OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 22 January 2020 ( 1 )

Case C‑307/18

Generics (UK) Ltd and Others

v

Competition and Markets Authority

(Request for a preliminary ruling

from the Competition Appeal Tribunal (United Kingdom))

(Reference for a preliminary ruling — Competition — Agreements, decisions and concerted practices — Dominant position — Abuse — Pharmaceutical products — Agreements in settlement of patent disputes entered into by a patent-holding originator company and generic medicinal products manufacturers)

Table of contents

I. Introduction II. Legal framework III. Background to the dispute A. Agreements entered into by GSK 1. The IVAX Agreement 2. The GUK Agreement 3. The Alpharma Agreement B. Additional and subsequent developments concerning the Anhydrate Patent and formation of a Generic Market C. The CMA Decision and the proceedings before the CAT IV. The procedure before the Court and the questions referred for a preliminary ruling V. Assessment A. The Court’s jurisdiction to reply to the questions from the CAT B. The questions referred 1. Article 101 TFEU (a) The concept of potential competition (Questions 1 and 2) (1) Uncertainty as to the validity of a medicinal product patent and whether generic versions of that product infringe that patent as a constituent of competitive relationships in the pharmaceutical sector (2) Disputes relating to the validity of a patent or whether a generic product infringes that patent as factors which may indicate the existence of potential competition (3) Scope of the competition authority’s assessment of the intellectual property rights at issue (4) The existence of interim injunctions or interim legal undertakings (5) Conclusion (b) The concept of restriction of competition by object (Questions 3 to 5) (1) Questions 3 and 4 (i) The ‘potential to restrict competition’ of an agreement imposing a restriction which does not go beyond the scope and unexpired period of a patent (ii) The relevant ‘counterfactual scenario’ (iii) The nature of the agreements as settlements of actual litigation (iv) Conclusion (2) Question 5 (i) The relevance of benefits resulting from an agreement to a finding that there is a restriction of competition under Article 101(1) TFEU (ii) The relevance of benefits resulting from an agreement to a finding of a restriction of competition by object under Article 101(1) TFEU (iii) Conclusion (c) The concept of restriction of competition by effect (Question 6) (1) Criteria for assessing the effects on competition of agreements to settle pharmaceutical patent disputes (2) The requirement of appreciable effects on competition (3) Conclusion 2. Article 102 TFEU (a) Definition of the relevant market (Question 7) (1) The scope of Question 7 (2) The inclusion of generic paroxetine for the purposes of determining the relevant market (3) Conclusion (b) Abuse of a dominant position (Questions 8 to 10) (1) The categorisation of entry into one or more agreements in settlement of patent disputes as abuse of a dominant position (Questions 8, 9 and 10(a)) (i) The link between the application of Article 101 TFEU and that of Article 102 TFEU (ii) Entry into the agreements concerned in the main proceedings as use by GSK of a method other than competition on the merits (iii) GSK’s entry into the agreements at issue in the main proceedings as a method capable of influencing the structure of the market concerned such as to hinder or even eliminate the remaining competition on that market (iv) Conclusion (2) The benefits afforded by the agreements at issue in the main proceedings (Question 10(b) and (c)) (i) The requirement to take the alleged benefits into consideration (ii) The possibility of justifying acts which are capable of falling within the prohibition laid down in Article 102 TFEU (iii) Conclusion VI. Conclusion

I. Introduction

1. May an agreement to settle a medicinal products patent dispute constitute a restriction of competition by object or by effect and may the conclusion of that agreement, possibly combined with entry into other agreements, constitute an abuse of a dominant position?

2. This, in a nutshell, is the essence of the 10 questions put by the Competition Appeal Tribunal (United Kingdom) (‘the CAT’) to the Court in this reference for a preliminary ruling. Those questions were raised in proceedings before the CAT between, on the one hand, Generics (UK) Ltd (‘GUK’) and other medicinal products manufacturers ( 2 ) and, on the other, the Competition and Markets Authority, United Kingdom (‘the CMA’) concerning three agreements entered into by GlaxoSmithKline plc (‘GSK’) with the generic manufacturers IVAX Pharmaceuticals UK (‘IVAX’), GUK and Alpharma.

3. The agreements in question were entered into as agreements in settlement of patent disputes which had, in the case of GUK and Alpharma, already given rise to patent litigation. Under the GUK and Alpharma Agreements, the generic manufacturers concerned undertook, inter alia, not to enter the market with their products for an agreed period, while GSK undertook to make significant transfers of value in their favour.

4. According to the CMA, the purpose of those agreements was to induce those generic manufacturers to abandon their efforts to enter the market independently during the agreed period and those agreements were therefore akin to market exclusion agreements prohibited by Article 101 TFEU, while their conclusion by GSK constituted an abuse of a dominant position within the meaning of Article 102 TFEU. GSK and the generic manufacturers maintain, on the contrary, that the agreements in question cannot be seen as constituting infringements of EU competition law.

5. The present case takes place within the context of Lundbeck ( 3 ) and Servier, ( 4 ) currently pending before the Court, in which the European Commission found that agreements in settlement of patent disputes constituted infringements of Article 101 and, with regard to Servier, Article 102 TFEU. The Court’s findings in the present proceedings will also be instructive in those cases.

II. Legal framework

6. Section 2 of Chapter 1 of the UK Competition Act 1998 provides: ‘Agreements … preventing, restricting or distorting competition. (1) …, agreements between undertakings, decisions by associations of undertakings or concerted practices which — (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited unless they are exempt in accordance with the provisions of this Part. (2) Subsection (1) applies, in particular, to agreements, decisions or practices which — … (b) limit or control production, markets, technical development or investment; (c) share markets or sources of supply; …’

7. Section 18 of Chapter 2 of the UK Competition Act 1998 provides: ‘Abuse of dominant position. (1) …, any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom. (2) Conduct may, in particular, constitute such an abuse if it consists in — … (b) limiting production, markets or technical development to the prejudice of consumers; …’

8. Section 60 of the UK Competition Act 1998 states: ‘Principles to be applied in determining questions (1) The purpose of this section is to ensure that so far as is possible (having regard to any relevant differences between the provisions concerned) questions arising under this Part in relation to competition within the United Kingdom are dealt with in a manner which is consistent with the treatment of corresponding questions arising in EU law in relation to competition within the European Union. (2) At any time when the court determines a question arising under this Part, it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between — (a) the principles applied, and decision reached, by the court in determining that question; and (b) the principles laid down by the Treaty and the European Court and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in EU law. (3) The court must, in addition, have regard to any relevant decision or statement of the Commission.’

III. Background to the dispute

9. Paroxetine is a prescription-only antidepressant medicine which belongs to the group of selective serotonin re-uptake inhibitors (‘SSRIs’). Paroxetine was marketed in the United Kingdom by the originator company GSK under the brand name ‘Seroxat’. Over the relevant period, GSK produced Seroxat in doses of 20 mg and 30 mg, but the 20mg dose was the more significant and more frequently prescribed.

10. Compound patent protection for paroxetine hydrochloride, the active pharmaceutical ingredient (‘API’) of that originator medicinal product expired in January 1999. Furthermore, GSK’s right to data exclusivity relating to that API expired in December 2000, thus allowing generic manufacturers to seek a marketing authorisation (‘MA’) under the abridged procedure. ( 5 )

11. By that time, GSK had obtained a series of secondary patents, including the GB 2297550 patent which covered four polymorphs of paroxetine hydrochloride anhydrate and the process to produce them (‘the Anhydrate Patent’). That patent was granted in 1997, and was subsequently declared invalid in part by the High Court of Justice (England & Wales), Chancery Division (patents court) (United Kingdom) and, to the extent that it remained valid, it expired in 2013.

12. By mid-2000 GSK was aware that a number of generic manufacturers were considering entry into the UK market with generic paroxetine. Accordingly, IVAX had submitted an application for an MA in Ireland and obtained from BASF AG the paroxetine API on the basis of which that application was submitted, GUK had obtained an MA for paroxetine in Denmark in April 2001 and Alpharma had submitted an application for an MA in the United Kingdom on 30 May 2001.

13. Against that background, GSK entered into three agreements with the companies concerned.

A. Agreements entered into by GSK

1. The IVAX Agreement

14. The first agreement, entered into by GSK with IVAX on 3 October 2001 and terminated on 29 June 2004 (‘the IVAX Agreement’), appointed IVAX as ‘sole distributor’ in the United Kingdom, with a limit of 770000 boxes per year, of 20 mg paroxetine hydrochloride in 30 tablet packs to be sold as an authorised generic, in exchange for an annual promotional allowance of 3.2 million pound sterling (GBP). The supply price at which GSK was to supply the product to IVAX, which was subsequently amended, was initially GBP 8.45 per pack and it was provided, inter alia, that IVAX had the immediate right to terminate the agreement if a generic product containing paroxetine hydrochloride as its active substance became available for GBP 8.45 or below for three consecutive days.

2. The GUK Agreement

15. The second agreement was entered into by GSK with GUK on 13 March 2002 (‘the GUK Agreement’). It was initially planned to have a three-year term, but ended on 1 July 2004. It followed several events: first of all, revocation proceedings commenced on 27 July 2001 by BASF against GSK in respect of GSK’s Anhydrate Patent; subsequently, the commencement by GSK, on 18 September 2001, of infringement proceedings in respect of the same patent against GUK, in which GUK challenged the validity of that patent; and finally, the grant by the High Court of Justice (England & Wales), Chancery Division (patents court), on 23 October 2001, of an interim injunction prohibiting GUK from entering the market, at which time GSK gave a ‘cross-undertaking in damages’. ( 6 )

16. On 4 December 2001 the High Court of Justice (England & Wales), Chancery Division (patents court) directed that the BASF and GUK cases, which both concerned the Anhydrate Patent, should be heard together the following March. On 13 March 2002, the day before that hearing, GSK and GUK reached the agreement at issue; the injunction and cross-undertaking in damages were discharged, all claims to damages were waived and the proceedings were stayed. Furthermore, under that agreement, GSK was to purchase all GUK’s stock of generic paroxetine intended for sale in the United Kingdom for the sum of 12.5 million United States dollars (USD), pay 50% of GUK’s costs in the litigation up to GBP 0.5 million, enter into a sub-distribution agreement with IVAX in favour of GUK (‘the IVAX-GUK Supply Agreement’) and pay GUK an annual marketing allowance of GBP 1.65 million; in return, GUK and all the companies in the Merck group undertook not to make, import or supply paroxetine hydrochloride in the United Kingdom during the currency of the IVAX-GUK Supply Agreement.

17. That IVAX-GUK Supply Agreement, which came into force on 14 March 2002 and was concluded for a term of three years, stated that IVAX would supply GUK with 750000 packs of 20 mg paroxetine per annum at a price of GBP 8.45 and included a profit guarantee in that if GUK’s average net selling price in any contract year fell below GBP 12.25 per pack, IVAX would pay it such sum as necessary to ensure that its profit did not fall below a margin of GBP 3.80 per pack. Moreover, it was agreed that the agreement could be terminated before the term initially laid down if the market price per pack of paroxetine fell below GBP 8.45 for at least three consecutive months in the third contract year or any time thereafter. At the same time as the IVAX-GUK Supply Agreement was entered into, GSK and IVAX amended the IVAX Agreement in order to adjust it accordingly.

3. The Alpharma Agreement

18. The third agreement, entered into by GSK with Alpharma on 12 November 2002 and terminated on 13 February 2004 (‘the Alpharma Agreement’) that was initially concluded for a term of one year and extended for an additional year subsequently, followed (i) the acquisition, by Alpharma, of an MA for paroxetine in the United Kingdom, (ii) infringement proceedings brought by GSK against Alpharma, (iii) a legal undertaking given by Alpharma not to sell paroxetine in the United Kingdom until judgment was given in those proceedings in relation to which a hearing was listed to take place in December 2002, and (iv) a cross-undertaking in damages given by GSK.

19. Under the Alpharma Agreement, Alpharma was to be discharged from its undertaking and GSK from its cross-undertaking in damages, and GSK’s claim would be dismissed. The agreement also provided for a sub-distribution agreement to be entered into between IVAX and Alpharma for the supply to Alpharma of 500000 packs (subsequently increased to 620000 packs) of 20 mg paroxetine (‘the IVAX-Alpharma Supply Agreement’) and for several transfers of value by GSK to Alpharma, namely: payment of GBP 0.5 million towards the legal costs in the proceedings, a one-off payment of GBP 3 million in respect of the production and preparation costs for the launch of paroxetine on the UK market, a marketing allowance of GBP 100000 per month and an option to purchase certain GSK products in order to ensure the transfer to Alpharma of at least GBP 500000. In return, Alpharma undertook not to make, import or supply paroxetine hydrochloride in the United Kingdom save as purchased from IVAX or manufactured by GSK.

20. On 20 November 2002, IVAX and Alpharma entered into the Supply Agreement provided for in the Alpharma Agreement. That supply agreement could be terminated on one month’s notice in the event of the formation of a ‘Generic Market’ or on the demise ‘whether by invalidation, surrender, abandonment, or otherwise’ of the process claim in the Anhydrate Patent. In that context, a Generic Market was considered to be formed when the monthly average price of paroxetine, not including that sold by GSK and Alpharma, fell below GBP 9.50 per pack or when a paroxetine 20 mg product was sold other than under GSK’s marketing authorisation. Furthermore, it was stated that if, during the two months following service of such notice to terminate, the average price of paroxetine fell below GBP 8.45, IVAX would pay Alpharma the difference between GBP 8.45 and that average price up to GBP 200000. At the same time as the IVAX-Alpharma Supply Agreement was entered into, GSK and IVAX amended the IVAX Agreement in order to adjust it accordingly.

B. Additional and subsequent developments concerning the Anhydrate Patent and formation of a Generic Market

21. Prior to the implementation of the IVAX, GUK and Alpharma Agreements, the UK paroxetine market was characterised by the presence of parallel imports of paroxetine from other Member States of the European Union. Those parallel imports are due to the fact that there are, particularly because of the different income levels and regulatory regimes, differences between the prices of medicinal products in the Member States. Therefore, as long as generic versions of a certain medicinal product are not available in a Member State, it can be profitable to import branded medicines from other Member States and to sell them at a price lower than that charged in the importing Member State. Thus, from September 2001, parallel imports represented approximately 30 to 40% of the paroxetine dispensed in the United Kingdom and were sold at a slightly lower price than GSK’s Seroxat. However, those parallel imports concerned only the 20 mg dose of paroxetine, not the 30 mg dose.

22. Under the IVAX, GUK and Alpharma Agreements, those generic companies were supplied with significant but limited quantities of generic paroxetine manufactured by GSK, which they could sell under their own brand names and which they invoiced at approximately the price charged for parallel imports. Subsequently, between November 2001 and November 2003, IVAX, GUK and Alpharma gained approximately 60 percentage points on the 20 mg paroxetine market, replacing almost all the parallel imports (some 30 percentage points) and a part of GSK’s Seroxat (another almost 30 percentage points). That change in the structure of the market led to a reduction in the overall weighted average price of 20 mg paroxetine of up to 4%. In contrast, the Agreements had no effect on GSK’s sales of 30 mg paroxetine.

23. Paroxetine was a medicinal product reimbursed by the UK National Health Service (‘the NHS’). The NHS reimbursement scheme comprised various categories including categories C and A for medicinal products which were not readily available in generic form and for those which were readily available in generic form respectively. Following the supply of generic paroxetine under the IVAX Agreement, the 20 mg paroxetine, which was originally classified in Category C moved to Category A with effect from 1 June 2002. This resulted in an immediate fall in the NHS Drug Tariff reimbursement price of 12%, a subsequent fall of 3% between June and November 2002 and a corresponding reduction in the costs borne by the NHS.

24. The judgment in the revocation proceedings as regards the Anhydrate Patent brought by BASF ( 7 ) was delivered on 12 July 2002. It held that most of the product claims in that patent were invalid but that two of the process claims were valid.

25. On 30 July 2002 Apotex, another generic manufacturer, obtained an MA for paroxetine in the United Kingdom and, together with its distributors Neolab and Waymade, commenced further revocation proceedings as regards the Anhydrate Patent, and GSK commenced infringement proceedings against those three companies. On 5 December 2003, the High Court of Justice (England & Wales), Chancery Division (patents court) held that the patent claims which had not been invalidated by the BASF judgment were not infringed by the process used by Apotex; this was upheld on appeal. ( 8 ) Subsequently, Neolab and Waymade entered the market in late December 2003 as distributors for Apotex with the 20 mg paroxetine product, which opened up the generic paroxetine market.

26. Alpharma then terminated the IVAX-Alpharma Supply Agreement and thereby brought to an end the Alpharma Agreement with effect from 13 February 2004, and entered the market with its own 20 mg and 30 mg paroxetine from February 2004. GUK subsequently terminated the IVAX-GUK Supply Agreement on 25 June 2004, which also put an end to its prohibition on the sale of paroxetine under the GUK Agreement. Finally, on 29 June 2004, IVAX and GSK terminated the IVAX Agreement.

27. The independent entry of generic paroxetine onto the market from the end of 2003 had a significant impact on prices. Thus, the prices of 20 mg paroxetine fell by 34% in the first three months following that entry, and by 69% the following year, while the price of 30 mg paroxetine had fallen by about 66% by December 2005. Average prices of 20 mg and 30 mg paroxetine had fallen by around 74% by December 2005.

C. The CMA Decision and the proceedings before the CAT

28. On 12 February 2016, the CMA adopted the decision at issue in the main proceedings (‘the CMA decision’), ( 9 ) in which it found that (1) GSK held a dominant position in the market for paroxetine and that it had abused that position contrary to the prohibition laid down by Chapter 2 of the UK Competition Act 1998 by entering into the IVAX, GUK and Alpharma Agreements; (2) GSK and GUK and the latter’s parent company, Merck, had infringed the prohibition laid down in Chapter 1 of the UK Competition Act 1998 and, for the period following 1 May 2004, Article 101 TFEU by entering into the GUK Agreement; and (3) GSK and the companies in the Alpharma group, namely Actavis, Xellia and Alpharma LLC, had infringed the prohibition laid down in Chapter 1 of the UK Competition Act 1998 by entering into the Alpharma Agreement; (4) In addition, the CMA imposed financial penalties on those companies in a total amount of GBP 44.99 million in respect of the infringements established.

29. Furthermore, the CMA concluded that it was not appropriate to impose penalties with respect to the IVAX Agreement in respect of the prohibition on anticompetitive agreements, in particular because it was excluded from the scope of Chapter 1 of the UK Competition Act 1998 under national legislation on vertical restraints which was applicable at the relevant time but subsequently repealed. ( 10 )

30. The companies on whom penalties were imposed brought an appeal against the CMA decision before the CAT. The CAT points out that, in those actions, it must give a ruling, inter alia, by referring to EU law, on whether GSK, on the one hand, and GUK, Alpharma and IVAX, on the other, were potential competitors for the supply of paroxetine in the United Kingdom at the relevant time; whether the agreements entered into by GSK and GUK and Alpharma, respectively, constituted a restriction of competition by object and by effect; which was the relevant product market on which GSK supplied paroxetine for the purpose of determining whether it held a dominant position; and whether GSK’s conduct constituted an abuse of a dominant position.

31. As regards the issues related to Article 101 TFEU, particularly concerning the existence of potential competition and of a restriction of competition by object, the CAT notes that those issues have already given rise to several judgments of the General Court in Lundbeck and others, ( 11 ) currently under appeal, the relevance of which to the present case is disputed by all the applicants. Moreover, the CAT considers that the detailed rules for assessing a restriction by effect, which is the subject of the sixth question referred and of the Commission’s decision in Servier, ( 12 ) remain uncertain. As regards the questions relating to Section 18 of the UK Competition Act 1998, which corresponds to Article 102 TFEU, which is also the subject of the Commission’s decision in Servier, the CAT points out that it is facing new points of law concerning both the definition of the relevant market and the finding of a possible abuse of dominant position and of any potential defences in that regard.

IV. The procedure before the Court and the questions referred for a preliminary ruling

32. In those circumstances, the CAT, by a judgment of 8 March 2018 (‘the CAT judgment’), ( 13 ) which was received, together with the questions referred and a summary of the main proceedings and of the main facts of the case, at the Court on 7 May 2018, decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘Potential competition (1) For the purpose of Article 101(1) [TFEU], are the holder of a patent for a pharmaceutical drug and a generic company seeking to enter the market with a generic version of the drug to be regarded as potential competitors when the parties are in bona fide dispute as to whether the patent is valid and/or the generic product infringes the patent? (2) Does the answer to Question 1 differ if: (a) there are pending court proceedings between the parties involving this dispute; and/or (b) the patent holder has obtained an interim injunction preventing the generic company from launching its generic product on the market until determination of those proceedings; and/or (c) the patent holder regards the generic company as a potential competitor? Restriction by object (3) When there are pending court proceedings concerning the validity of a patent for a pharmaceutical drug and whether a generic product infringes that patent, and it is not possible to determine the likelihood of either party succeeding in those proceedings, is there a restriction of competition “by object” for the purpose of Article 101(1) [TFEU] when the parties make an agreement to settle that litigation whereby: (a) the generic company agrees not to enter the market with its generic product and not to continue its challenge to the patent for the duration of the agreement (which is no longer than the unexpired period of the patent), and (b) the patent holder agrees to make a transfer of value to the generic company in an amount substantially greater than the avoided litigation costs (including management time and disruption) and which does not constitute payment for any goods or services supplied to the patent holder? (4) Does the answer to Question 3 differ if: (a) the scope of the restriction on the generic company does not go beyond the scope of the patent in dispute; and/or (b) the amount of the value transfer to the generic company may be less than the profit it would have made if it had instead succeeded in the patent litigation and entered the market with an independent generic product? (5) Do the answers to Questions 3 and 4 differ if the agreement provides for the supply by the patent holder to the generic company of significant but limited volumes of authorised generic product and that agreement: (a) does not give rise to any meaningful competitive constraint on the prices charged by the patent holder; but (b) brings some benefits to consumers which would not have occurred if the patent holder had succeeded in the litigation, but which are significantly less than the full competitive benefits resulting from independent generic entry which would have occurred if the generic company had succeeded in the litigation, or is this relevant only to assessment under Article 101(3)? Restriction by effect (6) In the circumstances set out in Questions 3-5, is there a restriction of competition “by effect” for the purpose of Article 101(1) [TFEU] or does that depend upon the court finding that in the absence of that settlement: (a) the generic company would probably have succeeded in the patent proceedings (i.e. that the chance that the patent was valid and infringed was below 50%); alternatively (b) the parties would probably have entered into a less restrictive settlement (i.e. that the chance of a less restrictive settlement was above 50%)? Market definition (7) Where a patented pharmaceutical drug is therapeutically substitutable with a number of other drugs in a class, and the alleged abuse for the purpose of Article 102 [TFEU] is conduct by the patent holder that effectively excludes generic versions of that drug from the market, are those generic products to be taken into account for the purpose of defining the relevant product market, although they could not lawfully enter the market before expiry of the patent if (which is uncertain) the patent is valid and infringed by those generic products? Abuse (8) In the circumstances set out in Questions 3-5 above, if the patent holder is in a dominant position, does its conduct in entering into such an agreement constitute an abuse within the meaning of Article 102 [TFEU]? (9) Does the answer to Question 8 differ if the patent holder makes an agreement of that kind not in settlement of actual litigation but to avoid litigation being commenced? (10) Does the answer to Question 8 or 9 differ if: (a) the patent holder pursues a strategy of entering into several such agreements to preclude the risk of unrestricted generic entry; and (b) the consequence of the first such agreement is that by reason of the structure of the national arrangements for reimbursement by the public health authorities to pharmacies of their costs of purchasing pharmaceutical drugs, the reimbursement level for the pharmaceutical drug in question is reduced, resulting in a substantial saving to the public health authorities (albeit a saving which is significantly less than that which would arise upon independent generic entry following a successful outcome for the generic company in patent litigation); and (c) that saving was no part of the intention of the parties when entering into any of the agreements?’

33. On 20 November 2018 the Court sent a request for information to the CAT, to which it replied on 17 December 2018.

34. In the proceedings before the Court of Justice, GUK, GSK, Xellia, Actavis, Merck, the CMA and the Commission submitted observations. Those same parties participated in the hearing on 19 September 2019.

V. Assessment

35. Before considering the questions referred for a preliminary ruling by the CAT (part B), it is necessary to clarify a point concerning the Court’s jurisdiction to reply to those questions (part A).

A. The Court’s jurisdiction to reply to the questions from the CAT

36. As stated above, ( 14 ) penalties were imposed by the CMA with respect to only the GUK Agreement under Article 101 TFEU for the period subsequent to 1 May 2004, ( 15 ) whereas penalties were imposed with respect to the Alpharma Agreement, which came to an end before that date, ( 16 ) only under Chapter 1 of the UK Competition Act 1998. Similarly, penalties were imposed on GSK for abuse of a dominant position only under Chapter 2 of the UK Competition Act 1998, since the CMA considered that GSK had held a dominant position only until the end of November 2003. ( 17 )

37. Nevertheless, the Court has jurisdiction to reply to the questions from the CAT concerning Article 102 TFEU and Article 101 TFEU in relation to aspects of the case other than the GUK Agreement between 1 May and its termination on 1 July 2004. ( 18 ) As the referring court states, Sections 2 and 18 of the UK Competition Act 1998 correspond to Articles 101 and 102 TFEU and must, under Section 60 of the UK Competition Act 1998, be interpreted in accordance with them. It is settled case-law that questions referred for a preliminary ruling relating to facts which are outside the direct scope of EU law are admissible where the provisions of EU law have been made applicable by national legislation, which, in dealing with situations confined in all respects within a single Member State, follows the same approach as that provided for by EU law. ( 19 )

B. The questions referred

38. The background to the questions referred to the Court by the CAT in these proceedings consists of the three agreements described above between the originator company GSK and the generic manufacturers IVAX, GUK and Alpharma concerning the antidepressant medication paroxetine.

39. Those agreements provided, in essence, in addition to payments by GSK to the generic manufacturers, for entry by those manufacturers onto the market with a limited quantity of generic paroxetine manufactured by GSK instead of independent entry by those companies onto the market with their own generic paroxetine. ( 20 ) Consequently, they entailed a certain reduction in the price of paroxetine and in the costs borne by consumers, which did not, however, bear any relation to the fall in prices and resulting savings caused by the independent entry of generics onto the market which did indeed take place from December 2003. ( 21 )

40. The agreements in question were entered into in a situation in which, following the expiry of the patent for the paroxetine API in 1999 and the corresponding right to data exclusivity in 2000, GSK continued to hold secondary patents relating to that medicinal product, including, in particular, patents protecting certain manufacturing processes for its API, such as the Anhydrate Patent at issue in the main proceedings. ( 22 )

41. In such a situation, generic manufacturers are able, from the point of view of patent law, to enter the market lawfully with generic copies of the originator product in two ways: either with generic copies manufactured in accordance with the manufacturing processes which remain protected by patents where those patents are declared invalid, or with generic copies manufactured via different processes, in which case those copies do not constitute an infringement of the manufacturing processes of the originator product which remain patent protected.

42. In other words and conversely, in a situation where the patent of a medicinal product’s API has expired and an originator company holds only process patents, entry of the generic versions of the medicinal product in question infringes solely the patent rights of that originator if it is established that the process patents at issue are both valid and infringed by each of the potential entrants.

43. In the present case, however, the referring court starts from the assumption that it is impossible to know whether market entry with generic paroxetine by IVAX, GUK and Alpharma would have infringed any rights which GSK held by virtue of its disputed Anhydrate Patent in the main proceedings, since it is uncertain whether that patent was valid and infringed by the generic products at issue. That is due, inter alia, to the fact that GSK entered into the agreement with IVAX even before legal proceedings were commenced and that it concluded the agreements with GUK and Alpharma in order to settle ongoing judicial proceedings with those companies. Therefore, it is not known whether the Anhydrate Patent would have been declared invalid in the course of those proceedings, and it has never been determined whether the generic products of IVAX, GUK and Alpharma infringed the processes protected by that patent. ( 23 )

44. That uncertainty as to the possible unlawful market entry, under patent law, of generic paroxetine by IVAX, GUK and Alpharma, constitutes the leitmotif both of the arguments of the applicant companies in the main proceedings and of the questions put to the Court by the referring court regarding the assessment of the agreements entered into between GSK and those generic manufacturers under competition law.

45. Thus, GSK and the generic manufacturers maintain, inter alia, that, since it is impossible to know whether those manufacturers would have been able to enter the market without infringing GSK’s patent rights, it is equally impossible to determine whether there was potential competition between the operators which could be restricted by the agreements at issue. In those circumstances, they claim that it is impossible to take the view that those agreements constituted restrictions of competition by object and by effect and that their conclusion constituted abuse of a dominant position.

46. According to GSK and the generic manufacturers, that is even more the case as those agreements provided certain benefits for consumers while it would have been wholly uncertain whether the more significant profits generated by an independent entry of the generic manufacturers onto the market would have been likely to materialise, since it would precisely have been impossible to know whether such entry would have been lawful. In those circumstances, it is alleged that the agreements at issue are as likely to have increased competition as to have restricted it, thereby making it impossible to impose any penalty under the prohibition of restrictions of competition.

47. The CAT considers, however, that, in spite of the fact that each of the parties was uncertain as to the outcome of the ongoing litigation, the agreements entered into do not reflect the respective assessment of those parties of their chances of success, but only the view that the terms of the agreements were commercially more advantageous than the risks of continuing the disputes. The reason for that was, according to the CAT, that the agreements effectively shared between GSK and the generic manufacturers GSK’s monopoly profits, which were preserved because there was no independent market entry by the generics, as ensured by the very terms of the agreements. In that context, the CAT analyses the supply of paroxetine by GSK at a preferential price to the generic manufacturers for distribution by them as a value transfer of a non-monetary nature.

48. The CAT therefore concludes that, by the agreements at issue, GSK ensured, for the agreed period, the protection of its patent position against the risk of entry by generic competitors, in exchange for substantial value transfers that far exceeded the costs of the avoided litigation. Although such a process may be entirely rational in economic and commercial terms for all the parties, the CAT doubts, however, whether it is permissible under competition law. For the purposes of such analysis, the CAT nevertheless raises the question of the weight to be accorded to the situation under patent law and whether, against that background, it is possible to equate the agreements at issue with simple agreements for the exclusion of potential competitors from the market or with market-sharing agreements. ( 24 )

1. Article 101 TFEU

49. As stated above, owing, in particular, to national legislation on vertical restraints applicable at the relevant time, the CMA only imposed penalties with respect to the GUK and Alpharma Agreements, but not the IVAX Agreement, under the prohibition of anticompetitive agreements. However, the IVAX Agreement was taken into account by the CMA when it assessed GSK’s conduct in the light of the prohibition on the abuse of a dominant position. ( 25 )

50. Although the CAT therefore refers only to the GUK and Alpharma Agreements in its questions on restrictions of competition by object or by effect, it nevertheless states that, for the purposes of examining the questions relating to abuse of a dominant position, it must also determine whether IVAX was a potential competitor of GSK at the relevant time.

51. In that regard, it should be noted that, in the context of the procedure referred to in Article 267 TFEU, the role of the Court is limited to interpreting the provisions of EU law referred to it, whereas it is for the referring court to apply that interpretation to the case before it. ( 26 ) Therefore, in the present case, it will ultimately be for the CAT to determine specifically whether IVAX, GUK and Alpharma were potential competitors of GSK at the relevant time and whether the GUK and Alpharma Agreements were restrictions of competition by object or by effect.

52. The Court’s task, in contrast, is limited to assessing whether, in the circumstances defined in abstract terms by the CAT in the questions it has referred, a patent holder and generic manufacturers may be regarded as potential competitors and agreements entered into between those operators may be regarded as restrictions of competition by object or by effect. In defining the circumstances set out in its questions, the CAT has already taken into account the relevant characteristics of the respective agreements (that is to say, the IVAX, GUK and Alpharma Agreements for Questions 1 and 2, and the GUK and Alpharma Agreements for Questions 3 to 6).

53. It should therefore be pointed out purely for the sake of clarification that, in the following arguments concerning potential competition, the facts in the main proceedings referred to include, in so far as relevant, the three IVAX, GUK and Alpharma Agreements, whereas the agreements at issue in the main proceedings to which the following arguments concerning restrictions of competition by object and by effect refer include only the GUK and Alpharma Agreements.

54. That said, it is necessary to deal first with Questions 1 and 2 referred for a preliminary ruling, relating to the concept of potential competition (part a), before turning to Questions 3 to 5 (part b), and 6 (part c), which relate, respectively, to the concepts of restriction of competition by object and by effect.

(a) The concept of potential competition (Questions 1 and 2)

55. By its first and second questions, which should be dealt with together, the CAT asks the Court whether the holder of a patent for a pharmaceutical product and a generic manufacturer wishing to enter the market with a generic version of that product are to be regarded as potential competitors when the parties are in bona fide dispute as to whether the patent is valid and/or whether the generic product infringes the patent.

56. In addition, the CAT wishes to know whether (i) the existence of pending court proceedings between the parties concerning that dispute, (ii) the patent holder’s obtaining of an interim injunction prohibiting the generic manufacturer from launching its product until judgment in those proceedings has been given, or (iii) the fact that the patent holder regards the generic manufacturer as a potential competitor, are likely to have an impact on the answer to that question.

57. In order to answer those questions, it must be noted first of all that, as the General Court has correctly held on a number of occasions, it is apparent from the terms of Article 101(1) TFEU relating to the impact of an agreement on competition that that provision applies solely to sectors open to competition. ( 27 ) To qualify an agreement between undertakings as having the object or effect of restricting competition presupposes, therefore, that there is competition which may be restricted.

58. Thus, if the examination of the economic and legal context of an agreement were to reveal that the undertakings in question could not be categorised as competitors, such an agreement likewise could not be categorised as restricting competition by its object or by its effects. Yet the examination of the conditions of competition on a market is based not only on existing competition between undertakings already present on that market, but also on potential competition between those undertakings and undertakings which are not yet present on that market. ( 28 )

59. In order to examine whether an undertaking which is party to an agreement is a potential competitor on a particular market, it must be ascertained whether that market has insurmountable barriers to entry ( 29 ) and whether, if the agreement at issue had not been implemented, there would have been real concrete possibilities for the undertaking in question to penetrate it and to compete with the undertakings already established. ( 30 ) In that context, the essential factor on which categorisation as a potential competitor must be based is whether an undertaking has the ability to enter a particular market, but its intention to enter it may also be of relevance. ( 31 )

60. Moreover, it has already been recognised by the Court that the conclusion by undertakings of an agreement the purpose of which is to keep one of them out of a specific market is a strong indication that a competitive relationship exists between them. ( 32 ) In the same vein, the perception of the established operator is a relevant factor in that regard, since it has been recognised that, irrespective of the intention of an undertaking outside a market to enter that market in the near future, the mere fact of the existence of such an undertaking may give rise to competitive pressure on the undertakings operating on that market, a pressure represented by the likelihood that a new competitor will enter the market if the market becomes more attractive. ( 33 )

61. As the CAT explains, in the present case, its first and second questions are based on the reasoning that, if GSK’s claims in the proceedings between it and GUK and Alpharma had proved to be correct, that is to say if the remaining claims of the Anhydrate Patent had been declared valid and infringed by the GUK and Alpharma products, entry onto the market of those generic producers would have constituted an infringement of GSK’s patent rights. However, since judgments were never given in those proceedings because the agreements between the parties were intended specifically to bring to an end the ongoing court proceedings in that regard, ( 34 ) it is impossible to know whether entry of the generics onto the market would have infringed GSK’s patent rights or not.

62. In those circumstances, the applicants in the main proceedings and, in particular, GSK, maintain that it is impossible to find that there was potential competition between GSK and the generic manufacturers in the paroxetine market. They claim that the existence of valid and infringed patents constitutes an insurmountable barrier to entry onto the market of an originator medicinal product protected by those patents and, therefore, where such patents exist, generic manufacturers do not have real concrete possibilities to enter that market.

63. According to that line of argument, it follows that, in a situation such as that in the main proceedings where the patent for the medicinal product API has expired but where the medicinal product is still protected by manufacturing patents, ( 35 ) the question of whether a generic manufacturer is a potential competitor of the holder of that patent pertains to the likelihood of that generic manufacturer being able either to have those manufacturing patents declared invalid or to find a method for manufacturing the API of the medicinal product concerned which does not infringe them.

64. Yet, in the present case, the CAT specifically found that it was impossible to assess that likelihood and to know whether or not generic entry onto the market would have infringed GSK’s patent rights. Consequently, according to the applicants in the main proceedings, it is also impossible to categorise GSK and the generic manufacturers as potential competitors, since it is quite simply impossible to know whether the latter had real concrete possibilities to enter the paroxetine market when the agreements in question were entered into.

65. The assumption on which those arguments are based, namely that there may be potential competition between a medicinal product patent holder and the manufacturer of a generic of that same medicinal product solely when it is certain or at least highly likely that the latter will be able to enter the market without infringing the former’s patent rights, is, however, erroneous for a number of reasons, which are explained below.

(1) Uncertainty as to the validity of a medicinal product patent and whether generic versions of that product infringe that patent as a constituent of competitive relationships in the pharmaceutical sector

66. First of all, as the General Court held in Lundbeck v Commission, ( 36 ) unless there is to be no distinction drawn between actual and potential competition, it cannot be necessary, in order to establish the existence of potential competition, to demonstrate with certainty that the generic undertaking would have entered the market and that that entry would inevitably have been successful; on the contrary, it must be sufficient to demonstrate that that undertaking had real, concrete possibilities in that respect.

67. Yet the fact that there is uncertainty as to the validity of patents protecting an originator medicinal product and as to whether a generic of that medicinal product infringes that patent is not such as to demonstrate that the market for the originator medicinal product has insurmountable barriers or that a generic manufacturer does not have real concrete possibilities to enter that market. That uncertainty is, on the contrary, a fundamental characteristic of competitive relationships in the pharmaceutical sector as in all sectors in which there are exclusive rights over technologies. ( 37 ) That applies both before and, in certain cases, after the market entry of generics of an originator medicinal product protected by patents since, as the Commission points out, in order to obtain an MA for a generic product, the manufacturer of that product is not required to show that it does not infringe any patent rights which continue to be held by the originator undertaking.

68. Thus, it is indeed true that, when granted by a public authority, an intellectual property right is normally assumed to be valid and an undertaking’s ownership of that right is assumed to be lawful, ( 38 ) so that patents are assumed to be valid until they are expressly revoked or invalidated by a competent authority or court. However, that presumption of validity, as the General Court correctly held in Lundbeck v Commission and Servier and Others v Commission, cannot be equated with a presumption of illegality of generic products validly placed on the market which the patent holder deems to be infringing the patent. ( 39 )

69. As the Court has stated, the purpose of a patent is indeed to ensure that the holder, in order to reward the creative effort of the inventor, has the exclusive right to use an invention with a view to manufacturing products and putting them into circulation for the first time, either directly or by the grant of licences to third parties, as well as the right to oppose infringements. ( 40 ) However, the subject matter of a patent cannot be interpreted as also affording protection against actions brought in order to challenge that patent’s validity, in view of the fact that it is in the public interest to eliminate obstacles to economic activity which may arise where a patent was granted in error. ( 41 ) Consequently, the existence of patents protecting a certain medicinal product does not amount to a legal barrier excluding all competition such as the exclusive rights recognised as constituting such barriers in earlier cases. ( 42 )

70. On the contrary, it is an integral part of patent law that, despite the presumption that patents are valid, there can be certainty as to that validity and as to whether competing products infringe that patent only once those matters have been examined by the competent national authorities and courts.

(2) Disputes relating to the validity of a patent or whether a generic product infringes that patent as factors which may indicate the existence of potential competition

71. Accordingly, it is customary that actions seeking to challenge the validity of a patent or to bring about an examination of its validity are part of the preparations for market entry of the generic version of an originator medicinal product which continues to be covered by patent rights. Such actions may consist not only of a direct challenge to those rights through proceedings for a declaration of the patent’s invalidity or proceedings for a declaration of non-infringement in respect of the generic product, but also of the so-called ‘at risk’ launch or the preparation of the so-called ‘at risk’ launch of a generic version of a medicinal product on the market, ( 43 ) which is capable of giving rise to an action for infringement by the holder of the patent rights. This is, furthermore, perfectly illustrated by the facts constituting the background to the dispute in the main proceedings. ( 44 )

72. Moreover, entry onto the market of a generic manufacturer amid uncertainty regarding the validity of patents continuing to protect the originator product or whether the generic product infringes those patents is all the more envisageable in a context such as that of the main proceedings, in which the patents at issue are not compound patents protecting the API of the originator medicinal product, in this case paroxetine, but rather process patents protecting certain methods of manufacturing that API. Consequently, unlike a compound patent, those process patents, irrespective of whether or not they are valid, do not prevent generic manufacturers from entering the market with paroxetine manufactured under other processes. ( 45 )

73. It follows that the Commission is correct when it maintains, in connection with the present proceedings, that not only does the existence of a dispute between the patent holder and a generic manufacturer concerning the validity of the patent or whether the generic product at issue infringes that patent not prevent it being recognised that potential competition exists between those two operators, but on the contrary, is a factor capable of demonstrating that such potential competition exists. That is true, as the Commission correctly points out, both for cases in which such a dispute has not yet given rise to legal proceedings and for cases in which legal proceedings between the parties relating to the dispute in question are already ongoing.

74. More specifically, the existence of legal proceedings concerning the validity of a patent or whether a generic product infringes that patent is even capable of indicating that a generic manufacturer is preparing to enter the market, since that is what gives rise to the legal proceedings on its part or on the part of the patent holder. Furthermore, as the CAT points out in relation to interim injunctions, ( 46 ) it is misconceived to take the view that the existence of judicial proceedings may preclude the existence of potential competition. If it were sufficient for legal proceedings to be ongoing in relation to a patent dispute in order to preclude the existence of potential competition between the operators who are party to the litigation, those operators would be able, by means of their litigation strategies, to influence it being found that potential competition exists between them.

75. In that context, it is not possible to accept the argument of the applicants in the main proceedings, and particularly GSK, according to which the view cannot be taken that there is a relationship of potential competition between the holder of a medicinal product patent and a manufacturer wishing to enter the market with a generic version of that medicinal product while uncertainty remains regarding the validity of the patent concerned or whether the generic product infringes that patent. That position is indeed not only contrary to the Court’s case-law, cited above, concerning the scope of exclusive rights conferred by a patent, ( 47 ) but furthermore if that position were adopted, it would amount to precluding any potential competition and thereby preclude competition law from being applied during the preparatory stage of the market entry of generic medicinal products.

76. However, as the Commission has correctly pointed out during the present reference for a preliminary ruling, potential competition precisely requires protection since, if it were permissible to halt or delay future entrants’ preparations for market entry by means of exclusion agreements, that potential competition could never come into existence by those operators entering the market. That is particularly the case in the pharmaceutical sector where entry requires long and costly preparations. ( 48 ) Therefore, as the Court has held, potential competition between undertakings holding patents for originator medicinal products and generic manufacturers of those same medicinal products may occur long before the expiry of a compound patent protecting the originator medicinal product. ( 49 )

77. The likelihood of the generic manufacturer being successful in a dispute with the holder of an originator medicinal product patent cannot therefore constitute the decisive criterion for examining the competitive relationship between those operators. That is confirmed by the fact, correctly pointed out by the CAT, that it is not for the competition authority or the court examining that relationship to conduct an intellectual property ‘mini-trial’ to assess the strength of the patent at issue.

(3) Scope of the competition authority’s assessment of the intellectual property rights at issue

78. In that regard, it is appropriate to recall the Court’s reasoning in its recent judgment in F. Hoffmann-La Roche and Others, ( 50 ) which concerned the relevance, for the purposes of the application of Article 101 TFEU, of the lawfulness of the placing on the market of a particular medicinal product from the point of view of EU pharmaceutical legislation.

79. In that judgment, the Court held that it is not for the national competition authorities to review whether the conditions under which a medicinal product is prescribed and marketed comply with that pharmaceutical legislation; such review can be carried out comprehensively only by the authorities with jurisdiction to ensure compliance with the rules governing pharmaceutical matters or by the national courts. ( 51 ) However, if those authorities or courts have not yet given a decision in that regard, the state of uncertainty surrounding the lawfulness of the conditions for marketing and prescribing the medicinal product at issue do not preclude a competition authority, for the purposes of the application of Article 101 TFEU, from finding that that product belongs to a particular market and therefore competes with the other medicinal product or products present on that market. ( 52 )

80. Similarly, in its judgment in Slovenská sporiteľňa, ( 53 ) referred to by Advocate General Saugmandsgaard Øe in his Opinion in Hoffmann-La Roche, cited above, ( 54 ) the Court stated, in essence, that the alleged illegality of the presence of certain products or services on a given market does not mean that there is no competitive relationship, which is capable of being restricted, between those goods and the other goods present on that market.

81. That reasoning can be transposed, mutatis mutandis, to the present issue of the relevance, for the purposes of the application of Article 101 TFEU, of the lawfulness of the placing on the market of a generic medicinal product under patent law.

82. Here too, reviewing compliance with patent law of the placing on the market of such a generic medicinal product is not a matter for the competition authorities, but can be carried out comprehensively only by the national authorities or courts having patent law jurisdiction. ( 55 ) Therefore, if such authorities or courts have not yet given a decision in that regard, the state of uncertainty surrounding the lawfulness of the placing on the market of a generic medicinal product for the purposes of patent law cannot preclude a competition authority, for the purposes of applying Article 101 TFEU, from finding that that medicinal product competes with the originator medicinal product protected by the patent which is alleged to have been infringed.

83. Admittedly, that does not mean that the competition authority concerned must disregard any question relating to patent law which is capable of influencing the finding that such a competitive relationship exists. ( 56 ) Any patent rights protecting an originator medicinal product undeniably form part of the economic and legal context of the competitive relationships between the holders of such rights and the manufacturers of generic medicinal products. However, the competition authority’s assessment of such patent rights must not consist of an examination of the strength of the patent or of the likelihood that a dispute between its holder and a manufacturer of generics might be brought to an end by the finding that the patent is valid and has been infringed. Rather, that assessment must have regard to the question of whether, despite the existence of the patent rights at issue, the generic manufacturer has real concrete possibilities to enter the market at the relevant time.

84. In that regard, account must be taken, inter alia, of the broad parameters specific to patent law and the pharmaceutical sector which have just been mentioned, that is to say, that uncertainty as to the validity of patents covering medicinal products is a fundamental characteristic of the pharmaceutical sector; that the presumption that a patent for a medicinal product is valid does not amount to a presumption that a generic version of that medicinal product validly placed on the market is unlawful; that a patent does not ensure protection against actions seeking to contest its validity; that such actions and, in particular, the ‘at risk’ launch of a generic medicinal product, as well as legal proceedings in that regard, often take place during the stage before or just after the market entry of such a generic medicinal product; that, in order to obtain a marketing authorisation for a generic medicinal product, it is not necessary to demonstrate that that placing on the market does not infringe any patent rights regarding the originator medicinal product; and that, in the pharmaceutical sector, potential competition may occur well before the expiry of a compound patent protecting an originator medicinal product, since the generic manufacturers wish to be ready to enter the market at the point when that patent expires.

85. In addition to that broad context, account must be taken of the factors specific to each individual case, such as, in the present case, the fact, which has already been pointed out, ( 57 ) that the patents at issue are not compound patents but process patents protecting certain methods of manufacturing the paroxetine API. Accordingly, those process patents, irrespective of whether or not they are valid, do not prevent generic manufacturers from entering the market with paroxetine manufactured under other processes. ( 58 )

86. Moreover, as the case-law has acknowledged, ( 59 ) the patent holder’s perception of the competitive pressure from generic manufacturers, similarly to those manufacturers’ perception of their possibilities to successfully enter the market and their intentions in that regard, are also relevant factors for the purposes of assessing whether there is potential competition between those operators.

87. Thus, account may be taken of the fact that the patent holder regards a generic manufacturer as a potential competitor, which can be shown, inter alia, by the readiness of the former to make a value transfer in favour of the latter if it is established, in fact, that the (sole) consideration for that value transfer consists in the generic manufacturer refraining from entering the market. ( 60 )

88. Similarly, account may be taken, as did the CAT in its judgment ( 61 ) and in its request for a preliminary ruling, of the progress of the generic manufacturers in preparing their entry onto the market in terms, inter alia, of investment, the building up of stocks of the medicinal product at issue or marketing strategies. As the CMA correctly explained, inter alia, at the hearing in these proceedings, it is those factors rather than an intellectual property ‘mini-trial’ which may inform the competition authority regarding the perception of the operators involved of the patent’s strength or as to whether the generic products concerned infringe it.

(4) The existence of interim injunctions or interim legal undertakings

89. Finally, the existence of interim injunctions or legal undertakings, such as those in the present case, temporarily prohibiting the generic manufacturers from entering the market pending the outcome of legal proceedings regarding the patent’s validity or whether the generic product infringed it, ( 62 ) cannot cast doubt on the existence of potential competition between the holder of a patent for a medicinal product and a generic manufacturer wishing to enter the market with a generic version of that medicinal product.

90. Thus, it is indeed true that, as the case-law has acknowledged, in order to find that potential competition exists, it is important that the potential entry by an operator from outside the market can occur with sufficient speed to form a constraint on market participants. ( 63 ) However, that does not mean that that entry must be capable of taking place immediately; it is sufficient if it can take place within a reasonable period. ( 64 )

91. However, both the interim injunction and the legal undertaking not to enter the market at issue in the main proceedings were to last for only a few months until the outcome of the respective disputes. Therefore, even though GUK and Alpharma were temporarily prevented from entering the market with generic paroxetine while those measures were in force, that does not establish that there was no longer potential competition between those generic manufacturers and GSK.

92. That is even more the case since the existence of such interim measures, even though they were to reflect an initial assessment by the court with jurisdiction in relation to the patent’s validity or whether the generic products infringed that patent, does not, at that point, prejudge the final outcome of the ongoing dispute in that regard. As has already been pointed out, ( 65 ) the very existence of legal proceedings relating to a patent’s validity or whether a generic product infringes that patent forms part, in the pharmaceutical sector, of the preparations for the market entry of such a product and indicates that potential competition exists between the operators involved. Similarly, a ‘cross-undertaking in damages’, such as that provided by GSK to GUK and Alpharma, that is to say GSK’s undertaking to compensate those operators if subsequently it is found that the injunctions wrongly prevented them from entering the market, assumes that a competitive relationship exists. Finally, as has already been noted, ( 66 ) whether legal proceedings and interim injunctions exist depends on choices made by the operators involved and cannot therefore be equated with the existence of objective, factual or legal barriers which restrict entry onto a particular market irrespective of the wishes of the economic operators concerned. ( 67 )

93. Last, as the CAT noted, in essence, in its judgment, ( 68 ) if it were established that the agreements which were entered into between GSK and the generic manufacturers were restrictive of competition, and therefore subject to confirmation of that very fact, entry into those agreements during the very period in which the interim measures at issue ( 69 ) were in force is a strong indication that those measures did not eliminate potential competition between those operators. ( 70 )

(5) Conclusion

94. It follows from the foregoing that uncertainty concerning the validity of a patent for a medicinal product or whether a generic version of that medicinal product infringes that patent does not prevent the patent holder and the generic manufacturer from being regarded as potential competitors. The existence of a bona fide dispute as to whether the patent is valid or whether the generic product infringes the patent, irrespective of whether or not that dispute has already given rise to judicial proceedings and interim injunctions or interim legal undertakings, is, on the contrary, a factor which is capable of demonstrating that potential competition exists between the patent holder and the generic manufacturer. Similarly, the patent holder’s perception and the fact that it regards the generic manufacturer as a potential competitor are factors which are capable of demonstrating that potential competition exists between those two operators.

(b) The concept of restriction of competition by object (Questions 3 to 5)

95. The CAT has referred three questions to the Court on the concept of restriction of competition by object. It is appropriate to begin with Questions 3 and 4, which concern the circumstances in which agreements such as those at issue in the present case may constitute restrictions of competition by object. Subsequently, it is appropriate to deal with Question 5, which concerns whether such an agreement may constitute such a restriction, despite the fact that it provides consumers with some limited advantages.

(1) Questions 3 and 4

96. By Questions 3 and 4, which may be dealt with together, the CAT questions the Court regarding the circumstances in which a settlement agreement, entered into in order to put an end to ongoing court proceedings concerning the validity of a patent for a medicinal product and whether a generic version of that medicinal product infringes that patent, is capable of constituting a restriction of competition by object within the meaning of Article 101 TFEU, in a situation where it is not possible to determine which party is likely to succeed in those proceedings.

97. The CAT asks, in particular, whether such an agreement constitutes a restriction of competition by object where the generic company agrees not to enter the market with its product and not to continue its challenge to the patent for the duration of the agreement, which is no longer than the unexpired period of the patent, and where the patent holder undertakes to make a transfer of value to the generic manufacturer in an amount substantially greater than the avoided litigation costs and which does not constitute payment for any goods or services supplied.

98. In addition, the CAT wishes to know whether the answer to that question may differ if the scope of the restriction on the generic manufacturer does not go beyond the scope of the patent in dispute or if the amount of the value transfer to that manufacturer is less than the profit it could have expected to make if it had succeeded in the patent litigation and entered the market independently.

99. In order to answer those questions, it should be noted, first, that Article 101 TFEU prohibits all agreements between undertakings which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and that the anticompetitive object and anticompetitive effect are not cumulative but alternative conditions for assessing whether an agreement is caught by the prohibition set out in that provision. ( 71 )

100. In other words, regardless of their effects, agreements are prohibited if they pursue an anticompetitive purpose. ( 72 ) The reason for that is that certain types of coordination, such as horizontal price-fixing by cartels, can be regarded, by their very nature, as being harmful to the proper functioning of normal competition, and therefore as revealing a sufficient degree of harm to competition that it may be held that there is no need to examine their effects. ( 73 )

101. In order to determine whether an agreement has such an anticompetitive object, regard must be had to the content of its provisions, the objectives it seeks to attain and the economic and legal context of which it forms part. When determining that context, it is also necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question. In addition, although the parties’ intention is not a necessary factor in determining whether an agreement between undertakings is restrictive, there is nothing prohibiting the competition authorities, the national courts or the Courts of the European Union from taking that factor into account. ( 74 )

102. Since the concept of restriction of competition ‘by object’ must nevertheless be interpreted restrictively, an agreement must, in order to be regarded as constituting such a restriction, clearly reveal a sufficient degree of harm to competition. ( 75 )

103. Where the analysis of a type of coordination between undertakings does not reveal a sufficient degree of harm to competition, the effects of the coordination must, on the other hand, be considered and, in order to prohibit it, it is necessary to find that factors are present which show that competition has in fact been prevented, restricted or distorted to an appreciable extent. ( 76 )

104. In the present case, the Commission and the CMA take the view that the GUK and Alpharma Agreements constitute, in the same way as those at issue in Beef Industry Development Society and Barry Brothers, ( 77 ) market exclusion agreements. Accordingly, under those agreements, GSK made substantial payments in favour of the generic manufacturers, the sole consideration for which was those manufacturers’ undertaking not to enter the market independently with their own generic paroxetine during the agreed period. The agreements concerned, according to the Commission and the CMA, therefore clearly had an anticompetitive object and consequently constituted restrictions of competition by object.

105. GSK and the generic manufacturers maintain, on the contrary, before the CAT and before the Court that the GUK and Alpharma agreements cannot in any way be regarded as clearly revealing, as required by the case-law, ( 78 ) a sufficient degree of harm to competition so as to constitute restrictions of competition by object within the meaning of Article 101 TFEU. Rather, those agreements were complex arrangements reflecting a compromise in the specific context of a patent settlement agreement, which did not constitute simple market exclusion agreements.

106. As has already been noted above, ( 79 ) according to the CAT, to which it falls, as has also already been stated, to assess the facts of the case in the framework of the present reference for a preliminary ruling, ( 80 ) the GUK and Alpharma agreements ( 81 ) sought to guarantee GSK, during the agreed periods, protection against the risk of those generic competitors entering the market, in exchange for substantial value transfers which far exceeded the avoided litigation costs. The CAT nevertheless wonders whether, against the relevant patent background in the present case, such characteristics allow those agreements to be categorised as restricting competition by object.

107. Therefore, it is necessary to examine below the arguments put forward by GSK and the generic manufacturers which prompted that question from the referring court, in order to establish whether those arguments are capable of establishing that the agreements at issue in the main proceedings do not reveal sufficiently clearly a sufficient degree of harm to competition to be categorised as restrictions of competition by object.

(i) The ‘potential to restrict competition’ of an agreement imposing a restriction which does not go beyond the scope and unexpired period of a patent

108. By an initial set of arguments, GSK and the generic manufacturers maintain that, since the scope and duration of the restrictions imposed by the agreements did not go beyond the scope and unexpired period of the patent at issue, those agreements did not have a greater potential to restrict competition than the legal scope of that patent. Thus, the restrictions imposed by the agreements simply implemented the right of the holder of that patent, that is to say GSK, to prevent infringements of its patent rights, which are presumed to be valid, by deterring infringing products from entering the market. Similarly, GUK and Alpharma undertook, under those agreements, to do no more than respect GSK’s patent rights, which were presumed to be valid.

109. However, it is incorrect to take the view that, if the restrictions imposed do not go beyond the scope and unexpired period of a patent, ( 82 ) the conclusion of an agreement by which the holder of that patent pays a competitor not to enter the market is equivalent to the implementation of the patent holder’s right to oppose any infringement, and to an undertaking by its competitors to respect its patent rights, which are presumed to be valid. ( 83 )

110. First, contrary to Alpharma’s assertions, in particular, it is not apparent from the case-law on which it relies that the Court has generally rejected the idea that agreements in the field of intellectual property may restrict competition. ( 84 )

111. On the contrary, it is apparent from the case-law that, although an industrial or commercial property right, as a legal entity, does not possess those elements of contract or concerted practice referred to in Article 101 TFEU, the exercise of that right might, however, fall within the ambit of the prohibitions contained in that provision if it manifests itself as the subject, the means or the result of an agreement. ( 85 ) In other words, as the General Court summarised in Servier and Others v Commission, it is a question of penalising not the lawful exercise of intellectual property rights but the abuse of those rights. ( 86 )

112. That is, furthermore, in accordance with the objectives of international and EU intellectual property law, which seeks to reconcile the protection of intellectual property rights, on the one hand, and the preservation of legitimate trade against any unjustified obstacle, on the other. ( 87 ) Accordingly, Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights ( 88 ) states inter alia that it should not affect the application of the rules of competition, and that the measures for which it provides should not be used to restrict unduly competition in a manner contrary to the Treaty. ( 89 )

113. In that regard, although, according to the case-law already cited above, ( 90 ) the object of a patent is to enable the patent holder to oppose any infringement, that object cannot, however, be interpreted as also affording protection against actions seeking to challenge the validity of the patent. The contrary would be inconsistent with the public interest in the elimination of all obstacles to economic activity which could arise if the patent were granted erroneously. Similarly, as the General Court has correctly acknowledged, the presumption of validity of a patent cannot be equated with a presumption of illegality of generic products validly placed on the market which the patent holder considers to be infringing that patent. ( 91 )

114. Yet the conclusion of an agreement under which a competitor of the patent holder undertakes not to enter the market and to cease its challenge to the patent in return for payment of a substantial sum, the sole consideration for which is that undertaking, amounts precisely to ensuring protection for the patent holder against actions seeking to contest the validity of its patent and to establish a presumption that the products which may be put on the market by his competitor are unlawful. Therefore, it cannot be maintained that entering into such an agreement falls within the exercise, by the patent holder, of its prerogatives stemming from the object of the patent. That is all the more the case since, as has been stated in the case-law, it is for public authorities and not private undertakings to ensure compliance with statutory requirements. ( 92 )

115. Similarly, it cannot be claimed that, from the point of view of the generic manufacturers, entering into such an agreement is equivalent solely to them acknowledging the patent rights, which are presumed to be valid, of the patent holder. If the patent holder makes, in their favour, a significant value transfer the sole consideration for which is their undertaking not to enter the market and no longer to challenge the patent, that indicates, in the absence of any other plausible explanation, that it is not their perception of the patent’s strength, but the prospect of that value transfer which has induced them to refrain from entering the market and challenging the patent. That is also confirmed by the facts in the main proceedings, pointed out by the CAT, which demonstrate that the agreements at issue were the outcome of negotiations during which GSK gradually increased the amount of its offers until reaching a sufficient level to persuade the generic manufacturers to sign. ( 93 )

116. Therefore, it is incorrect to maintain that the potential of the GUK and Alpharma Agreements to restrict competition was not more significant than the legal scope of the patent at issue. Indeed, the potential to restrict competition arising from the legal scope of that patent was limited to the possibility of opposing any challenge to its validity and any alleged infringement by the legal means available under patent law, which is the normal process of competition in sectors in which there are exclusivity rights over technologies. ( 94 ) By contrast, the potential to restrict competition of an agreement under which a patent holder ‘buys’ an undertaking from a competitor to refrain from entering the market and from challenging the patent amounts to the elimination of any risk of challenge which thereby eliminates competition in relation to its patented product.

117. Thus, in the area of implementation of pharmaceutical patents as elsewhere, the concept inherent in the TFEU provisions on competition requires that each economic operator determines independently the policy which it intends to adopt on the market ( 95 ) and prohibits those operators from knowingly substituting practical cooperation between them for the risks of competition. ( 96 ) Yet entering into an agreement under which a patent holder pays a generic manufacturer to refrain from entering the market and from challenging the patent means precisely that those operators no longer determine independently their conduct in relation to the implications of that patent, but, on the contrary, agree on a concerted position in that regard.

118. Similarly, entering into such an agreement amounts, for the parties involved, to substituting, knowingly, practical cooperation between them for the risks of competition. In the present case, by continuing the dispute concerning the validity of the patent or the question of whether the generic products infringed it, GSK continued to have both the opportunity to keep all its profits arising from the absence of paroxetine generics and the risks of losing those profits following market entry of such generics. Similarly, the generic manufacturers continued to have both the opportunity to make significant profits by entering the market independently and the risk of not making any gains at all if the patent at issue were found to be valid and their products to have infringed it.

119. If, in such a situation, competitors enter into agreements such as those at issue in the main proceedings, that means that they take the view that it is more advantageous to them to replace those opportunities for gains and risks of losses with the certainty of an assured return consisting of a share of the profit made by the patent holder as a result of the generic manufacturers’ concerted action of refraining from market entry. ( 97 ) That such sharing of the patent holder’s profits may continue to be advantageous for all the parties is explained, inter alia, by the significant difference in the prices of medicinal products before and after generic products enter the market. ( 98 ) That also explains why it may be advantageous for the holder of a patent for an originator medicinal product to defer the entry of generic versions of that medicinal product even if only for a few months.

120. In those circumstances, the fact that the amount transferred by the patent holder to the generic manufacturer is less than the profit which the generic manufacturer was likely to make in the event of independent entry onto the market, does not mean that an agreement under which the sole consideration for payment of that sum is an undertaking to refrain from entering the market does not constitute a restriction of competition by object. Indeed, if the amount remains, however, sufficient to be an incentive, ( 99 ) it may continue to be advantageous for the generic manufacturer to enter into an agreement even if it is paid less than the profit it could have expected if it entered the market independently. The reason for that is that, in so doing, it replaces the risks and hazards inevitably linked to such market entry, as well as the need to make the necessary economic and commercial efforts for that purpose, with the certainty of obtaining, without further effort, a significant part of the patent holder’s monopoly revenues.

(ii) The relevant ‘counterfactual scenario’

121. It follows from the foregoing that nor can the second set of arguments raised by GSK and the generic manufacturers establish that agreements such as those at issue in the present case do not have potential for sufficient harm to constitute restrictions of competition by object.

122. By that second set of arguments, GSK and the generic manufacturers maintain that, since, in the present case, as the CAT itself acknowledges, the status of the patent was wholly uncertain and the outcome of the dispute in that regard impossible to predict, it is also impossible to conclude that the agreements were capable of restricting competition. Indeed, it is impossible to determine whether the counterfactual scenario, which would have taken place in the absence of the agreements, would have been more ‘competitive’ than the situation created by those agreements, because it is impossible to know whether that scenario would have resulted in a legal victory for the generic manufacturers and their independent entry onto the market. Similarly, according to that line of argument, it is wrong to consider a scenario in which the generic manufacturers entered the market in infringement of GSK’s patent rights as being more competitive than the scenario established by the agreements, since the specific aim of the patent system is precisely to protect competition on the merits and to protect innovation.

123. Thus, in particular, Merck maintains that, since the assessment of the agreements indicates doubts as to whether they had any effect on competition, those doubts must be resolved by a comprehensive analysis of the effects of those agreements.

124. It is, however, incorrect to claim that, since the status of the patent and the question of whether the generic products infringed it are, in the case in the main proceedings, uncertain, it is impossible to determine whether the agreements at issue were capable of restricting competition.

125. Indeed, in order to determine whether that was the case, it is not necessary to seek to ascertain whether, in the absence of the agreements, the generic manufacturers would certainly or very probably have entered the market following success in the patent proceedings. As the General Court summarised, in essence, in Lundbeck v Commission, ( 100 ) to apply such a criterion would be to confuse actual and potential competition and to ignore the fact that Article 101 TFEU also precisely protects the latter.

126. In order to ascertain whether the agreements at issue were capable of restricting competition, it is therefore necessary, rather, to examine whether, by means of those agreements, the parties substituted practical cooperation between them for the risks of normal competition, in which each party determines independently its conduct on the market. If that is the case, the situation created by the agreements is characterised by the fact that it is not the result of such normal competition, but the result of a concerted practice by which the parties eliminated the risks of competition.

127. It follows that, without prejudice to the question of whether a competition authority must establish a ‘counterfactual scenario’ in order to determine whether an agreement has an anticompetitive object, the situation with which it is necessary to compare the situation put in place by the agreements is not, in any event, the scenario of one or the other of the parties being successful in the patent proceedings or the generics entering the market or refraining from entering it. On the contrary, the scenario with which the situation created by the agreements is to be compared is quite simply a situation in which the parties continued to manage their patent litigation independently and on the basis of their own assessment of the risks and opportunities in entering or refraining from entering the market. What is important is not to depict the situation concerning the patent which would have occurred in the absence of the agreements, but rather the situation concerning competition.

128. That is, moreover, consistent with the fact that, as the parties correctly state, a situation in which GSK was successful at the end of the disputes and thus prevented the generic manufacturers from entering the market independently would not have been less favourable in terms of competition than a situation in which the generics entered independently, following their being successful. What is crucial is indeed not whether the generics enter or refrain from entering the market independently, but whether that refraining is a result of normal competition or an anticompetitive concerted practice.

129. Such a conclusion is, furthermore, in accordance with the principles, already set out above, of patent law and its interaction with competition law. First, patent law does not guarantee protection against challenges to patents; uncertainty as to the status of patents and actions seeking to challenge them are therefore part of normal competition in the sectors concerned. ( 101 ) Second, it is not for the competition authorities to evaluate the strength of patents and to make predictions concerning the outcome of disputes in that matter, but nor is that necessary to assess patent agreements under competition law. ( 102 )

(iii) The nature of the agreements as settlements of actual litigation

130. Finally, the third set of arguments put forward by the applicants in the main proceedings also fails to establish that agreements under which a generic manufacturer undertakes not to enter the market and to abandon its challenge to a patent in return for a substantial payment from the patent holder, the sole consideration for which is that undertaking, cannot constitute restrictions of competition by object.

131. That third set of arguments consists of a claim that, as agreements to settle ongoing court proceedings, the GUK and Alpharma Agreements pursued a legitimate objective which is from the outset incompatible with the categorisation of an agreement as restricting competition by its object, since such settlement agreements have a public interest and are encouraged by the public authorities. According to that argument, it is therefore possible to categorise such a settlement agreement as a restriction of competition by object, at most, in cases in which the patent is clearly invalid or fraudulent, and in which the proven intention of the parties consists in bringing an end, anticompetitively, to a purely fictitious dispute over such a patent.

132. In contrast, according to the applicants in the main proceedings, in an actual dispute concerning a legal patent, the outcome of which is impossible to predict, payments concurred upon in the agreements represent merely a compromise between the parties in view of the risk of losses likely to be suffered by GSK in the event of unlawful market entry by the generic producers on the one hand and the losses likely to be suffered by the latter if they refrain from entering the market for no good reason on the other. To categorise such an agreement as a restriction of competition by object would deprive pharmaceutical operators of any possibility of settling a patent dispute and leave them no choice, when faced with such a dispute, other than to concede or to pursue the legal proceedings already commenced to their conclusion.

133. Yet, first, as the Court has already stated, Article 101 TFEU draws no distinction between agreements whose purpose is to put an end to a dispute and those entered into with other aims in mind, so that a court settlement may be invalid for breach of EU competition law. ( 103 ) The objective of encouraging settlement agreements cannot indeed shield such agreements from the application of competition law, the rules of which are part of public policy. ( 104 )

134. Furthermore, as the Commission correctly points out, even in the case of an actual dispute with an uncertain outcome concerning a lawful patent, in order to assess whether an agreement to settle such a dispute has an anticompetitive object, it must be ascertained whether that agreement has actually resolved the dispute in question and whether those terms reflect a compromise between the parties in that regard. In other words, the question is whether the agreement is a genuine compromise reached on the basis of an independent assessment by the parties of their situation regarding the patent, or whether the agreement consists, rather, in putting an end to the dispute by means of a payment made by one of the parties to the other, so that the latter no longer challenges the patent and no longer competes.

135. Yet contrary to the parties’ claims in the present case, it is apparent from the CAT’s factual findings that the agreements at issue in the main proceedings do not seem to have settled the parties’ patent disputes, but only to have deferred resolution of the disagreement in that regard until after expiry of the agreements. Rather than having been settled, the disputes between the parties therefore seem only to have been put on hold during the term of those agreements.

136. According to the CAT’s findings, ( 105 ) the GUK and Alpharma Agreements provided only for an undertaking by those generic manufacturers to withdraw their challenge to GSK’s patent and to refrain from entering the market with their products during the agreed period. On the other hand, no provision was made that, after that period, those manufacturers could enter the market without facing further opposition from GSK.

137. Likewise, it is not apparent that the undertaking to withdraw the challenge to GSK’s patent and not to enter the market on the one hand, and the amount of the payments on the other hand, were linked in any way whatsoever to the risks of losses which could be suffered either by GSK if the generics entered the market unlawfully, or by the generic manufacturers if they refrained from entering the market and that was subsequently found to be for no good reason, owing to the invalidity of the patent or to the fact that the generic products did not infringe it.

138. Yet it cannot be claimed, on the pretext that it is concluded as an agreement to settle an actual patent dispute, that an agreement may avoid being categorised as a restriction of competition by object if its purpose is not, in reality, to settle the ongoing patent dispute, but only to defer that dispute in time by means of a payment inducing the patent holder’s competitor not to compete during the term of the agreement.

139. It follows that nor can the applicants in the main proceedings argue that prohibiting that type of agreement deprives the parties to the patent proceedings of any possibility of reaching a settlement. Such settlements continue to be possible if they are genuinely intended to settle the disputes at issue and reflect a compromise between the parties reached following an independent assessment of the competitive situation by them. That is confirmed, furthermore, by an empirical study from the US cited by the CAT, ( 106 ) which revealed that after proceedings were brought by the competition authorities against agreements such as those at issue in the present case, the number of agreements of that type dramatically declined, although the overall number of patent settlements did not decline.

140. Finally, it follows from all the foregoing that nor can Alpharma’s argument succeed, according to which the restrictions imposed by the agreements at issue should be regarded as restrictions which are ancillary to the settlement of patent disputes. Thus, it is true that it is apparent from the case-law that the prohibition laid down by Article 101 TFEU does not apply to a restriction of competition necessary for the implementation of an operation which is not itself caught by that prohibition. ( 107 ) However, in the present case, it does not appear that there is a legitimate operation for the implementation of which the agreed restrictions were necessary, since those restrictions were precisely themselves the subject matter of the agreements at issue.

(iv) Conclusion

141. It follows from the foregoing that an agreement to settle court proceedings, the outcome of which is uncertain, relating to an actual dispute concerning the validity of a patent or the question of whether a generic product infringes that patent, under which the patent holder gives an undertaking in favour of a generic manufacturer to make a value transfer in a sufficient amount to induce that manufacturer to abandon its efforts to enter the market independently, constitutes a restriction of competition by object if it is found that the sole consideration for that value transfer is that the generic manufacturer refrains from entering the market with its product and from continuing to challenge the patent during the agreed period, which it is for the referring court to review. That also applies where the restrictions imposed by such an agreement do not go beyond the scope and unexpired period of the patent and where the amount transferred to the generic manufacturer is lower than the profit it could have expected if it had entered the market independently.

(2) Question 5

142. The fifth question referred for a preliminary ruling by the CAT concerns the assessment, in the light of Article 101 TFEU, of the benefits afforded to consumers by the GUK and Alpharma Agreements.

143. In the present case, according to the CAT, those agreements have brought certain benefits to consumers owing to the fact that they provided for the supply by GSK of significant but limited volumes of authorised generic paroxetine to the generic manufacturers, which those manufacturers distributed at a lower price than that charged by GSK for Seroxat, which led to a slight reduction in the average price of paroxetine. ( 108 )

144. Moreover, according to the CAT, the replacement of parallel imports of paroxetine by the authorised generic paroxetine of IVAX, GUK and Alpharma ( 109 ) afforded some limited benefits to consumers in terms of quality, since the parallel imports had been subject to foreign language over-stickering, which patients found unattractive. ( 110 ) On the other hand, as the CAT stated, the reclassification of paroxetine in the NHS Drug Tariff and the corresponding reduction in the costs incurred by the latter were due solely to the IVAX Agreement. ( 111 )

145. Against that background, the CAT is asking