3rd Annual W@Competition Conference

For those of you with an interest in IP/tech issues, you may find the upcoming 3rd Annual W@Competition Conference of interest, in particular the session being chaired by our own Pat Treacy on excessive pricing (including in the Pharma sector) and the use of data as payment.  The conference is taking place on Thursday 21 February in Brussels and more information can be found here.

CLIP of the month: Competition law and innovation - where do we stand?

This month’s CLIP is an editorial in the Journal of European Competition Law and Practice written by leading  LSE economist Pablo Ibanez Colomo.  Pablo writes regularly and is a co-founder of the superb Chillin'Competition blog.  This particular article looks at the latest developments in the evolving relationship that exists between competition law and policy and innovation.  The debate of these issues in some ways came to a head in the Commission’s Phase II decision in Dow/DuPont in which the Commission delved more deeply into speculative research poles when considering overlaps not just of products on the market, but of those in an earlier stage of development.  In this article, Pablo looks at the tension that can exist between the legal framework and an economic assessment of the relationship between market concentration and innovation.  Looking beyond the field of merger control, Pablo also considers the ongoing Commission investigation into alleged collusion between German car manufacturers where the alleged collusion itself was in respect of future developments and innovation of clean emission technologies (see our own comment on this investigation: “The Cartelization of Innovation – a new emissions scandal?”).  It is clear that this topic is far from stale and that we can look forward to further developments across merger control and anti-trust decisions in the year ahead.

High Court rejects application to discharge CMA search warrant

In its judgment yesterday, the High Court rejected an application by Concordia to have a CMA search warrant discharged in relation to two specific drugs (Carbimazole and Hydrocortisone).

Background

The CMA was granted warrants under section 28(1)(b) of the Competition Act 1998 by Mann J on 5 October 2017 following a without notice and private application.  The warrant applied to documents relating to an ongoing CMA investigation into alleged anti-competitive behaviour in respect of a number of pharmaceutical drugs.  The legislation itself provides that the CMA should be granted warrants where it suspects that relevant material might be otherwise concealed or destroyed.  Unusually, the CMA was seeking a warrant despite the fact that Concordia had been subject to, and was cooperating in, an ongoing investigation in respect of both Carbimazole and Hydrocortisone for some 18 months as at the date of the warrant and that Concordia had responded to numerous section 26 notices during this time.  When granting the warrant, Mann J stated that he was satisfied that the application was focussed on “different types of abuse”.  The fact that Concordia would have been on notice from the first formal section 26 request and therefore had already had ample time to destroy or conceal evidence was not sufficient to conclude that no such documents existed on Concordia’s premises.

The warrants themselves were executed on 10 October 2017 and Concordia applied to have the warrant discharged in respect of Carbimazole and Hydrocortisone on the same day.  The reasons given were that there could be no basis for the CMA to conclude that there was a risk that relevant documents would be concealed or destroyed as Concordia had been co-operating fully with the CMA in its ongoing investigation, a fact that had not been raised before Mann J.  Further, the CMA had sought to widen the investigation by suggesting that it was investigating other potential abuses, whereas in fact the CMA had only ever been investigating one particular alleged abuse (i.e. market sharing).

In the interim, the Court of Appeal had given its judgment that in hearing the main application to vary, the High Court must be able to review all relevant materials including any that are subject to public interest immunity. The Court of Appeal also stated that the appropriate time for the court to form a definitive view on what material is subject to public interest immunity (and therefore should be withheld from Concordia) is when the application to vary is made.  On 12 December 2018, having heard arguments from the CMA in a closed hearing, the High Court held that the majority of the CMA’s requests for public immunity interest redactions were properly made and could not (consistent with the Court of Appeal’s view) be disclosed to Concordia, whether into a confidentiality ring or otherwise.

The Judgment 

Finding that Concordia’s application must fail, Marcus Smith J stated that this was primarily as a result of reviewing the material that was properly protected by public interest immunity (and which therefore had not been made available to Concordia).  This material made clear that the focus of the CMA’s ongoing investigation had shifted and that the scope of the document retrieval methodology was no longer appropriate in view of the type of documents and the range of custodians at issue.  In particular, the CMA had taken the view that whilst it was co-operating, Concordia’s response was incomplete and that there remained relevant material within Concordia that would not be caught by the proposed methodology.

Turning to the question of whether the CMA was indeed investigating a different abuse to that it had been following in the course of the ongoing investigation, Marcus Smith J stated his belief that Mann J was not using the term “in a technical way”.  Rather, the term was used to describe the reasonable suspicion raised by the CMA that Concordia may have deliberately framed its search methodology with a view to ensuring that relevant materials were omitted.  If that were the case, then it was reasonable for the CMA to also conclude that a further, targeted section 26 notice might well lead to concealment or destruction of relevant material.

Comment

It remains to be seen whether the CMA will seek to make more use of its section 28 powers to investigate under a warrant without notice. Historically, the CMA has preferred either to proceed under section 26 (on notice information requests) or by using its section 27 powers which enables the CMA to conduct unannounced visits without a warrant. The main practical difference for a company facing a section 28 investigation rather than a section 27 is that in the former the CMA has the power to conduct its search itself, whereas under section 27 the CMA must ask for relevant information to be brought to it.  It is certainly the case that the facts were unusual, particularly given that the decision to seek a warrant was taken despite the ongoing investigation and the fact that Concordia had been co-operating.  It also remains to be seen how the CMA will deal with its reasonable suspicion that Concordia might continue to conceal or destroy relevant materials in the context of any eventual infringement decision.