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Pfizer v The Competition and Markets Authority
Factual and Procedural Background
Company A acquired marketing authorisations for phenytoin sodium capsules and sold them as a branded product subject to a price control regime. In September 2012 Company A and Company B entered an exclusive distribution agreement under which Company B acquired the marketing authorisations for a nominal sum, de-branded the product, and became the exclusive UK distributor. Company A continued manufacturing and supplying capsules to Company B. Following the agreement prices to the purchaser of the product rose sharply and remained high through December 2016.
Company C investigated and in a Decision (21 July 2022) found abuse of dominance under section 18 Competition Act 1998 and imposed penalties. Company A and Company B appealed to the Competition Appeal Tribunal ("the Tribunal"). The Tribunal set aside Company C's Decision but then exercised its powers to remake the decision and again found abuse, imposing penalties. Company A and Company B obtained permission to appeal parts of the Tribunal's Judgment to the Court of Appeal. Company C sought permission to appeal the Tribunal's setting aside of its Decision. The Court of Appeal heard the consolidated appeals and delivered the present judgment (19 June 2026).
Legal Issues Presented
- Issue I: Whether the Tribunal was wrong to treat Company C's Decision as depending on an implied prior illegality (an unlawful cartel or joint abuse) in the distribution agreement between Company A and Company B.
- Issue II: Whether Company C adopted a de facto per se approach that any price above Cost Plus is unlawful.
- Issue III: Whether Company C's investigation and Decision were infected by confirmation bias such that the Decision was procedurally unfair.
- Issue IV: Whether Company C erred in its ROCE/WACC analysis for Company B (capital employed and cost of capital).
- Issue V: Whether Company C failed properly to analyse and give appropriate weight to comparators (tablets, other AEDs) and the Drug Tariff.
- Issue VI: Whether Company C wrongly relied on comparative prices in other EU states.
- Issue VII: Whether Company C wrongly treated the temporal evolution of prices (before and after the agreement) as determinative of abuse.
- Issue VIII: Whether Company C wrongly relied upon evidence that Company A and Company B knowingly exploited market power as an improper or irrelevant factor.
Arguments of the Parties
Company A and Company B (Appellants)
- The Tribunal's remade decision was procedurally unfair and outside its proper remit under Schedule 8(3) CA 1998.
- The Tribunal mischaracterised Company C's Decision (including implying prior illegality), adopted incorrect legal tests (including a novel "ultimate consumer" benchmark), and made substantive errors (Cost Plus, comparators, ROCE/WACC).
- Any determination adverse to finality should be resisted; the litigation has been protracted and the Tribunal should not have remade the Decision on a new legal/evidential basis without fair notice.
Company C (Respondent)
- Company C contends the Tribunal materially misconstrued the Decision and wrongly set it aside; the Tribunal therefore had no basis to remake the Decision.
- Company C originally accepted that, if the remade decision were found procedurally unfair, the remade decision should not stand; it maintained that the original Decision was lawful and should be restored.
- Company C defended its Cost Plus methodology, its ROCE/WACC analyses, and its assessment of comparators and EU price evidence.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Case C-27/76 United Brands v Commission EU:C:1978:22 ("United Brands") | Established the core test for unfair/excessive pricing under Article 102: comparison of price to economic value and workable competition. | Used as the locus classicus for the fairness test and as the starting point for assessing methodology and evidence in excessive pricing cases. |
| [2018] CAT 11 (First CAT judgment) | Assessment of comparators and evidential adequacy; required more detailed analysis of tablets and medical benefit issues. | Referred to as prior procedural history; Court noted the Tribunal and Company C had respectively remediated and addressed issues identified there. |
| [2020] EWCA Civ 339 ("Phenytoin I") | Guidance on appellate role and the evidential approach; emphasised that appeals are not de novo and summarised relevant jurisprudence on unfair pricing. | Re-affirmed limits of appellate interference on evaluative findings and cited for principles on weighing evidence and comparators. |
| [2024] CAT 76 ("Le Patourel") | Endorsed a simplified two-stage analytical approach (Cost Plus computation then overall unfairness evaluation) and the utility of separating accounting from evaluative stages. | Cited as supporting the analytical approach adopted by Company C and as a sensible framework for the Court's evaluation. |
| [2025] EWCA Civ 578 ("Cinven") | Explored use and limits of comparators, including post-infringement prices and foreign comparators; emphasised that comparators may be probative but are not mandatory. | Relied upon as a close analogy supporting Company C's treatment of comparators and as authority for rejecting certain comparators tainted by market power. |
| [2025] EWCA Civ 54 (Airwave Solutions Limited v CMA) | Limits of appellate review on evaluative factual findings; identification of circumstances where evaluation errors can amount to points of law. | Used to frame the standard of review the Court must apply to the Tribunal's evaluative conclusions. |
| [2023] CAT 56 ("Allergan v CMA" / "Hydrocortisone I") | Use of economic concepts "consumer surplus" and "producer surplus" in assessing value and producer benefit. | The Tribunal invoked those concepts in its remade decision; the Court considered that usage but addressed whether the Tribunal's application was fair and adequately notified. |
| Case C-549/10P Tomra et ors v Commission (19 April 2012) | Permits consideration of subjective motives/object in abuse assessments; intent is admissible evidence but not required for finding abuse. | Cited to support that Company C could properly take account of business strategy and motive as part of the factual matrix for abuse. |
| Magill v Porter [2001] UKHL 67 | Framework for actual or apparent bias / predetermination and the distinction between predisposition and closed mind. | Applied to assess whether Company C or the Tribunal exhibited predetermination or unacceptable bias in the investigative or adjudicative process. |
| R (QA) v Secretary of State for Foreign, Commonwealth and Development Affairs [2024] EWHC 3064 | Restatement of tests for predetermination and procedural fairness (analogue of Porter test). | Used to evaluate the Tribunal's procedural conduct and whether a fair-minded observer could perceive predetermination in the remade decision. |
| [2011] CAT 41 (Imperial Tobacco) | Limits on the Tribunal's power to advance or entertain a new, materially different case not pleaded in the notice of appeal. | Distinguished: Court concluded statutory powers to remake a decision (Schedule 8(3)) can be exercised after a decision has been set aside, but procedural fairness constraints apply. |
| Aspen (Case AT.40934) (Commission decision cited in Decision) | Recognition that reasonable return to cover cost of capital is legitimate; cost-plus approaches can account for capital remuneration. | Considered in relation to the ROCE/WACC discourse and the legitimacy of recognising a reasonable return as part of Cost Plus. |
Court's Reasoning and Analysis
The Court addressed two interrelated strands: (A) whether the Tribunal was right to set aside Company C's Decision; and (B) whether the Tribunal lawfully and fairly remade the Decision.
On (A) the Court concluded the Tribunal erred in material respects when it set aside the Decision. Key errors identified were: the Tribunal misread the Decision and attributed to Company C a hidden finding that the distribution agreement was an unlawful cartel or joint abuse (the Court found no such implicit finding in the Decision); the Tribunal misconstrued Company C's position on Cost Plus (Company C did not treat prices above Cost Plus as per se illegal and expressly stated otherwise); and the Tribunal mischaracterised Company C's analysis of comparators and of medical/economic value. The Court concluded these misreadings led the Tribunal to reject findings that were supported by detailed analysis in the Decision.
On technical accounting issues the Court held the Tribunal was wrong to substitute its own flawed approach to ROCE for Company C's approach. In particular, the Tribunal erred by treating operating expenditures for acquiring and distributing product as "capital employed" for ROCE, and by rejecting the factual and expert basis Company C advanced for a 10% WACC for Company B.
On (B) the Court accepted that, independently, the Tribunal's remade decision was vitiated by procedural unfairness. The Tribunal exercised Schedule 8(3) powers after setting aside the Decision but proceeded to remake the decision on a different evaluative framework (including introducing the "ultimate consumer" hypothetical and deploying consumer/producer surplus reasoning) without giving adequate notice or an opportunity for Company A, Company B and Company C to address those new legal and factual constructs. Given the scale and novelty of the Tribunal's re-framing, fairness required the parties and Company C to be given opportunity to respond before adverse findings were remade; the Tribunal did not afford that, and the remade decision was therefore procedurally unfair.
Having found both that the Tribunal had materially misread the Decision and that the remade decision was procedurally unfair, the Court allowed Company C's appeal against the Tribunal's setting aside of the Decision and allowed Company A and Company B's appeals against the Tribunal's remade decision.
Holding and Implications
APPEAL ALLOWED; TRIBUNAL JUDGMENT SET ASIDE
Holding: The Court granted Company C permission to appeal, allowed that appeal, set aside the Tribunal's Judgment in its entirety, and set aside the Tribunal's remade (re-taken) decision on grounds of procedural unfairness.
Implications: The Tribunal's Judgment is quashed. The remade decision is vitiated by procedural unfairness and cannot stand. The Court indicated that if relevant it will determine separately whether Company C's original Decision should be reinstated and any consequential matters (including penalties) after receiving further submissions from the parties; no substantive reinstatement or penalty determinations were made in this judgment.
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