Allergan PLC & Ors v Competition and Markets Authority

Factual and Procedural Background

This opinion concerns appeals by commercial parties (the companies) against a Competition and Markets Authority (CMA) infringement decision dated 15 July 2021 (the Decision) relating to alleged anti-competitive agreements in the market for 10mg and 20mg hydrocortisone tablets. The companies appealed the Decision to the Competition Appeal Tribunal (the Tribunal), which issued three key decisions: H1 (18 September 2023), H2 (29 September 2023), and H3 (8 March 2024).

H1 found infringements of the Chapter II prohibition on abuse of a dominant position, with no appeal against it. H2 found infringements of the Chapter I prohibition on anti-competitive agreements, but provisionally dismissed the companies' appeals while expressing concerns that the CMA had not fully put its case to the companies' witnesses, particularly Mr Beighton. H2 included additional findings beyond the Decision, including allegations of dishonesty and a specific inferred agreement between parties. The Tribunal directed further argument on due process implications.

A two-day due process hearing in October 2023 expanded the enquiry to fundamental questions about the CMA's case, including the nature of the alleged collateral agreement and dishonesty. The Tribunal in H3 concluded that the CMA had failed to put its case fully to the witnesses, fatally undermining the provisional findings in H2, leading to the success of the companies' appeals against the Decision.

The CMA appealed the H3 decision, contending that its case had been properly put and that it had not alleged dishonesty. The court also considered applications for permission to appeal parts of H2 by both the CMA and the companies. The court ultimately allowed the CMA's appeal against H3, granted its permission to appeal H2, dismissed the companies' permission to appeal H2, reinstated the Tribunal's provisional dismissal of the companies' appeals from the Decision, but overturned the Tribunal's additional findings on dishonesty and other matters.

Legal Issues Presented

1. Whether the CMA properly put its infringement case to the companies' witnesses, particularly regarding the alleged collateral agreement and any implied dishonesty.
2. The appropriateness of the Tribunal's procedural approach in issuing provisional decisions and ordering further hearings on due process issues.
3. The legal effect and necessity of allegations of dishonesty in establishing infringements of the Chapter I prohibition under the Competition Act 1998.
4. The validity of the Tribunal's additional findings beyond the CMA's original Decision, including findings of dishonesty and sham agreements.
5. The scope and continuation of the alleged anti-competitive agreement following changes in corporate ownership.
6. Whether the Tribunal erred in its findings on market definition and "by object" infringement related to 10mg hydrocortisone tablets.

Arguments of the Parties

CMA's Arguments

• The CMA's case was clear and did not involve allegations of dishonesty; it alleged a tacit understanding that AMCo would not enter the market in exchange for advantageous supply terms from Auden.
• The CMA contended that it had properly put its case to the companies' witnesses, including Mr Beighton, through extensive cross-examination focused on the economic rationale and commercial realities of the agreements.
• The CMA argued that the Tribunal erred in requiring allegations of dishonesty to be put and in reopening the substantive case at the due process hearing.
• The CMA sought to confirm the original Decision and challenged the Tribunal's provisional findings that a further substantive hearing was necessary.

Companies' Arguments

• The companies contended that important evidence, particularly Mr Beighton's positive case denying the existence of a collateral understanding, had not been properly challenged by the CMA.
• They argued that the Tribunal was correct to find that the CMA had failed to fully put its case, especially regarding alleged dishonesty and the implications of the written agreements being shams.
• The companies submitted that the collateral understanding could not have persisted after key personnel changes and corporate acquisitions.
• They challenged the Tribunal's findings on market definition and object infringement, particularly whether the skinny label and full label products were substitutes.
• The companies suggested that if the Tribunal's procedural concerns were upheld, a retrial might be necessary.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the procedural and substantive issues arising from the Tribunal's decisions H2 and H3. It found that the Tribunal erred procedurally by issuing a provisional decision in H2 and then ordering a further hearing to consider whether the CMA's case had been fully put to the witnesses. The Tribunal's approach allowed parties a second opportunity to argue points they had already addressed, which was inappropriate.

Substantively, the court emphasised that the CMA's case was clear and did not allege dishonesty or misconduct by the companies' representatives. The Chapter I prohibition imposes strict liability for anti-competitive agreements, and allegations of dishonesty are not required. The Tribunal misunderstood the CMA's case by conflating intentional infringement with dishonesty and by requiring the CMA to put such allegations to witnesses.

The court examined the cross-examination of Mr Beighton in detail, concluding that the CMA had properly put its case, including the economic rationale and the existence of a tacit understanding that AMCo would not enter the market. Mr Beighton was a sophisticated witness who understood the case against him and repeatedly denied the existence of such an agreement, but this was a matter for the Tribunal to assess on the evidence.

The court rejected the Tribunal's view that the failure to expressly challenge Mr Beighton on dishonesty or lying fatally undermined the CMA's case. It held that such challenges were not necessary and that the Tribunal's hypothetical questions and concerns were overthought.

The court also addressed the companies' additional points, finding no arguable legal grounds or real prospects of success in their challenges to the Tribunal's findings on market definition, object infringement, continuation of the agreement after corporate changes, or the nature of the written agreements.

Overall, the court found that the Tribunal should have decided the companies' appeals on the evidence before it without reopening the case or making additional findings beyond the CMA's Decision. The procedural errors and misunderstandings in H2 and H3 warranted allowing the CMA's appeal against H3, granting its permission to appeal H2, dismissing the companies' permission to appeal H2, reinstating the Tribunal's provisional dismissal of the companies' appeals, and overturning the Tribunal's additional findings on dishonesty and sham agreements.

Holding and Implications

The court's final decision is as follows:

The CMA's substantive appeal against the Tribunal's decision in H3 is allowed.

The CMA's application for permission to appeal H2 is granted, and its appeal is allowed.

The companies' applications for permission to appeal H2 are dismissed.

The Tribunal's provisional findings in H2 dismissing the companies' appeals from the CMA's Decision are finalised and reinstated.

The Tribunal's additional findings in H2 concerning dishonesty, sham agreements, and inferred conversations are overturned.

The direct effect of this decision is that the companies' appeals against the CMA's infringement Decision are dismissed, confirming the CMA's findings of anti-competitive agreements under the Chapter I prohibition. No retrial or further substantive hearing is required. The decision clarifies the procedural standards for appeals from CMA infringement decisions, particularly regarding the necessity and scope of putting allegations to witnesses and the role of dishonesty in competition law infringements. No new legal precedent beyond the facts of this case is established.