Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia

>> Court finds that Greek pharmaceuticals company abused its dominant position by refusing to meet ordinary orders by wholesalers in order to prevent parallel exports

GlaxoSmithKline AEVE was the Greek subsidiary of GlaxoSmithKline, which held the marketing authorisation in Greece for certain prescription-only medicines and imported, warehoused and distributed pharmaceutical products of the GSK group in Greece.

In 2000, GlaxoSmithKline AEVE stopped meeting the orders of the Greek wholesalers who bought the medicines in question for distribution in Greece and export to other Member States, citing a shortage of the products at issue.

The company denied responsibility, and, altering its system of distribution, began itself to distribute those medicines to Greek hospitals and pharmacies.

In February 2001, GlaxoSmithKline AEVE started once more to supply the wholesalers with limited quantities of the medicinal products on the ground that the supply of medicines on the Greek market had to some extent normalised and that stocks had been reconstituted.

The wholesalers brought an action claiming that the sales policy of GlaxoSmithKline AEVE breached both Greek and Community competition law.

The referring court asked whether there is an abuse of a dominant position contrary to Art. 82 EC if a pharmaceuticals company occupying such a position on the national market for certain medicinal products refused to meet orders sent to it by wholesalers on account of the fact that those wholesalers are involved in parallel exports of those products to other Member States.

The Court of Justice reiterated that the refusal by an undertaking occupying a dominant position on the market of a given product to meet the orders of an existing customer constituted abuse of that dominant position under Art. 82 EC where, without any objective justification, that conduct was liable to eliminate a trading party as a competitor. (see
Joined Cases 6/73 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission [1974] and Case 27/76 United Brands and United Brands Continentaal v Commission [1978]).

The Court held that It was common ground between the parties in the main proceedings that, by refusing to meet the Greek wholesalers’ orders, GlaxoSmithKline AEVE aimed to limit parallel exports by those wholesalers to the markets of other Member States in which the selling prices of the medicinal products in dispute were higher.

The Court reiterated that a practice by which an undertaking in a dominant position aimed to restrict parallel trade in the products that it put on the market constituted abused of that dominant position, particularly when such a practice had the effect of curbing parallel imports by neutralising the more favourable level of prices which might apply in other sales areas in the Community or when it aimed to create barriers to re-importations which came into competition with the distribution network of that undertaking. Indeed, parallel imports enjoyed a certain amount of protection in Community law because they encouraged trade and helped reinforce competition. (see
Case 26/75 General Motors Continental v Commission [1975], Case 226/84 British Leyland v Commission [1986], and Case C-373/90 X [1992]).

The Court held that an undertaking in a dominant position for the purpose of marketing a product - which cashed in on the reputation of a brand name known to and valued by consumers - could not stop supplying a long-standing customer who abode by regular commercial practice, if the orders placed by that customer were in no way out of the ordinary. Such conduct was inconsistent with the objectives laid down in Art. 3(1)(g) EC, which were set out in detail in Art. 82 EC, since the refusal to sell would limit the markets to the prejudice of consumers and would amount to discrimination which might in the end eliminate a trading party from the relevant market.

According to the Court, “there could be no escape from the prohibition laid down in Art. 82 EC for the practices of an undertaking in a dominant position which were aimed at avoiding all parallel exports from a Member State to other Member States, practices which, by partitioning the national markets, neutralised the benefits of effective competition in terms of the supply and the prices that those exports would obtain for final consumers in the other Member States.” Para. 66

In order to appraise whether the refusal by a pharmaceuticals company to supply wholesalers involved in parallel exports constituted a reasonable and proportionate measure in relation to the threat that those exports represented to its legitimate commercial interests, it must be ascertained whether the orders of the wholesalers were out of the ordinary. (see
Case 27/76 United Brands and United Brands Continentaal v Commission [1978]).

It was for the referring court to ascertain whether the orders were ordinary in the light of both the previous business relations between the pharmaceuticals company holding a dominant position and the wholesalers concerned and the size of the orders in relation to the requirements of the market in the Member State concerned (see
Case 77/77 Benzine en Petroleum Handelsmaatschappij and Others v Commission [1978]).

Text of Judgment