Flynn / Pfizer v CMA: the CMA misapplied the test for excessive pricing

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The Competition Appeal Tribunal handed down a Judgment today setting aside parts of the CMA’s decision imposing combined fines on the pharmaceutical companies, Pfizer and Flynn, of around £90 million for charging unfairly high prices for the anti-epileptic drug, phenytoin sodium capsules, in breach of Article 102 TFEU / the Chapter II prohibition.

Although the Tribunal upheld the CMA’s findings that Pfizer / Flynn each occupied a dominant position in the relevant market, it struck down the findings of abuse on the basis that the CMA was wrong in law to confine its methodology for testing whether the drug prices were excessive to a purely “Cost Plus” approach. The Tribunal held that the correct approach, which the CMA should have but failed to adopt, was to identify a benchmark price or price range which would have applied in conditions of “normal and sufficiently effective competition”. In determining that benchmark price, the CMA should have given proper consideration to whether phenytoin sodium tablets – the prices of which were higher than the allegedly excessive prices for capsules – served as a meaningful price comparator. The CMA also erred in law in failing to have any regard to the benefit to patients of phenytoin capsules in determining their economic value.

The Tribunal has indicated that its provisional view is to remit the matter back to the CMA for further consideration, but has invited written submissions from the parties before coming to a final decision on remedy.

Mark Brealey QC acted for Pfizer.

Ronit Kreisberger acted for Flynn.

Click here for the full judgment.

Secretary of State announces decision and publishes CMA final report on Fox’s proposed acquisition of Sky

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On 5 June 2018, the Secretary of State for Digital, Culture, Media and Sport published the final report of the Competition and Markets Authority (CMA) and announced his decision on the proposed acquisition by Fox of the remaining shares in Sky plc.

The CMA’s final report confirms its provisional finding that the transaction is not in the public interest due to media plurality concerns. The CMA concluded that the transaction may be expected to result in insufficient plurality of persons with control of media enterprises in the UK because it would lead to the Murdoch Family Trust (MFT), which owns 39% of Fox and News Corp, holding too great a degree of control over the diversity of viewpoints consumed by audiences in the UK, and would give the MFT too much influence over public opinion and the political agenda. The CMA also confirmed its provisional finding that there are no public interest concerns arising from lack of a genuine commitment to meeting broadcasting standards in the UK.

The CMA concluded that only prohibition or the divestiture of Sky News would provide an effective solution to the identified adverse public interest effects. Of these two options, the CMA recommended that the most effective and proportionate remedy would be the divestiture of Sky News to Disney or to another suitable upfront purchaser.

The Secretary of State has accepted the CMA’s findings and recommendations. Fox has written to the Secretary of State to offer undertakings on effectively the same terms as set out by the CMA in its final report. The Secretary of State has asked DCMS officials to begin immediate discussions with the parties to finalise the details of the undertakings with a view to agreeing an acceptable form of the remedy. The Secretary of State will then consult on the proposed undertakings.

Kassie Smith QC, Alistair Lindsay and Julian Gregory are advising the Secretary of State.

Rob Williams is advising the CMA. Conor McCarthy is also advising the CMA with their investigation.

George Peretz QC and Azeem Suterwalla are advising an interested party Avaaz.

Bratt v. HMRC – formal requirements for VAT repayment claims

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The Court of Appeal has decided that VAT repayment claims made under section 80 VATA must refer to quarterly or monthly accounting periods. In Bratt, the taxpayer purported to make a Fleming claim for the whole of 1989 without identifying which of the sums claimed related to particular accounting periods. The Court of Appeal agreed with HMRC that this was not a valid claim since a claim under section 80 was one to recover an amount which was not in fact VAT which had been accounted for to HMRC “for a prescribed accounting period”. Therefore, the claim had to identify the relevant accounting period and the quantum of the claim was the amount of VAT overpaid in that period. This requirement also had the “sound purpose” of allowing HMRC to determine with certainty from the outset whether the whole or any part of the claim was out of time, or whether HMRC needed to go on and investigate it.

Raymond Hill acted for HMRC before the Court of Appeal.

Click here for the full judgment.

Ronit Kreisberger – Joint Lead Counsel for European Commission Written Observations on MasterCard and Visa MIF claims

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On 23 May, the European Commission published its Written Observations submitted under Article 15(3) of Regulation 1/2003 in the Appeals in the English Court of Appeal against the 3 first instance Judgments dealing with the claims against MasterCard and Visa for recovery of multilateral interchange fees (MIFs).

Article 15(3) provides that the Commission may, acting on its own initiative, submit written observations to national courts where the coherent application of Articles 101/102 so require. The Commission may also make oral observations with the permission of the court in question.

Given the significance of the UK Appeals in the context of the competition law analysis of MIFs, the Commission made Written Observations on the Article 101(1) issues (attached here) and the Article 101(3) issues (attached here). The Commission also made oral submissions, with the Court’s permission, on both topics at the hearing of the Appeals.

Ronit Kreisberger acted as Joint Lead Counsel with Nicholas Khan QC for the European Commission.

Kassie Smith QC appointed to carry out independent review of the Jersey Competition and Regulatory Authority

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Kassie Smith QC has been appointed by the States of Jersey to carry out an independent review of the Jersey Competition and Regulatory Authority (JCRA) following the Royal Court judgment in ATF Overseas Holdings Ltd v JCRA.

The review will look into the circumstances leading up to a decision by the JCRA that ATF Fuels had abused a dominant market position. The Royal Court overturned this decision and this independent evaluation of the circumstances surrounding the case will investigate whether the JCRA discharged its legal duties appropriately, and whether there are any significant deficiencies in how Jersey competition law has operated.  Terms of reference were published in a Ministerial Decision on 20 March 2018.

The initial phase of the review will involve a documentary review, followed by meetings with stakeholders to address points of clarification.  It is anticipated that a draft report will be completed in the summer.

This has also been covered by the Bailiwick Express; see here.

Tariq v UK: Lack of Gist in Closed Proceedings Not Unfair

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Gulamhussein and Tariq v United Kingdom, application nos. 46538/11 and 3960/12

The recent decision of the European Court of Human Rights in Tariq v UK has significant implications for the use of closed material procedures in civil proceedings in which article 6 ECHR is engaged.

Mr Tariq was employed by the Home Office as an immigration officer. In 2006, his security clearance was revoked due to his “close association with individuals suspected of involvement in plans to mount terrorist attacks” and he was dismissed from his job. Mr Tariq attempted to challenge the decision in the Employment Tribunal but the Home Office refused to disclose the evidence supporting its revocation of his clearance. A special advocate was appointed to represent him in closed proceedings but Mr Tariq complained that he was not provided with a gist of the accusations contrary to the principle identified by the ECtHR in A and others v United Kingdom (2009) 49 EHRR 29. In Mr Tariq’s appeal in 2011, however, the Supreme Court held that the principle in A and others did not require a gist to be provided in every case in which article 6 ECHR was engaged.

In Tariq, the First Section agreed with the Supreme Court, noting that article 6 ECHR did not mean that it was “invariably essential for someone to know the “gist” of the case against them” (para 84). It also noted that, despite the lack of disclosure, the special advocate had been able to make submissions on Mr Tariq’s behalf and the resort to closed proceedings had not been arbitrary or manifestly unreasonable.

Eric Metcalfe acted for the human rights organisation JUSTICE as third-party intervener, led by John Howell QC.

A copy of the Court’s judgment is available here.

Two wrongs don’t make a right: The Supreme Court’s Decision in R (Gallaher and Somerfield) v Competition and Markets Authority [2018] UKSC 25

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The Supreme Court has considered the way in which the OFT conducted its ‘Early Resolution’ settlement negotiations with parties who were subject to its tobacco investigation.  In overturning the decision of the Court of Appeal, the Supreme Court has held that a mistake made to the benefit of one party in a settlement negotiation is not required to be replicated to the benefit of other similarly situated parties. It so concluded on the basis of traditional principles of public law rationality, rejecting the opportunity to fashion any stand-alone principle relating to mistakes in public law.

Daniel Beard QC and Brendan McGurk acted for the successful appellant, the CMA.

Click here for the full judgment.

Court of Appeal grants permission to appeal decision to allow UK arms exports to Saudi Arabia

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On 4th May the Campaign Against Arms Trade (CAAT) was granted permission to appeal against a High Court judgment which allows the UK Government to continue to export arms to Saudi Arabia for use in Yemen. See previous news item here.

The appeal has been expedited to be heard by the Court of Appeal in the Autumn.

Please click here to read the full press release by the Campaign Against Arms Trade (CAAT), the article by The Guardian can be found here.

Conor McCarthy, was instructed by Leigh Day as junior counsel for the Claimant.

Nikolaus Grubeck, was instructed by Debevoise and Plimpton as junior counsel in the proceedings for a coalition of intervenors (Human Rights Watch, Amnesty International and Rights Watch UK).

Airline liable for carrying non-EU citizen without correct papers

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On 24 April 2018, the Court of Appeal handed down judgment in the case of Ryanair v Home Secretary [2018] EWCA Civ 899. The appeal concerned the application of Directive 2004/38/EC, on the right of citizens of the Union and their family members to move and reside freely within the territory of the member states, and the UK carriers liability regime under which airlines may be fined for transporting passengers without the correct documentation into the UK.

In the present case, the passenger had flown from Germany to London on a Ryanair flight with his son, an Austrian citizen. The passenger, a citizen of Bosnia and Herzegovina, had produced a card issued by the Austrian authorities bearing words which could be translated as: “family member — permanent residency”. When the father arrived (with his son) he was stopped by UK Border Force and refused leave to enter the UK. He explained that he lived in Austria and had been told by a German official that he did not need a visa. The UK Border Force ordered Ryanair to take him back to Germany. The Home Office subsequently confirmed that Ryanair was liable to pay £2,000 under section 40 of the Immigration and Asylum Act 1999, on the basis that one of the passengers had arrived in the UK without appropriate documentation.

On appeal, the Court of Appeal held that, in order to take advantage of the visa exemption for family members of EU citizens contained in Art 5.2 of the Directive, a passenger had to have a valid residence card issued under Art 10 of the Directive. A valid residence card for the purposes of Art 10 had to bear the words “Residence card of a family member of a Union citizen”. A card purportedly issued without the requisite words might potentially provide powerful evidence of the holder’s right of free movement and so, perhaps, enable him to prove his entitlement “by other means” under Art 5.4. However, a card that did not carry the specified wording would not of itself satisfy Art 5.2. Further, possession of a card issued under Art 20 of the Directive might potentially afford strong evidence of a right of free movement. Where a passenger failed to produce such a document and failed to establish a right of free movement in some other way, the home secretary was entitled to impose a charge on the carrier in respect of a passenger without proper documentation.

In the present case, however, there was no evidence that the card held by the passenger had been applied for or issued under Art 20. It appeared to have been issued pursuant to Austrian domestic law rather than Art 20. Since the passenger had neither produced the documents required by Art 5.2 nor proved by other means that he was covered by the right of free movement, the home secretary had been entitled to impose the £2,000 charge on Ryanair.

The case was reported in the Times Law Reports on 1 May 2018 (read here).

A copy of the judgment is available here.

Kassie Smith QC, instructed by Stephenson Harwood LLP, acted for Ryanair Ltd.

EU Advocate General concludes that UK pension protection rules are contrary to EU law

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In her Opinion dated 26 April 2018, Advocate General Kokott concludes that restrictions on the compensation payable by the UK Pension Protection Fund (PPF) to employees of insolvent companies is contrary to Directive 2008/94/EC (the Insolvency Directive).

The Advocate General accepts all of the arguments of the claimant Mr Hampshire, represented by Monckton Chambers’ Gerry Facenna QC and James Bourke. In particular, the Advocate General agrees that (except in cases of abuse) EU law entitles every employee of an insolvent employer to receive at least half of the total value of their accrued pension benefits, including any indexation benefits. The Advocate General also agrees that Article 8 of the Insolvency Directive is directly effective and can therefore be relied on directly against the Pension Protection Fund to override the terms of the Pensions Act 2004, and that in practice this binds the trustees administering any pension scheme that is or has been subject to PPF assessment.

Assuming the Advocate General’s Opinion is followed by the Court of Justice, it will represent a significant victory for Mr Hampshire and hundreds of pensioners who have campaigned against the UK’s pension compensation cap for over a decade. Of potentially even greater significance than the ruling on the cap is the impact of any ruling that pensioners in receipt of PPF compensation must receive at least half of any entitlements to annual increases in their pension. Such a ruling would potentially benefit thousands of PPF members, including those who may have initially received a high percentage of their original pension but who have lost any accrued rights to index-linked or guaranteed annual increases.

The Court of Justice has not yet announced a date for its judgment.

Gerry Facenna QC and James Bourke, instructed by Ivan Walker of Walkers Solicitors, are acting for Mr Hampshire.

A copy of the Advocate General’s Opinion is available here.

A previous news item on the reference by the Court of Appeal is here.