ECJ Refuses To Hear Pharmaceutical Parallel Trading Case

by Ulrika Lomas, Tax-News.com, Brussels

08 June 2005

The European Court of Justice says it has no jurisdiction to hear a reference from the Greek Competition Commission dealing with GlaxoSmithKline's distribution practices, because the Commission is not 'a court or tribunal'.

GlaxoSmithKline stopped supplying various drugs to Greek wholesalers who it said were re-exporting them to third markets in which prices were lower than in Greece. The wholesalers accused GSK of breaching article 82, and in 2001 the Greek Competition Commission ordered GSK's Greek subsidiary to meet orders in full. The subsidiary filled their orders up to the size of the Greek market, but refused further orders. The wholesalers returned to the Commission, which then sought guidance from the ECJ.

Pharmaceutical companies had hoped for more clarity about the rules governing parallel trade in Europe, but have been disappointed.

In its May 31 decision in Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and others v GlaxoSmithKline plc and others, the ECJ said that it has no jurisdiction to answer the questions referred by the
Epitropi Antagonismou since that body is not a "court or tribunal" within the meaning of Article 234 EC – the provision which allows national courts or tribunals to refer questions to the Court for a preliminary ruling – because it does not have certain of the characteristics necessary for it to be classified as such, namely independence and the fact of being called upon to give judgment in proceedings intended to lead to a decision of a judicial nature.

First, the Court noted that the Epitropi Antagonismou is subject to the supervision of the Minister for Development, which implies that that minister is empowered, within certain limits, to review the lawfulness of the decisions adopted by the Epitropi Antagonismou. Second, although the members of the Epitropi Antagonismou are independent in the exercise of their duties, their dismissal or the termination of their appointment are not subject to any particular safeguards.

Third, since the President of the Epitropi Antagonismou is responsible for the coordination and general policy of the secretariat and is the immediate superior of the personnel of that secretariat, there is no separation of functions between the Epitropi Antagonismou, a decision-making body, and its secretariat, a fact-finding body on the basis of whose proposal it adopts decisions.

Lastly, the Court pointed out that a national competition authority such as the Epitropi Antagonismou is required to work in close cooperation with the Commission of the European Communities and may, as a matter of Community competition law, be relieved of its competence by a decision of the Commission initiating its own proceedings. It is therefore possible that the proceedings initiated before the Epitropi Antagonismou will not lead to a decision of a judicial nature. A body may refer a question to the Court only if there is a case pending before it and it is called upon to give judgment in proceedings intended to lead to a decision of a judicial nature.

Unusually, the Court did not follow the opinion of Advocate General Francis Jacobs, who said last year that in the pharmaceutical sector normal conditions of competition did not apply, due to high levels of regulation by the European Commission and EU member states. He added: "Given the specific economic characteristics of the pharmaceutical industry, a requirement to supply would not necessarily promote either free movement or competition and might harm the incentive for pharmaceutical undertakings to innovate."

The Court's judgement (or lack of one) seems to be an open invitation to the European Commission to bring forward a clearer set of rules covering parallel trading.

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