.    See the text of the decision.

(see paras 799, 800, 804, 808, 809, 811)

17.    See the text of the decision.

(see paras 820, 822-824)

18.    The fact that the existence of reasonable doubt as to the existence of an infringement does not appear explicitly among the mitigating circumstances explicitly referred to in the Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 (‘the 2006 Guidelines’) does not suffice for the Commission automatically to reject its application as a mitigating circumstance. In the absence of a mandatory indication in the Guidelines of the mitigating circumstances which may be taken into account, the Commission retains a certain discretion in its global assessment of the size of any reduction in the fines to reflect mitigating circumstances.

However, the fact that a Commission decision is the first application of the competition rules to a particular sector of the economy cannot be regarded as a mitigating factor if the perpetrator of the infringement knew or could not have been unaware that its conduct could lead to a restriction of competition on the market and pose problems with regard to competition law.

(see paras 830, 831)

19.    See the text of the decision.

(see paras 838, 841, 842)