Syfait case:ECJ unable to pronounce on stock management polices for dominant company

The pharmaceutical industry has received some bad news regarding stock management policies operated by pharmaceutical companies with dominant products. The European Court of Justice (ECJ) declared on 31 May 2005 that it has no jurisdiction to answer questions referred to it by the Greek competition commission regarding the legality under competition law of such policies. This means that the ECJ is unable to determine whether the opinion of an Advocate General (AG) which was favourable to the pharmaceutical industry is accepted as a clear part of competition law.

The Advocate General's opinion – 28 October 2004

These proceedings relate to the supply by GlaxoSmithKline plc (GSK) and its Greek subsidiary to Greek wholesalers of three products. GSK was considered to be dominant in relation to at least one of these products. From November 2000, GSK stopped supplying these wholesalers and stated instead that it would supply hospitals and pharmacies directly. GSK alleged that the wholesalers were selling products they had ordered on the "grey market" (parallel trade) and that this was leading to significant shortages on the Greek market. GSK later reinstated supplies to wholesalers, but only in limited quantities.

The wholesalers involved (Syfait) subsequently complained to the Greek Competition Commission, which referred the case to the ECJ. Article 234 of the EC Treaty states that a "court or tribunal of a Member State" may refer questions to the ECJ for preliminary rulings.

On 28 October 2004, an AG's opinion was published, which is a standard preliminary to an ECJ judgment. After some hesitation, the AG gave the view that the Greek competition commission was a sufficiently judicial body to refer such questions. The AG therefore felt able to address the key competition law questions and reached the encouraging view that a refusal by a dominant pharmaceutical company to meet all orders of its customers so as to restrict parallel trade does not automatically constitute an abuse of a dominant position in the specific economic circumstances of the pharmaceutical industry.

The ECJ judgment – 31 May 2005

The AG's opinion raised hopes in the industry that the ECJ might adopt the AG's relatively permissive approach. Unfortunately, the ECJ has disagreed with the AG's view on the procedural point, by now declaring that the Greek competition commission is not a "court or tribunal" with the meaning of Article 234. The ECJ found that the Greek competition commission was not a court or tribunal in the narrow sense, rather it is just a competition authority. This means that the ECJ has no jurisdiction to answer the substantive questions referred to it on the interpretation of competition law, so it cannot go on to give a judgment on the matters raised in this case.

This judgment leads to two broad areas of legal uncertainty:

• What happens now? – The immediate position is simply that the Greek competition commission is left to reach its decision without the assistance of the ECJ. Any decision it reached could be challenged in the Greek courts, which would themselves be entitled to refer relevant questions to the ECJ. Alternatively, the Greek competition commission could seek to pass this case to the European Commission, whose decisions are themselves appealable to the Court of First Instance and ultimately to the ECJ. Technically, either of these routes back to the ECJ would be a fresh case for which there does not appear to be a "fast track" procedure. It is not clear whether this procedure would be in any way abbreviated, given the existence of an earlier AG's opinion.
• What is the status of the 28 October 2004 AG's opinion? – The existing AG's opinion has no official legal status. However, the ECJ's 31 May 2005 judgment is nothing more than a declaration that it has no jurisdiction – it says nothing either to contradict or accept the AG's views on the substantive competition law points. The AG's opinion could well be considered by the industry as the nearest thing to a judicial pronouncement and therefore as a form of "soft" law. It is likely to be influential to some degree, but a competition authority/court is not bound to follow it and it remains to be seen whether any decision reached by a competition authority is equally permissive.

To view the full text of the judgment please click here. This will open a PDF in a new window.