CMA to appeal hydrocortisone ruling
The CMA believes the CAT’s decision to overturn nearly £100 million of fines for drug firms despite initially confirming flagrant anti-competitive conduct is fundamentally misconceived. The CMA has a duty to ensure effective competition law enforcement and will be seeking to appeal.
Despite initially confirming that the Competition and Markets Authority’s (CMA) decision correctly found “flagrantly anti-competitive” cartel behaviour by Auden/Actavis UK and AMCo/Advanz, the Competition Appeal Tribunal (CAT) has today allowed their appeals on what the CMA considers a fundamentally misconceived procedural point.
The CAT has allowed the appeals because it considers that the CMA did not fully put its case to former CEO of Advanz John Beighton in cross-examination at trial.
The CMA fundamentally disagrees with the CAT’s reasoning and decision to allow the appeals. The CAT’s reasoning overlooks critical evidence that formed the basis for the CMA’s decision and was put to Mr Beighton over two days of cross-examination.
The CMA will be seeking leave to appeal the CAT’s decision to ensure the effective enforcement of competition law.
Sarah Cardell, Chief Executive Officer of the CMA, said:
The CMA imposed significant penalties on these firms after finding they engaged in a market sharing agreement that denied the NHS the potential savings from competition for this essential medicine.
We believe the Competition Appeal Tribunal’s decision to allow the appeals is fundamentally misconceived. The impact of this judgment is highly concerning. We will be appealing and remain determined to see this case through.
Background to the case
- The CMA’s July 2021 decision found a market sharing agreement between Auden/Actavis UK and AMCo/Advanz relating to 10mg hydrocortisone tablets from October 2012 to June 2016. The CMA fined the firms and their current and former parents £106 million. All these parties appealed to the CAT.
- The CAT has today published two judgments on the appeals. In the first, the CAT finds that the decision was right on the facts and that all the grounds of appeal fail. In the second, the CAT finds that the appeals must nonetheless be allowed because the CMA did not fully put its case to a witness during cross-examination at trial.
- The CMA fundamentally disagrees with the CAT’s reasoning and decision and will seek permission to appeal. If the CMA successfully appeals the “due process question”, the findings in the CAT’s first judgment would stand.
- The CMA’s decision to impose fines on Actavis UK and its current and former parents for excessive and unfair pricing infringements was unanimously upheld by the CAT in its September 2023 ‘Hydro 1’ judgment, and the firms in question must still pay fines of £129 million. Today’s judgments do not affect that outcome.
The judgments
The CAT has today published 2 judgments relating to the CMA’s finding that Auden/Actavis UK paid AMCo/Advanz to stay off the market with its own 10mg hydrocortisone tablets.
The first ‘Hydro 2’ judgment was handed down on 29 September 2023. The Hydro 2 judgment upheld the decision’s findings and found that: “All of the grounds of appeal fail. The 10mg Agreement … is a by object infringement of the Chapter I prohibition. The object was flagrantly anti-competitive and the anti-competitive effects significant, in that an abused monopoly position was maintained and supported.”
The CAT reached these findings “conscious that we must be satisfied to a very high standard”’ and exercising “an extraordinarily high degree of care in finding the facts”.
However, the Hydro 2 judgment expressed concern that the CMA had not fully put its case to Advanz’s witness, former CEO John Beighton, in cross-examination. The judgment remained under embargo pending a further hearing on this point, which took place in October 2023.
The CAT’s second judgment in relation to the 10mg agreement (‘Hydro 3’) was handed down today. The judgment finds that the CMA did not fully put its case to Mr Beighton in cross-examination and that for this reason the “provisional” findings in Hydro 2 are “unsafe” and the appeals must be allowed.
The Hydro 3 judgment states that without this “due process question” the CAT would be “completely comfortable with the terms and outcome” of the Hydro 2 judgment. It states that if the CMA successfully appeals the due process question, the findings in the Hydro 2 judgment would stand.
Notes to editors
- For media queries, please contact the press office on press@cma.gov.uk or on 020 3738 6460.
- The appeal deadline in relation to the Hydro 1 excessive and unfair pricing judgment was suspended pending determination of the appeals relating to the 10mg agreement. The parties now have until 29 March 2024 to seek leave to appeal the Hydro 1 judgment.
- The CMA imposed fines of £106 million on Actavis UK and AMCo/Advanz (and their current and former parents) in relation to the 10mg agreement. The Hydro 3 judgment finds that these fines are overturned.
- A small proportion of the fines imposed for the 10mg agreement (approximately £9 million) would have been overturned as a result of the finding in the Hydro 1 judgment that the penalties on Allergan, a former parent of Actavis UK, should be reduced to reflect that it was required to ‘hold separate’ Actavis UK during 2016.
- The due process question identified by the CAT also applies to another witness for Advanz, Robert Sully. However, the outcome in Hydro 3 turns on the question as it relates to the cross-examination of Mr Beighton.
- Previous action taken by the CMA in relation to the pharma sector and the fines imposed:
- Paroxetine (2016): £45 million in fines for anti-competitive agreements and abuse of dominance (reduced to £27.1 million on appeal).
- Fludrocortisone (2019): £2.3 million in fines and £8 million redress to the NHS for market sharing.
- Nortriptyline (2020): £3.4 million in fines and £1 million redress to the NHS for illegal arrangements including market sharing and information exchange.
- Prochlorperazine (2022): £35 million in fines for an illegal arrangement that restricted competition in the supply of prescription tablets.
- Phenytoin (2022): £70 million in fines for excessive and unfair pricing.
- Liothyronine (2021, upheld by the CAT in August 2023): £101 million in fines for excessive and unfair pricing (reduced to £84 million on appeal).