The Gray Blog

The European Court of Justice has ruled in GlaxoSmithKline Services Unlimited v Commission and Others, a case arising from Spain, that differentiated pricing agreements intended to discourage parallel market sales violate European competition laws but has found that exemptions to that rule were not properly investigated.

In March 1998, the pharmaceuticals manufacturer GlaxoSmithKline Unlimited (‘GSK’) entered into an agreement with 75 Spanish wholesalers establishing a two tier price structure for medicinal products sold in Spain or exported from Spain.  The purpose of this differentiated pricing structure was to discourage parallel market sales of pharmaceuticals.

GSK submitted its price conditions to the European Commission seeking a ruling that they did not violate European rules against competitive restrictions. On May 8, 2001, the Commission decided that GSK’s general sales conditions were prohibited by Community competition law, because they constituted an agreement restricting competition and because GSK had not proved that the agreement met a recognized exception.

GSK brought suit seeking to overturn the Commission’s ruling.  On September 27, 2006 the court of first instance upheld the Commission’s finding principal finding but required the Commission to do further investigation regarding GSK’s claim of exemption.  Both GSK and the Commission appealed.

On October 6, 2009, the European Court of Justice, in its appellate capacity, affirmed the lower court’s ruling that GSK’s agreement violates European rules against competitive restrictions.  The Court also found that in order to be subject to an exemption, an agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress.  The Court affirmed the Court of the First Instance’s ruling that the Commission had not conducted an adequate review of the claim of exemption.