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Wednesday, 7 January 2004

COMMISSION GETS A KICKING AS ECJ AFFIRMS BAYER’S RIGHT TO CUT OFF SUPPLIES TO PARALLEL TRADERS

Press Release 01/04 of 6 January 2004 announces that the European Court of Justice has dismissed the Commission’s appeal against the decision of the Court of First Instance (CFI) in Joined Cases C-2/01 P and C-3/01 P Bundesverband der Arzneimittel-Importeure and Commission of the European Communities v Bayer AG.

In this case Bayer, one of the main European chemical and pharmaceutical groups, was represented in all Member States by national subsidiaries. It made and sold a range of medicinal products designed to treat cardio-vascular illnesses under the brand names ADALAT and ADALATE. In most EU Member States the price of medicinal products was fixed by the competent national authorities and from 1989 to 1993 the prices of ADALAT in France and Spain were about 40% lower than those charged in the UK. Those price differences led Spanish and French wholesalers to export a large quantity of ADALAT to the UK, inflicting a DM 230 million upon for the British subsidiary of Bayer. The Bayer Group then changed its supply policy and refused to meet all orders placed by Spanish and French wholesalers. Those wholesalers complained to the Commission, which ruled Bayer guilty of making competition-distorting agreements under Art. 81(3) EC and fined the group 3 million ecu.

In October 2000 the CFI annulled that decision: it found that the Commission had not proved that there was an “agreement” within the meaning of Article 81(1) between Bayer and its Spanish and French wholesalers to limit parallel exports of ADALAT to the UK. Neither the conduct of Bayer nor the attitudes of the wholesalers were factors constituting an agreement between undertakings. Moreover, none of the documents submitted by the Commission contained evidence proving (i) that Bayer intended to impose an export ban on its wholesalers or (ii) that supplies were made conditional on compliance with that alleged ban. Nor had the Commission proved that the wholesalers had adhered to that policy, their reaction showing, on the contrary, an attitude of opposition. The Commission had not therefore proved the existence of an express or tacit acquiescence by the wholesalers in the attitude adopted by the manufacturer. The CFI also rejected the Commission's argument that, to prove an agreement existed, it was sufficient to show that the parties continued to maintain their business relations, holding that the very concept of an agreement rests on a meeting of minds between economic operators. This decision has just been upheld by the ECJ in a 16,000 decision which really rubs the Commission’s nose in the dirt and asserts Bayer’s right to take the steps it did in order to protect its market for ADALAT products

The IPKat says that by not taking a narrow approach to what constitutes an agreement for the purposes of Article 81(1), the ECJ has left a practical means of escaping the effects of Article 7 of Directive 89/104 (the exhaustion provision) open for trade mark owners. He also points out that this sort of problem could occur more frequently in the future, considering that pharmaceuticals on the markets of the new accession states are sold at lower prices than those on the markets of the existing EU Member States.

More signficant parallels here, here, here, here and here

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