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Published online by Cambridge University Press: 27 October 2017
On 1 March 2002, the Competition Commission Appeal Tribunals (‘the Appeal Tribunals’) celebrate the second year of their existence, this being also the second anniversary of the coming into force of the Competition Act 1998 (‘the Act’) which founds their jurisdiction. In fact the Act had existed in dormant form for some time before this date (it was enacted on 9 November 1998), giving competition practitioners and officials alike ample warning of the main provisions of the new regime. However, as the Appeal Tribunals are an appellate body, their opportunity to play their part in the brave new world of competition law had to await the actions of the administrative bodies, and hence the Appeal Tribunals were not called upon to act until fifteen months into their tenure. Nevertheless, once appraised of appeals they have proceeded to produce a number of final and interlocutory judgments which have established the framework and ground rules for an effective judicial forum.
1 Section 2 of the Act.
2 Section 18 of the Act.
3 Sections 3 and 19 of the Act.
4 Sections 25 to 44 of the Act.
5 Section 36 of the Act and Statutory Instrument No. 309/2000 The Competition Act 1998 (Determination of Turnover for Penalties) Order 2000.
6 Section 2(4) of the Act.
7 Section 60(2) of the Act.
8 Section 60(3) of the Act.
9 Section 60(1) of the Act.
10 The position of the Director was created by section 1 of the Fair Trading Act 1973. Significant powers are entrusted to him as an individual, and all decisions are those of the Director, not the Office.
11 There are exceptions—for example water charging references under the Water Industry Act 1991, and by virtue of the Utilities Act 2000 the reporting side may veto modifications to licences of gas and electricity undertakers. There are similar proposals under consideration in respect of water undertakers. Further the Government is consulting on proposals on the merger control regime under which the reporting side would finally determine remedies to address anti-competitive effects of mergers.
12 Sections 46(1) and (2) and 48(1) of the Act.
13 Sections 47(6) and 48(1) of the Act.
14 Schedule 8, para 3(1) of the Act.
15 Schedule 8, para 3(2)(e) of the Act.
16 Schedule 8, para 3(2)(a) of the Act.
17 All references to ‘Rules’ hereafter relate to the Tribunal rules, unless otherwise stated.
18 Section 49(2) of the Act.
19 Section 49(1) of the Act.
20 Section 49(4) of the Act.
21 Sustained release morphine is a strong opioid analgesic used to treat constant pain, particularly in cancer patients.
22 Napp launched MST, the first sustained release morphine product to appear on the market, in 1980 and had the United Kingdom patent on its formulation until 1992.
23 The hospital sector relates to the prescriptions by hospital doctors to patients and comprises 10–14% of the relevant market.
24 The community sector relates to the prescriptions by GPs once the patients have left the hospital. This sector comprises 86–90% of the relevant market.
25 The PPRS is a voluntary scheme between the Secretary of State for Health and the Association of British Pharmaceutical Industry which regulates the profit companies make for sales of branded prescription drugs to the NHS—it sets a limit on the rate of return for a company across all branded prescription medicines and is not applied to each product individually.
26 A generic drug is one with the same compound preparation as the original branded drug, but usually given a non-proprietary name based on the compound preparation itself e.g. morphine sulphate.
27 These were estimated to be in excess of 90% in both sectors.
28 The Director considered that there existed both regulatory and strategic barriers to entry—for instance Napp’s ‘first-mover’ advantage and its reputation as an aggressive competitor; see paras 101–118 of the Decision.
29 See para 236(a) of the Decision. The Director referred, in particular, to Napp’s (i) selectively supplying MST to customers in the hospital segment at lower prices than to customers in the community segment; (ii) targeting competitors in (a) supplying at higher discounts (in excess of 90%) to hospitals where it faced or anticipated competition, or (b) supplying at higher discounts on those strengths of MST where it faced competition; and (iii) supplying MST to hospitals at excessively low prices, in some cases below total delivered cost, and in other cases below direct costs (see paras 188 to 196). Moreover, Napp’s pricing policy also foreclosed a large part of the total market (see paras 160 to 180).
30 Case C–62/86 AKZO Chemie BV v. Commission [1991] ECR I–3359.
31 In its final judgment (see below) the Tribunal noted that there existed considerable confusion on the part of both parties in relation to the term ‘follow-on’ effect. According to the Tribunal, the parties used the term interchangeably when referring to two, separate, concepts. The Tribunal suggested that the reason for this confusion was probably because it was a phrase ‘coined by Napp’s advisers for the purposes of this case’ (para 235). The first was a ‘narrow follow-on effect’ whereby in about 15% of cases the brand of oral sustained release morphine prescribed by the GP in the community sector is determined by the hospital’s choice of brand. The second concept, termed ‘hospital influence’ describes the whole range of ways in which the fact that a drug is used in hospitals may affect the prescribing habits of GPs; this would include direct referrals, but also enhancement of the brand’s reputation simply because hospitals stock the drug. Regardless of the correctness or otherwise of the ‘follow-on’ effect in the broad or the narrow sense and regardless of the Director’s apparent acceptance of it (at para 150 of the Decision), the Tribunal concluded that it did not assist Napp’s Case (para 247) since there was no evidence emanating from any of the documents produced by Napp that it ‘ever took into account any follow-on effect when setting or carrying out its pricing policy (…) what Napp was well aware of was not any follow-on effect in the narrow sense, but the strategic importance of hospital business, and the hospital influence thereby acquired, as the gateway to the community segment’ (paras 248 and 255).
32 Case C–27/76 United Brands v. Commission [1978] ECR 207.
33 The directions required Napp (i) to reduce the list price for MST by at least 15% within 15 working days, and thereafter to supply MST at a price no higher than the reduced NHS list price less the normal wholesaler’s discount of 12.5%; and (ii) to supply MST to hospitals at a price of not less than 20% of the (reduced) list price. Napp was given a four month period of grace to renegotiate its existing hospital contracts.
34 The President sat alone in accordance with his powers under Rule 33(1).
35 The President also drew to the attention of the Director that it would be desirable in the future for directions to be made at the same time or in the same document as the decision, due to the potential complications of different appeal dates as a result of separate decisions by the Director. Section 46(4) of the Act provides that an appeal does not automatically suspend the effect of a decision, except in relation to an appeal against a penalty, but Rule 32(4) allows the Appeal Tribunals to do so by taking into account all relevant circumstances.
36 Case–149/95P (R) Commission v. Atlantic Container Line AB and Others [1995] ECR I–2165.
37 Paras 3(2), 3(3) and 10 of Schedule 8 of the Act have this combined effect as applied by Rule 32(11).
38 Section 34 and Schedule 8, paras 3(2)(d) and (e) of the Act.
39 The Tribunal was also asked to rule on the Director’s request to withdraw his acceptance of Napp’s ‘follow-on effect’ figure of 15% (see above n 31) on the basis of doubts surrounding the internet survey, such doubts being supported by a witness statement. In the event, the Tribunal did not need to rule since, during the course of the case management conference, he abandoned the request. For the record, the Tribunal noted that it would have been difficult to permit such a with-drawal in view of the significance of the figure of 15% for the Decision as a whole.
40 Referring to the Tribunal’s powers to provide for the giving of evidence, e.g. hearing of witnesses, appointment of experts (see Schedule 8, para 9(1) of the Act and Rules 17, 20–21).
41 For instance, the right to a fair and public hearing (Art. 6(1)), the presumption of innocence (Art. 6(2)) and the right to ‘examine or have examined witnesses against him’ (Art. 6(3)(d)).
42 See Potter LJ at para 84 and Mance LJ at para 88 of that judgment.
43 See Lord Bridge at p 884F and Lord Templeman at p 891 E–G. This approach was confirmed by the Tribunal in its final judgment (para 137), which referred to a House of Lords case which post-dated this interlocutory judgment, Magill v. Porter [2001] UKHL 67 per Lord Hope at 87–94.
44 Para 79 of the judgment.
45 See Lord Nicholls’ speech in In re H [1996] AC 563, citing notably In re Dellow’s Will Trusts [1964] 1 WLR 451, 455 and Hornal v. Neuberger Products Ltd [1957] 1 QB 247, 266.
46 See para 114 of the judgment.
47 The Director’s Rules are contained in the Competition Act 1998 (Director’s Rules) Order 2000, SI No. 293.
48 Case T–30/91 Solvay v. Commission [1995] ECR II–1775.
49 See paras 171 to 198 of the judgment.
50 See paras 199 to 206 of the judgment.
51 See paras 207 to 216 of the judgment.
52 Para 217 of the judgment.
53 See para 219 of the judgment.
54 Joined Cases C–395/396 P and C–396/96 P Compagnie Maritime Belge Transports SA and others v. Commission [2000] ECR I–1365 at 132–37.
55 At paras 226–28 of the judgment.
56 Case T–83/91 Tetra Pak v. Commission [1994] ECR II–755, confirmed on appeal, Case 333/94 P Tetra Pak v. Commission [1996] ECR I–5951.
57 Rule 20(2) provides: ‘The tribunal may admit or exclude evidence, whether or not the evidence was available to the respondent when the disputed decision was taken and notwithstanding any enactment or rule of law relating to the admissibility of evidence in proceedings before a court.’
58 Para 400 of the judgment.
59 Paras 428–41 of the judgment.
60 Case C–137/95P SPO and others v. Commission [1996] ECR I–1611. The Tribunal did not consider that the slightly different structure under sections 36 and 38 of the Act, as compared to Article 15(2) of Regulation 17/62 (which confers power on the European Commission to impose fines) was sufficient to constitute a relevant difference between the provisions concerned for the purposes of section 60 of the Act.
61 Para 455 of the judgment.
62 Case 100/80 Musique Diffusion Française v. Commission [1983] ECR 1825, at 112; Case T–77/92 Parker Pen v. Commission [1994] ECR II–549, at 81.
63 Case T–65/89 BPB Industries and British Gypsum v. Commission [1993] ECR II–389 at para 165 and Case T–29/92 SPO and Others v. Commission [1995] ECR II–289 at para 356.
64 See United Brands, paras 298 to 301.
65 Para 535 of the judgment.
66 Above n 31.
67 Para 34 of the GISC Decision.
68 Para 35 of the GISC Decision.
69 Para 193 of the judgment.
70 At the case management conference GISC (intervening) agreed to write to its members, in terms satisfactory to IIB, stating that GISC Rule F42 was not yet in force and that, until its introduction under transitional rules on 1 September 2001, members of GISC were free to deal with non-Members. On that basis, IIB did not pursue its application for interim relief.
71 Para 166 of the judgment.
72 The judgment consisted of some seventy five pages, compared to the GISC Decision which ran to just over seven.
73 Paras 25–86 of the judgment.
74 Paras 168–178 of the judgment. In very brief outline, the Tribunal considered that the most recent Community law on the subject was as set out in Advocate General Léger’s opinion of 10 July 2001 in Case C–309/99 Wouters which held that the first step is to determine the ‘object’ of the agreement in accordance with Case 56/65 Société Technique Minière [1966] ECR 235; if the object is clearly restrictive (for instance a price-fixing agreement) the agreements ‘by their nature’ restrict competition and no further analysis is required. If that is not the case, it is necessary to consider the effects on competition of the agreement, by considering the competition that would occur in the absence of the agreement (Société Technique Minère; Cases 180 to 184/98 Pavlov [2000] ECR I–6451). In addition, it must be shown that the effect is appreciable (Case 5/69 Völk v. Vervaecke [1969] ECR 295; Cases T–374/94 etc European Night Services v. Commission [1998] ECR II–3141). The Tribunal also touched on the troublesome concept of ‘rule of reason’; referring to Advocate General Léger in Wouters, the Tribunal noted that, if it exists at all, it is confined to a ‘purely competitive balance sheet of the effects of the agreement’ and accordingly, any public interest issues are irrelevant and may be considered only in relation to exemption under Art. 81(3) EC.
75 Para 215 of the judgment.
76 Paras 179–92 of the judgment.
77 Paras 193–205 of the judgment.
78 Paras 219–44 of the judgment.
79 Para 248 of the judgment.
80 Paras 202–04 and 223–44 respectively.
81 Case T–42/89 Yorck van Wartenburg v. Parliament [1990] ECR II–31.
82 Para 270 of the judgment.
83 Paras 21–32 of the judgment.
84 Paras 8–15 and 16–20 of the judgment respectively.
85 Paras 39–41 of the judgment.
86 Paras 42–46 of the judgment.
87 Paras 49–53 of the judgment.
88 Paras 54–61 of the judgment.
89 Section 49 of the Act.
90 For instance, where the applicant is habitually resident or where any impugned conduct took place.
91 For instance, the ‘just, expeditious and economical conduct of the proceedings’.
92 Para 8 of the judgment.
93 See paras 12–16 of the judgment.