Monopolies and dominant positions: focus on pharma & big tech

The boisterous headlines on nos.nl and other news sites these last few years speak volumes. Competition law is hot, particularly with regard to dominant positions of companies in the technology and pharmaceutical sectors. This goes virtually hand in hand with social criticism of how companies in these sectors operate. It is one of the few subjects that musters both the left and the right in the Netherlands and elsewhere in the world. But it by no means makes the subject apolitical.

In recent years, competition authorities have been focusing increasingly on companies that hold a dominant position in the technology and pharmaceutical sectors. And there’s more on the horizon this coming year (2022). We will describe the expected trends in this blog, in particular the developments at the Netherlands Authority for the Consumers and Markets (“ACM”) and the European Commission (the “Commission”).

The Netherlands

In its Focus Areas for 2022, ACM named the digital economy (in addition to sustainability and the housing market) as one of its key themes for 2022. ACM on the digital economy: “Risks in the digital world partially differ from those in the ‘analog’ economy. For example, as a result of the dynamic nature of the digital economy, dominant market participants emerge sooner, such as big platforms, on which consumers and businesses are dependent.”

The fact that ACM had these platforms in its sights in 2021 was apparent from its enforcement actions against Apple in late 2021. In December 2021, ACM imposed an order subject to a penalty on Apple for abusing its dominant position on the market for App Store services on the iOS mobile operating system. According to ACM, the abuse relates to the application of unfair conditions for dating apps that want access to the App Store. Dating apps are obligated, for instance, to use Apple’s payment service to have users pay for these apps. Apple does not allow the apps to refer to payment systems outside the App Store. Preliminary relief proceedings instituted by Apple against ACM’s decision were of no avail. The court largely upheld ACM’s order subject to a penalty. Apple must pay a penalty of €5 million per week until it meets ACM’s requirements, i.e. by allowing alternative payment systems in the dating apps. The maximum penalty amount (€50 million) has already been forfeited, but Apple and ACM are still wide apart. And EU Competition Commissioner Vestager believes that Apple deliberately ignored ACM’s penalties.

ACM has identified abuse of dominant positions not only in the digital economy: it is taking action against such abuse also in the pharmaceutical sector. In June 2021, ACM imposed a fine of €20 million on pharmaceutical company Leadiant. According to ACM, Leadiant charged an excessive price for a medicine for a genetic metabolic disease (CDCA). The price that Leadiant charged for CDCA was unreasonable and, according to ACM, had nothing to do with the recovery of innovation costs. After a limited investment, Leadiant implemented an enormous price increase for a long-standing medicine. ACM considers this a very serious violation of Article 24 of the Competition Act. Leadiant has filed an objection to ACM’s decision. To be continued!

ACM also called to account another pharmaceutical company, Pfizer, for possible abuse of a dominant position. ACM no longer allows Pfizer to persuade hospitals to primarily purchase rheumatoid arthritis drug Enbrel via discounts. This creates room for competition from new, competing medicines (known as “biosimilars”), since Pfizer’s patent for its rheumatoid arthritis drug has expired. In the past, Pfizer’s strict discount policy obstructed the entry of these biosimilars because discounts given by Pfizer dropped sharply if hospitals purchased lower quantities of Pfizer’s drug. This creates a significant financial barrier for hospitals to switch (in whole or in part) to another medically comparable drug.

ACM enforced a similar decision against pharmaceutical company AbbVie in the past already. That case also involved an anticompetitive discount policy for a rheumatoid arthritis medicine (Humira) after the expiry of the patent. According to ACM, this discount policy amounted to an exclusive purchasing obligation. AbbVie put an end to the policy at ACM’s insistence. This should now lead to more competition from biosimilars and ultimately a lower price for hospitals, insurers and the insured.

An entirely different case, but no less high-profile in terms of abuse of a dominant position, was the NS saga. In 2017, ACM imposed a fine of EUR 41 million on NS (Dutch Railways) for abusing its dominant position on the market for the right to operate the main rail network concession. The fine was later annulled by the court in 2019. The court ruled that ACM had not demonstrated that NS actually had a dominant position on the aforesaid market at the time of the violation. Last summer, the Trade and Industry Appeals Tribunal upheld the court’s ruling on appeal. We previously wrote a blog and an article in Mededingingsrecht in de Praktijk (see here and here) about the course of events in those interesting proceedings.

Europe

The Commission has also persistently paid attention this pas year to the dominant positions of large tech companies. We previously wrote about the two bills that are in the making to regulate online platforms and their market power: (i) the Digital Services Act (“DSA”) and (ii) the Digital Markets Act (“DMA”). In those earlier blogs (see here and here) we addressed the various new regulatory instruments included in those bills. Final agreement has now also been reached within the EU on the exact wording of the DSA and DMA. The DMA and DSA may therefore come into force this calendar year already.

An important moment for the Commission last December was the General Court ruling in the Google Shopping case. In 2017, the Commission imposed a €2.9 billion fine on Google for abuse of a dominant position. Through its search engine, Google favoured its own price comparison service (Google Shopping) over other similar online services (known as self-preferencing). Unsuccessful court proceedings would set a bad precedent for the Commission’s current and future investigations into abusive practices of tech companies (including Google). However, the General Court dismissed Google’s appeal and upheld the Commission’s decision. Google has since appealed the General Court’s decision.

The Commission was slightly less successful with the anti-abuse fine it imposed on Intel. That fine of approximately €1.06 billion was imposed on Intel in 2009 for two types of abuse. According to the Commission, Intel abused its dominant position by granting discounts to various computer manufacturers on condition that they purchase all (or almost all) processors of a certain type from Intel (loyalty discounts). Intel also allegedly paid retailers and computer manufacturers to delay the commercialisation of certain AMD chips (pay for delay). AMD was Intel’s only significant competitor in 2009. In a chronicle lasting almost 13 years, the 2009 fine was first upheld by the General Court (in 2014) and then annulled by the Court of Justice (in 2017). The Court of Justice then referred the case back to the General Court, on the grounds that the economic evidence provided by Intel to prove that the abuse had not taken place had to be examined. The General Court then ruled (in 2022) that the Commission had wrongly imposed the fine on Intel because the Commission’s investigation of Intel had been inadequate.

The Commission is now busily conducting other investigations into big tech (although it is a challenge for the Commission to keep its key officials on board). It is investigating, for instance, Google’s conduct in relation to its online advertising services. Like ACM, the Commission is also close on the heels of Apple. The Commission shared its Statement of Objections with Apple last summer, informing it that the Commission had provisionally found that Apple had abused its dominant position on the market for the distribution of music streaming apps. Apple may now file a response. We will be interested to hear the Commission’s final decision (expected in the first half of 2022). Amazon has also been under investigation by the Commission for some time, but that investigation will most likely end in a commitment decision.

In sum, the Commission is already very active, but once the DMA and DSA enter into force in 2022 it will have even more tools to regulate big tech. That will undoubtedly give rise to even more legal fireworks. To be continued!

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Contact details

Martijn van de Hel

T +31 20 238 20 02
M +31 6 21 210 853

Diederik Schrijvershof

T +31 20 238 20 03
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Ramesh Kaushik

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