Abuse of Dominant Position in Pharmaceutical Pricing: The CMA v. Flynn Pharma Ltd & Anor [2020] EWCA Civ 339

Introduction

The case of The Competition and Markets Authority (CMA) v. Flynn Pharma Ltd & Anor addresses significant legal questions surrounding the abuse of a dominant position through excessive pricing in the pharmaceutical sector. The parties involved include the CMA, Flynn Pharma Ltd and its holdings, and Pfizer Inc., with the European Commission also intervening to support CMA's legal interpretations.

Summary of the Judgment

The Court of Appeal upheld the High Court's decision, agreeing with the initial judgment that the CMA erred in its analysis of excessive pricing as an abuse of dominance. The Tribunal had set aside the CMA's decision, mandating a reconsideration of abuse findings based on flawed legal reasoning and inadequate consideration of comparator evidence.

Analysis

Precedents Cited

The judgment heavily references United Brands v. Commission as the seminal case establishing the two-limb test for abusive pricing. Additionally, cases like Latvian Copyright and Intel v. Commission were pivotal in shaping the understanding of evidence evaluation and the margin of appreciation granted to competition authorities.

Legal Reasoning

The Court emphasized that while competition authorities have discretion in choosing methodologies to assess excessive pricing, they must fairly evaluate any exculpatory evidence presented by undertakings. The CMA's rigid adherence to the Cost-Plus approach without adequately considering competing product evidence was identified as a legal misstep.

Impact

This judgment reinforces the necessity for competition authorities to adopt flexible, evidence-based approaches when assessing potential abuses of dominance. It underscores the importance of considering all relevant evidence, including comparators, to ensure fair and accurate determinations, thereby influencing future competition law enforcement across various sectors.

Complex Concepts Simplified

Dominant Position: A market position where a company can operate without effective competition.

Excessive Pricing: Charging prices significantly higher than costs, lacking a reasonable relation to the product's economic value.

Two-Limb Test: A legal framework assessing whether pricing is excessive and unfair either in itself or compared to competitors.

Conclusion

The CMA v. Flynn Pharma decision serves as a crucial precedent in competition law, highlighting the balance between authority discretion and the rigorous evaluation of evidence. It mandates that competition authorities must not overlook alternative evidence and must ensure comprehensive analysis to uphold market fairness and protect consumer interests.