Novartis, Roche and Genentech given particularly heavy fines for abuse of a collective dominant position in the AMD market

On September 9, 2020, the French Competition Authority sanctioned the pharmaceutical companies Novartis, Roche and Genentech €444 million for having abused their collective dominant position for the purpose of preserving the sales of the medicinal product Lucentis, to the detriment of Avastin, used for the treatment of age-related macular degeneration (AMD). This French decision comes at a time when the Italian competition authority had already fined Roche and Novartis €182.5 million in 2014 for similar practices, but on the grounds of an anti-competitive agreement.

The laboratory Genentech developed Lucentis, a medicinal product for the treatment of AMD that was granted a European marketing authorization (MA) in 2007. Genentech also developed Avastin, a medicinal product used for the treatment of certain types of cancer, which received a MA in 2005 for therapeutic indications in oncology only.

Genentech ensures the marketing of both medicinal products in the United States, but granted, for the rest of the world, a license to use and market to Novartis, for Lucentis, and to Roche, for Avastin.

The first administrations of Avastin in oncology showed positive effects on the health of patients also suffering from AMD, which led certain practitioners to an off-label use in ophthalmology (it being specified that the cost of an injection of Lucentis for the treatment of AMD is thirty times higher than that of an injection of Avastin). In essence, the Authority criticized these three laboratories for having tried to preserve Lucentis’ position and price, by impeding Avastin’s off-label use for the treatment of AMD.

To do so, the French Competition Authority took into account the cross-holdings links (controlling interests of Roche in Genentech and non-controlling interests of Novartis in Roche) and the contractual links that existed between the companies (in particular, the license agreements between Genentech and Novartis, for Lucentis, and between Genentech and Roche, for Avastin). It inferred that Novartis, Roche and Genentech form a collective entity within the meaning of competition law, which held a dominant position in the AMD market during the infringement period.

The Authority considered that these links had notably encouraged the three companies to adopt a common course of action aimed at maintaining a distinction between the two medicinal products and guaranteeing Lucentis’ high price, which was financially beneficial for all: for Novartis (licensee), which received the proceeds of Lucentis’ sales, for Genentech (licensor) that received royalties on the sales of this medicinal product, and for Roche, as Genentech’s (main, then sole) shareholder. According to the Authority, using Avastin rather than Lucentis was therefore likely to cause a loss of earnings for each of the three companies. 

Regarding the abuses, the Authority criticized Novartis for having implemented, between 2008 and 2013, a communications campaign intended to disparage the use of Avastin in ophthalmology with specialist doctors, patient associations and the general public, to preserve Lucentis’ prescription and position. The Authority also condemned the scaremongering and misleading statements concerning the risks of using Avastin for the treatment of AMD conveyed by the three laboratories with the French public authorities. 

Novartis was fined over €385 million, and Roche and Genentech nearly €60 million. These amounts were substantially increased for belonging to a large group (70% increase for Roche, 50% for Novartis). It may seem particularly harsh for practices falling within a context of off-label prescribing which is relatively free and little controlled by regulation in its effects on patients, since it falls under the physicians’ freedom to prescribe.

The French Competition Authority sanctions an anti-competitive agreement in the Alsace wine sector

By a decision dated September 17, 2020, the French Competition Authority sanctioned two trade union organizations and one inter-professional organization of the wine industry up to €376,000 for fixing price of grapes and for defining and broadcasting price recommendations on bulk wine. 

First, the Authority sanctioned the Association des Viticulteurs d’Alsace (AVA) and the Groupement des Producteurs Négociants du Vignoble Alsacien (GPNVA), two trade union organizations, as well as an inter-  professional organization, the Comité Interprofessionnel des Vins d’Alsace (CIVA), for agreeing between 2008 and 2017 to increase raw material prices and thus the sale price to consumers of Alsace wines. In its decision, the Authority noted that these interactions led to establishing recommendations on grape prices, at the end of each harvest and for each Alsace grape variety, which were published from 2013 in the magazine Les Vins d’Alsace. We note that the Authority considered that the presence of representatives of the French administration at some of the meetings organized by these organizations does not change the characterization of the practices.

Secondly, the Authority criticized CIVA for having defined and broadcast for each harvest between 1980 and 2018 price recommendations intended for its members on bulk wine. The Authority found that CIVA established single prices, per grape variety, applicable to all Alsatian wine growers and published them before the marketing period of bulk wine. 

The Authority considered that, although not binding, these negotiated prices and recommendations encouraged operators to align their behavior and stray away from an individual consideration of their costs, their commercial strategy and an independent determination of their prices. Consequently, it considered that the practices had limited free competition on the relevant market.

The amount of the financial sanctions was determined according to the specificities of the case at hand. The Authority noted that the organizations involved did not themselves have a turnover but that they had their own resources, coming from the annual contributions of their members. It is on this basis that the Authority calculated the fine. Thus, CIVA received the heaviest sanction, i.e. a fine of €348,000, followed by AVA (€26,000) and GPNVA (€2,000). 

These three Alsatian organizations said they were stunned and dismayed at the level of the financial sanctions ordered, which did not seem to take into account the unprecedented crisis currently experienced by the sector.

The European Commission agrees to examine concentrations that do not meet the national control thresholds

On September 11, 2020, on the occasion of the 24th meeting of the International Bar Association, Mrs. Margrethe Vestager, executive vice-president of the European Commission, announced that national competition authorities could, from mid-2021, send to it for review concentration operations deemed sensitive, including when they do not exceed the national notification thresholds.

For the record, Article 22 of Regulation UE No. 139-2004 on the control of concentrations, enables national competition authorities to refer to the European Commission the review of an operation that does not have a Community dimension but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request. Until now, the European Commission considered it necessary for the State requesting such referral to have jurisdiction to examine the contemplated operation. In other words, the operation had to satisfy the national notification thresholds.

In practice, this new interpretation of Article 22 will notably allow the review of so-called “predatory” or consolidating acquisitions, taking place mainly in innovative sectors which until now had escaped the control of concentrations, as these companies did not meet the turnover thresholds. 

The French Competition Authority welcomes this announcement which, however, raises questions, notably from a procedural point of view but also in terms of legal certainty for companies. 

The Commission will have to specify in 2021 the conditions under which these referrals could be implemented in practice.