ACCC Pfails in section 46 prosecution – in brief

Published On 25/02/2015 | By Peta Stevenson | Enforcement, Reform

This morning the Federal Court handed down its decision in the misuse of market power proceedings against Pfizer, holding that the ACCC had failed to establish any contravention of section 46 or section 47 of the Competition and Consumer Act 2010 (Cth).  The reasons for decision will be handed down by Flick J tomorrow (the parties and companies subpoenaed in the proceedings have the reasons, and have the opportunity to review for confidentiality before it is released).

A more detailed summary considering the case will be posted after the judgment is publicly released tomorrow.

Snapshot of case and decision

By way of snapshot of the facts and findings based on the Judge’s comments this morning, the ACCC alleged that Pfizer misused its market power (section 46) and engaged in exclusive dealing (section 47) in the lead up to the expiry of a key patent relating to its blockbuster atorvastatin drug, Lipitor.  The ACCC argued that Pfizer offered discounts (and payment of accrued rebates for purchases of Lipitor) conditional on pharmacies taking 12 months of stock of Pfizer’s generic atorvastatin products.  This conduct was alleged to have been for the purpose of deterring or preventing competitors from supplying generic products into pharmacies after patent expiry.

In relation to section 46, Justice Flick concluded that:

  • while Pfizer had a substantial degree of market power in the period to late 2011 and had taken advantage of that power through its distribution scheme, the requisite purpose was not established; and
  • from January 2012, Pfizer did not have substantial market power.

In relation to section 47, Justice Flick found that Pfizer’s conduct did not amount to exclusive dealing on the basis that Pfizer was not acting for the purpose of substantially lessening competition (the ACCC did not plead that Pfizer’s conduct had the effect of substantially lessening competition).

The ACCC has also been ordered to pay Pfizer’s costs.

Impacts for reform

The decision adds to the ACCC’s losses in section 46 cases, and is likely to add fuel to its calls for amendment to the section.  The ACCC has been calling for section 46 to be changed to remove the ‘take advantage’ limb, and replace the purpose test with a ‘substantial lessening of competition’ (SLC) test (so that you would breach the section if you had market power and engaged in conduct that had the purpose or effect of SLC – see here).

Interestingly, in this case, as the ACCC actually did establish that there was a ‘taking advantage’ of market power, but did not establish that there was the purpose of SLC, the ACCC would still have lost its case, even if its proposed amended section 46 test had applied.

The decision is also of particular significance given the impending release of the Harper Panel’s report on Competition Policy in Australia (expected in mid-March).  The Panel’s  draft report, released in September, had made a draft recommendation that section 46 should be amended to remove the ‘take advantage’ and purpose limbs, and replace them with a “purpose, effect or likely effect of substantially lessening competition” test and a defence.

The judgment will also be of interest to patent holders and others in the pharmaceutical industry, as it applies competition law to defensive conduct engaged in by a patentee when a patent is due to expire.

Photo credit: / Foter / CC BY

About The Author

is a partner in the Sydney office of King & Wood Mallesons where she specialises in competition litigation with experience in a wide range of jurisdictions. Peta also advises clients on the application of the anti-competitive conduct, consumer protection and access provisions of the Competition & Consumer Act 2010 (Cth) and related state legislation. In 2001/02 she undertook her LLM at the University of Cambridge, during which time she developed a passionate if fleeting interest in rowing.

Leave a Reply

Your email address will not be published. Required fields are marked *

18 − 11 =