ACCC v Pfizer and the future of section 46

Published On 03/03/2015 | By KWM | Enforcement, Litigation, Reform

As we reported in brief last week, the Federal Court has again found against the ACCC in a misuse of market power case, this time involving allegations that Pfizer abused its incumbent position as a patent holder to deter competition from generics when its cholesterol drug Lipitor came off patent.

Our in-depth analysis of the Court’s decision can now be found here.

The decision adds to a list of failed proceedings brought by the ACCC under section 46, and will attract particular scrutiny in light of the Harper Review’s recommendation to amend the section. However, the case differs from many of these previous decisions in that the ACCC succeeded in proving the normally problematic element of ‘taking advantage’ of market power, but failed to prove that Pfizer was acting for the purpose of deterring or preventing other suppliers from engaging in competitive conduct. Similarly, the ACCC’s exclusive dealing case against Pfizer fell over due to a failure to prove that Pfizer was acting for the purpose of substantially lessening competition.

Interestingly, even if the Harper Review’s recommended changes to section 46 were in place, the ACCC’s case would not have succeeded. The ACCC has advocated for:

  • the removal of the ‘take advantage’ limb, and
  • replacing the current purpose test with a requirement that the relevant conduct have the purpose, effect or likely effect of substantially lessening competition in a market.

The draft Harper Report has made a similar recommendation, but with the addition of a defence. However, as in this case the ACCC failed to establish that Pfizer was acting with the purpose of substantially lessening competition (and did not allege that Pfizer’s conduct had this effect), the same outcome would have resulted even under a revised section 46.

We believe the case highlights the difficulties in successfully establishing that conduct amounts to a misuse of market power, and that the amendments proposed by the Harper Review will not make it any easier to do so. However, we also consider it appropriate for section 46 to set a high bar, as any lowering of that bar risks inhibiting vigorous competition and innovative responses to evolving market conditions.

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