Source: EURLEX
Language: en
Format: md

OPINION OF ADVOCATE GENERAL

RANTOS

delivered on 27 March 2025 ([1](#Footnote1))

**Case C**‑**2/24 P**

**Teva Pharmaceutical Industries Ltd,**

**Cephalon Inc.**

**v**

**European Commission**

( Appeal – Competition – Agreements, decisions and concerted practices – Modafinil market – Patent dispute settlement agreement aimed at delaying the entry onto the market of a cheaper version of modafinil – Decision infringing Article 101 TFEU and Article 53 of the EEA Agreement – Action for annulment – Restriction by object – Restriction by effect – Assessment tests )

  
  
  
  

I.      **Introduction**

1.        In their appeal, Teva Pharmaceutical Industries Ltd (‘Teva’) and Cephalon Inc. (jointly, the ‘appellants’), request that the judgment of the General Court of the European Union of 18 October 2023, *Teva Pharmaceutical Industries and Cephalon* v *Commission* (T‑74/21, the ‘judgment under appeal’, EU:T:2023:651), rejecting their application, be set aside. That application sought, principally, the annulment of Decision C(2020) 8153 final of the European Commission of 26 November 2020, relating to a proceeding under Article 101 TFEU and Article 53 of the EEA Agreement (Case AT.39686-CEPHALON), (the ‘contested decision’), ([2](#Footnote2)) by which it held that the appellants had infringed Article 101 TFEU and Article 53 of the EEA Agreement by participating in a settlement agreement, the purpose of which was to resolve patents litigation between them, and also, in the alternative, the cancellation or reduction of the fines imposed.

2.        This case arises from a settlement agreement (the ‘settlement agreement’) concluded between the appellants, two pharmaceutical companies, pursuant to which one of them, Teva, undertook not to put a generic product on the modafinil markets at issue, not in return for direct payments, but for a series of commercial transactions listed in the agreement. In the contested decision, the Commission held that the agreement constituted a restriction of competition both by object and by effect within the meaning of Article 101(1) TFEU and Article 53 of the EEA Agreement. Cephalon and Teva were consequently both ordered to pay fines of EUR 30 480 000 and EUR 30 000 000 respectively.

3.        This case is a continuation of the cases that resulted in the judgments in *Generics (UK) and Others**,*([3](#Footnote3))*Lundbeck* ([4](#Footnote4)) *and* *Servier*, ([5](#Footnote5))concerning the characterisation of settlement agreements on patents as restrictions of competition by object within the meaning of Article 101 TFEU. It offers the Court the opportunity to clarify the criteria that apply for establishing a restriction of competition, within the meaning of that provision, in the context of a settlement agreement in a patents dispute that was concluded between a manufacturer of an originator medicine which owns secondary patents associated with a pharmaceutical product, and a manufacturer of a generic version of the medicine.

II.    **Background to the dispute**

4.        The background to the dispute is set out in paragraphs 2 to 43 of the judgment under appeal and, for the purposes of this Opinion, may be summarised as follows.

A.      **Operators at issue**

5.        Cephalon is a United States-based biopharmaceutical company supplying both originator and generic pharmaceutical products worldwide. Its principal activities include research and development and bringing medicines to the market, and focus in particular on central nervous system disorders.

6.        Teva is a multinational pharmaceutical company which is active in the development, production and marketing of generic medicines as well as innovative and speciality pharmaceuticals, active pharmaceutical ingredients and over-the-counter products.

7.        In October 2011, once the Commission approved the notified concentration, by Decision C(2011) 7435 final (Case COMP/M. 6258 –Teva/Cephalon), of 13 October 2011, ([6](#Footnote6)) adopted pursuant to Article 6(1)(b) of Regulation (EC) No 139/2004 ([7](#Footnote7)) (the ‘concentration decision’), Cephalon was acquired by Teva.

B.      **Product and patents at issue**

8.        The product concerned in the present case relates to medicines containing the active pharmaceutical ingredient (‘API’) known as modafinil. Modafinil was discovered in 1976 by Laboratoire Lafon, a French pharmaceutical company. It is a long-acting wake-promoting agent used for the treatment of certain sleep disorders.

9.        In 1993, Cephalon obtained exclusive rights to modafinil and, during 1997, it started selling it in the United Kingdom under the brand name Provigil. In the course of 2005, it was selling modafinil in several countries in the European Economic Area (EEA).

10.      With regard to the EEA, Cephalon’s various national compound patents for modafinil API expired during 2003, while data protection in relation to the active API expired during 2005. Although the patents for modafinil had expired, Cephalon still owned particle-size secondary patents and other modafinil-related patents with an expiry date in 2015 in the EEA.

11.      Provigil was the most significant product in Cephalon’s portfolio in terms of sales. Taking account of the imminent entry onto the market of generic products and in order to protect its business, Cephalon also worked on a second-generation product (named Nuvigil), based on modafinil API, which it planned to place on the market to replace Provigil from 2006 onwards, initially in the United States and subsequently within the EEA. In addition, Cephalon had planned to launch another modafinil-based medicine, named Sparlon. Ultimately, Cephalon did not launch Nuvigil or Sparlon within the EEA.

12.      When, at the end of 2002, four generic companies (including Teva) applied for regulatory authorisation to market their generic modafinil products in the United States, Cephalon initiated patent infringement proceedings against them in the United States. Teva launched its generic modafinil product in the United Kingdom in June 2005.

13.      On 6 July 2005, following an exchange of letters, Cephalon initiated court proceedings in relation to patents against Teva before the High Court of Justice (England & Wales) (United Kingdom) and applied for an interim injunction to prevent Teva from selling its generic modafinil product in the United Kingdom. Teva then filed a counterclaim for revocation. Prior to the hearing on the request for an interim injunction scheduled for 11 July 2005, Teva agreed to stop selling generic modafinil products in the United Kingdom. In return, Cephalon agreed to provide a bond of 2.1 million British pounds (GBP) (approximately EUR 3.07 million) in the event that Teva succeeded in the court proceedings and was entitled to claim damages for foregone profit suffered.

14.      The negotiations for a settlement agreement started at the end of November 2005.

C.      **The settlement agreement**

15.      On 8 December 2005, Cephalon and Teva concluded the settlement agreement, which was also concluded for their affiliates, and became effective on 4 December 2005.

16.      The agreement stipulated, inter alia, that, under Article 2, Teva undertook not to enter the market independently and not to compete with Cephalon in the modafinil market (‘the non-compete clause’) nor challenge Cephalon’s modafinil patent rights (‘the non-challenge clause’) (together ‘the restrictive clauses’).

17.      Articles 2.2 to 2.6 provided for a package of transactions relating to the following: a licence from Teva to Cephalon in respect of Teva’s intellectual property rights; a licence from Cephalon to Teva to use the data (known as CEP-1347) co-developed by Cephalon in (the) connection with studies on the treatment of Parkinson’s disease; the supply by Teva to Cephalon of the modafinil API; payments from Cephalon to Teva for avoided litigation costs; and the distribution by Teva of Cephalon’s products in the United Kingdom.

18.      Article 3 of the settlement agreement also provided for generic rights to be granted to Teva. Under that article, Cephalon granted to Teva a non-exclusive licence to launch its generic modafinil product, including in the EEA, from 2012 (or earlier, in the event that any other entity were to enter the market with a generic modafinil product).

19.      In accordance with Article 4 of that agreement, Teva and Cephalon committed to immediately ending the modafinil litigation between them in the United States and the United Kingdom.

20.      Finally, the settlement agreement also included the amounts or royalties involved in the various transactions referred to in points 16 and 18 of this Opinion.

III. **The contested decision**

21.      On 26 November 2020, the Commission adopted the contested decision, by which it found that the appellants had infringed Article 101 TFEU and Article 53 of the EEA Agreement by participating in the settlement agreement in the pharmaceutical sector in exchange for a reverse payment. The infringement concerned Austria, Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom and lasted from 4 December 2005 to 12 October 2011, except for Bulgaria and Romania, where the infringement started on 1 January 2007, and Hungary, where the infringement ended on 14 June 2011. ([8](#Footnote8)) For this infringement, the Commission imposed fines on Cephalon and Teva amounting to EUR 30 480 000 and EUR 30 000 000 respectively. ([9](#Footnote9))

IV.    **The procedure before the General Court and the judgment under appeal**

22.      By application lodged at the Registry of the General Court on 5 February 2021, the appellants sought the annulment of the contested decision and, in the alternative, the cancellation or reduction of the amount of the fines imposed.

23.      In support of their action, the appellants put forward four pleas in law. According to the first plea, the Commission erred in law and in fact, in so far as it characterised the settlement agreement as a ‘restriction of competition by object’. According to the second plea, the Commission erred in law and in fact in so far as it characterised the agreement as a ‘restriction of competition by effect’; the third plea, raised in the alternative, is based on an erroneous application of Article 101(3) TFEU, and lastly, raised in the alternative also, the appellants seek cancellation of the fines imposed on them [or, at least, substantial partial cancellation of the fine imposed on Teva].

24.      In the judgment under appeal, first of all the General Court examined the first plea that the Commission erred in characterising the settlement agreement as a ‘restriction of competition by object’. ([10](#Footnote10)) First, it dismissed the complaints regarding failure to apply the appropriate legal test for identifying a ‘restriction of competition by object’. ([11](#Footnote11)) Second, the General Court dismissed the complaints regarding the existence of a plausible explanation for the transactions concluded alongside the agreement other than serving solely as consideration for the restrictive clauses. ([12](#Footnote12)) Third, the General Court dismissed the complaints regarding the test established by the judgment in *Generics (UK)* concerning the existence of pro-competitive effects that are demonstrated, relevant, specifically related to the agreement concerned and sufficiently significant. ([13](#Footnote13)) Fourth, the General Court dismissed the complaints that the Commission allegedly erred in its assessment of the economic and legal context of the settlement agreement. ([14](#Footnote14))

25.      The General Court then dismissed the second plea alleging that the Commission erred in so far as it characterised the settlement agreement as a ‘restriction of competition by effect’ in that it relied solely on its potential effects. ([15](#Footnote15))

26.      Subsequently, the General Court dismissed the third and fourth pleas, which were included for the sake of completeness by the appellants. It thus dismissed the third plea, alleging an error of assessment made by the Commission in the contested decision, in that the decision finds that the agreement itself failed to fulfil the conditions for exemption laid down in Article 101(3) TFEU. ([16](#Footnote16)) It also dismissed the fourth plea, alleging that when imposing the fines the Commission breached the principles of legal certainty, non-retroactivity and the protection of legitimate expectations as well as the principles *nullum crimen sine lege* and *nulla poena sine lege*. ([17](#Footnote17))

27.      Lastly, the General Court dismissed the claim by the appellants for the cancellation or reduction of the amounts of the fines imposed in the contested decision. ([18](#Footnote18))

28.      In the light of these findings, the General Court dismissed the applicants’ action and ordered them to pay the costs of the proceedings.

V.      **Procedure before the Court and forms of order sought**

29.      In their appeal, the appellants request the Court to grant the appeal and declare the action admissible; set aside the judgment under appeal; refer the case back to the General Court for reconsideration, unless the Court considers that it is sufficiently well informed to annul the contested decision; and, to order the Commission to pay the costs, including the costs incurred by the appellants before the Court and before the General Court. For its part, the Commission asks the Court to dismiss the appeal and order the appellants to pay the costs.

VI.    **Analysis**

30.      In support of their appeal, the appellants raise two grounds of appeal, which allege, respectively, an error of law by the General Court, first in the application of the test to establish the existence of a restriction of competition by object in the context of a settlement agreement relating to pharmaceutical patents, within the meaning of the case-law arising from the judgment in *Generics (UK)*  (A) and second in the context of examining the anti-competitive effects of the settlement agreement (B).

A.      **Regarding the first ground of appeal**

31.      In their first ground of appeal which is divided into two parts, the appellants maintain that the General Court erroneously applied the legal test deriving from the judgment in *Generics (UK)* which establishes whether there is a restriction of competition by object in the context of a settlement agreement.

32.      The *first part* concerns the interpretation by the General Court of the first part of the test laid down by the judgment and, more specifically, the question as to whether a transfer of value provided for in a settlement agreement can be explained solely by the interest of the parties not to engage in competition on the merits. ([19](#Footnote19))*The second part*, meanwhile, focuses on the second part of this test, and in particular on the circumstances under which such an agreement may create proven pro-competitive effects capable of giving rise to a reasonable doubt that it causes a sufficient degree of harm to competition. ([20](#Footnote20))

33.      To help with analysing this ground of appeal, it seems to me to be useful to recall the criteria established by the case-law of the Court in terms of characterising *‘pay for delay’* agreements as ‘restriction of competition by object’, and, in particular, the principles arising from the judgment in *Generics (UK)*, which is at the heart of the present case, as well as the subsequent case-law of the Court on the subject.

1.      ***Characterising pay for delay agreements as ‘restriction of competition by object’***

34.      As a preliminary point, I would like to recall that, according to the settled case-law of the Court, the concept of ‘restriction of competition by object’ can be applied only to certain concerted practices between undertakings that reveal, in themselves, a sufficient degree of harm with regard to competition which support a finding that there is no need to examine their effects. ([21](#Footnote21))

35.      More specifically, as regards settlement agreements, such as that in the present case, in the context of disputes over a process patent for the manufacture of an API that is in the public domain and concluded between a manufacturer of originator medicines and a manufacturer of generic medicines, which had the effect of delaying the entry of generic medicines onto the market in return for pecuniary or non-pecuniary transfers of value from the former to the latter, the Court has held that such agreements cannot be considered, in all cases, to be ‘restrictions by object’ within the meaning of Article 101(1) TFEU. ([22](#Footnote22))

36.      In that regard, it should be pointed out that, in accordance with the aforementioned case-law, a manufacturer of generic medicines, having assessed its chances of success in the court proceedings between it and the manufacturer of the originator medicine concerned, may decide not to enter the market in question and to conclude a settlement agreement with that manufacturer with regard to those proceedings. Such an agreement cannot be considered, in all cases, to be a restriction by object within the meaning of Article 101(1) TFEU. The fact that such an agreement involves transfers of value by the manufacturer of originator medicines in favour of a manufacturer of generic medicines does not constitute a sufficient ground for characterising it as a ‘restriction of competition by object’, since those transfers of values may prove to be justified. That may be the case where the manufacturer of generic medicines receives from the manufacturer of the originator medicine sums that correspond in fact to compensation for the costs of or disruption caused by the litigation between them, or that correspond to remuneration for the actual supply of goods or services to the manufacturer of the originator medicines. ([23](#Footnote23))

37.      Therefore, where a settlement agreement relating to litigation concerning the validity of a patent between a manufacturer of generic medicines and a manufacturer of originator medicines, which is the holder of that patent, involves transfers of value by the manufacturer of originator medicines in favour of the manufacturer of generic medicines, it is important to ascertain, first, whether the net gain from those transfers may be fully justified, as envisaged in the preceding point, by the need to compensate for the costs of or disruption caused by that litigation, such as the expenses and fees of the latter manufacturer’s advisers, or by the need to provide remuneration for the actual and proven supply of goods or services by that manufacturer to the manufacturer of the originator medicine. ([24](#Footnote24)) The settlement of such a dispute implies that the manufacturer of generic medicines recognises the validity of the patent in question, since it waives its right to challenge it. It follows that it is only where a ‘reverse’ payment, by the manufacturer of originator medicines to the manufacturer of generic medicines, is by way of the reimbursement of such costs or of remuneration for the supply of such goods or services that it can be regarded as consistent with such recognition and, therefore, as capable of being justified in terms of competition. ([25](#Footnote25))

38.      In the event that this net gain from the transfers is not fully justified by such a need, it must be ascertained, second, whether, in the absence of such justification, those transfers can have no explanation other than the commercial interest of those manufacturers of medicines not to engage in competition on the merits. In the context of that examination, it is necessary to determine whether the net gain, including any justified costs, is sufficiently large to actually act as an incentive for the manufacturer of generic medicines to refrain from entering the market concerned. There is no requirement for that net gain to necessarily be greater than the profits which it would have made if it had been successful in the patent proceedings. ([26](#Footnote26))

39.      Taking into account the complexity of settlement agreements, the degree of economic harmfulness that they have for the proper functioning of competition in the market concerned cannot be assessed in an abstract way and involves a detailed analysis, based on objective consideration not only of the agreement but also of its objectives and of the economic and legal context of which it forms part. ([27](#Footnote27))

2.      ***The first part of the first ground of appeal alleging incorrect application of the first part of the test established by the judgment in*** **Generics (UK)**

40.      In support of the first part of the first ground of appeal, the appellants challenge paragraphs 45 to 47 of the judgment under appeal and, in particular, the legal test used by the General Court to characterise non-compete and non-challenge commitments made in the context of the settlement agreement as ‘restrictions of competition by object’.

41.      According to them, the judgment under appeal suffered from legal flaws in three respects. First, in their view the legal test referred to in paragraphs 46 and 47 of the judgment is intrinsically counterfactual and corresponds to what would be required for an assessment of a restriction of competition by effect, not a restriction by object, which is contrary to the judgment in *Generics (UK)*  (subparagraph (a)). Second, they claim that in paragraph 45 of the judgment the General Court formulated a legal standard that is stricter than the test laid down in the judgment in *Generics (UK)*  (subparagraph (b)). Third and finally, they maintain that the judgment approved a test that is impossible for the parties to demonstrate, which is in direct contradiction with the judgment in *Generics (UK)* (subparagraph (c)).

(a)    ***The counterfactual scenario adopted by the General Court***

(1)    *Summary of the arguments of the parties*

42.      First, the appellants criticise the General Court for considering, in paragraph 46 of the judgment under appeal, that, in order ‘to determine whether the only plausible explanation for each of the commercial transactions was to induce Teva to accept the restrictive clauses and thus to refrain from competing with Cephalon on the merits or whether those transactions would have been concluded in any event under normal market conditions, the Commission had to compare what had actually happened with what would have happened absent the restrictive clauses’. They claim that the test at issue, as laid out by the General Court, would entail a counterfactual analysis falling within the assessment of restrictions of competition by effect. On the same grounds, the appellants maintain that the conclusion in paragraph 47 of the judgment, according to which ‘the legal test applied by the Commission does not amount to a counterfactual analysis falling within the assessment of agreements as restrictions by effect’ erred in law.

43.      Second, their view is that while paragraph 46 of the judgment refers to the non-compete and non-challenge clauses, as a discrete part of the settlement agreement (*‘absent the restrictive clauses’),* the test approved by the General Court would actually require an assessment, for each commercial transaction, of whether it would have been concluded at all, or on the same terms, in the *absence of the settlement agreement as a whole.* Therefore, according to the appellants, by establishing that test, the General Court erred in law by confusing the assessment of restriction of competition by object with restriction by effect.

(2)    *Assessment*

(i)    *The relevance of the counterfactual scenario in the context of the analysis of the anti-competitive object*

44.      As a preliminary point, I would like to recall that settlement agreements whereby a manufacturer of generic medicines that is seeking to enter a market recognises, at least temporarily, the validity of a patent held by a manufacturer of originator medicines and gives a commitment, as a result, no longer to challenge that patent and not to enter the market concerned are liable to have effects that restrict competition, since challenges to the validity and scope of a patent are part of normal competition in the sectors where there exist exclusive rights in relation to technology. ([28](#Footnote28))

45.      Such agreements should not, however, be considered, in all cases, as a restriction of competition by object, within the meaning of Article 101(1) TFEU, in so far as transfers of value provided for in the context of those agreements as well as non-compete and non-challenge commitments may prove to be justified. ([29](#Footnote29)) Therefore, characterisation as restriction of competition by object cannot solely be held when restrictions of competition resulting from non-compete and non-challenge clauses provided for in settlement agreements are not based on the recognition of the validity of the patents owned by the manufacturer of originator medicines, but on a transfer of value from that manufacturer to the manufacturer of generic medicines in question constituting an inducement, for that manufacturer, not to engage in competition on the merits. ([30](#Footnote30))

46.      It follows that, in order to determine whether an agreement may be characterised as a ‘restriction of competition by object’, it is necessary, not to analyse each of its clauses separately, but to assess whether that agreement, taken as a whole, reveals a degree of economic harm to the proper functioning of competition in the market concerned. ([31](#Footnote31))

47.      Having clarified this, it is now appropriate to examine whether the criteria identified by the case-law of the Court, highlighted in the previous paragraphs of this Opinion, are fulfilled in the present case, and therefore whether, in the context of analysing restrictions of competition by object, the General Court was correct in finding in paragraph 46 of the judgment under appeal that, for the purpose of conducting that assessment, it needed to analyse whether the commercial transactions in the agreement would have been concluded or concluded on the same terms (‘absent the restrictive clauses’).

48.      For the reasons that I will explain in the following paragraphs, my view is that the approach taken by the General Court is not contrary to the method established by the judgment in *Generics (UK)* and the more recent case-law of the Court on the subject. ([32](#Footnote32))

49.      I would firstly like to point out that, in so far as the deciding test for characterising a settlement agreement as a ‘restriction of competition by object’ is to establish that the *only consideration for the value transfer* received by the manufacturer of generic medicines from the manufacturer of originator medicines consists of *abstaining from entering the market*, ([33](#Footnote33)) the General Court cannot be criticised for having focused its examinations on the non-compete and non-challenge commitments in the restrictive clauses, which in practice involve *abstaining from entering the market.* Moreover, the General Court did not limit itself to a formalist and abstract analysis of the restrictive clauses, but sought to determine, following a detailed analysis and an overall assessment of the settlement agreement, whether the insertion of these clauses in the agreement (and therefore in the commitment by Teva to abstain from entering the generic medicines market independently) constituted the consideration for the transfer of value conducted by Cephalon to Teva through commercial transactions. ([34](#Footnote34))

50.      It should be noted in that regard that, through the approach taken, the General Court actually, as shown by paragraphs 43 to 46 of the judgment under appeal, aimed to establish, on the basis of a hypothetical scenario, whether the agreements concluded between the appellants deviated from the normal conditions of the market by focusing, in particular, on the objectives and the economic and legal context that the agreements were part of at the time they were concluded, in order to determine the incentive effect of the transfers of value provided for by those agreements. ([35](#Footnote35)) The case-law of the court does not exclude in itself that counterfactual elements may be taken into account to support a finding of restriction of competition by object. ([36](#Footnote36))

51.      Second, I note that while the analysis conducted by the General Court in paragraph 46 of the judgment under appeal, consisting of examining the connected transactions in the absence of restrictive clauses, implies to a certain extent an analysis of a hypothetical situation, it is sufficiently clear from paragraphs 43 to 47 of the judgment that it was conducted in order to verify whether the clauses constituted an incentive for Teva to refrain from competing with Cephalon on the merits in order to determine the objective seriousness of the practice concerned. However, such an assessment must not be confused, as the General Court rightly points out in paragraphs 47 to 50 of the judgment, with the counterfactual analysis arising from the assessment of the agreements as restriction of competition by effect. ([37](#Footnote37))

52.      Whatever the name given to this analysis, the fact that it involves a hypothetical or counterfactual element does not in itself mean that it corresponds to what is known as the ‘counterfactual’ method, in which a hypothetical scenario is used to reconstruct the competitive situation that would have prevailed on the market in the absence of the settlement agreement in order to assess the effects arising from it for competition. ([38](#Footnote38)) It is also clear that the assessment conducted by the General Court to identify whether there was restriction of competition by object differs from the methodology used to analyse the anti-competitive effects of the settlement agreement described in paragraphs 221 to 223 and 230 to 254 of the judgment under appeal. ([39](#Footnote39))

(ii) *The ‘counterfactual’ scenario held by the General Court*

53.      According to the appellants, the test established by the General Court in paragraph 46 of the judgment under appeal requires assessing, for each commercial transaction, whether it would have been concluded at all or on the same terms ‘absent the settlement agreement’ as a whole and not ‘absent the restrictive clauses’ as stated in that paragraph of the judgment under appeal. In so far as these clauses are an integral part of the settlement agreement, it would not be possible, contrary to what is required by the test established by the General Court, to examine them in isolation.

54.      I would like to point out immediately that, with this argument, on which a large proportion of the first part of the first plea is based, it appears to me that the appellants are actually aiming to demonstrate that the test laid down by the General Court corresponds to the test arising from the judgment in *Generics (UK)* for examining the existence of a restriction of competition by effect and could not therefore be used to establish a restriction by object without resulting in an error of law.

55.      In my view, such an argument is based on an erroneous reading of the judgment under appeal and cannot be accepted.

56.      In that regard, I think it is necessary to highlight the fact that, as stated in paragraph 43 of the judgment under appeal, the General Court intended, in accordance with the case-law of the Court, to proceed to an *overall assessment* of the interests and incentives of the parties concerned, in order to ascertain whether the *commercial transactions contained in the settlement agreement* could have any explanation other than the commercial interest of the appellants not to engage in competition on the merits.

57.      Nevertheless, such an analysis presupposes, as was rightly observed by the General Court in paragraphs 50 and 56 of the judgment under appeal, analysing the commercial transactions and the settlement agreement together in the event that those agreements form part of a single contractual framework. Indeed, taking into account the contractual links between the settlement agreement and the commercial transactions which in practice render them indissociable, it is difficult to conceive how they could be interpreted individually. This is even more the case where the objective of this analysis consists of, as shown in point 50 of this Opinion, identifying the incentive effect of transfers of value and determining whether the insertion of the restrictive clauses in the settlement agreement (and therefore the commitment by Teva to refrain from entering the market or delay its entry) represented the consideration for the transfers of value made by Cephalon through the commercial transactions. ([40](#Footnote40))

58.      In addition, contrary to what the appellants claim, no element of the judgment under appeal indicates that the General Court did not conduct the analysis described in the previous point of this Opinion, ([41](#Footnote41)) as paragraphs 61 and 162 of the judgment under appeal demonstrate the contrary, ([42](#Footnote42)) or that in practice it required a demonstration of what would have happened in *the absence of the settlement agreement* as a whole. ([43](#Footnote43))

(b)    ***Regarding the appellants’ argument relating to the use by the General Court of a stricter legal rule than that established in the judgment in*** **Generics (UK)**

59.      The appellants point out that, according to the judgment in *Generics (UK)*, a settlement agreement constitutes an agreement that has as its object the prevention, restriction or distortion of competition if it is clear from all the information available that the transfers of value *can* have no other explanation than the commercial interest of the parties to that agreement not to engage in competition on the merits. ([44](#Footnote44)) Moreover, according to them, the Court also considers that it is sufficient for that explanation to be ‘plausible’ for the arrangements to fall outside the definition of an agreement that restricts competition by object. ([45](#Footnote45)) In their view, in paragraph 45 of the judgment under appeal, the General Court ruled that the Commission is required to ascertain whether the commercial transactions covered by the settlement agreement *would* have also been concluded, on equally favourable terms, in the absence of the restrictive clauses. They claim that the General Court not only distorted the test laid down in the previous case-law of the Court ([46](#Footnote46)) confirmed by the judgment in *Generics (UK)**,* but also reversed the burden of proof in contradiction of that judgment. ([47](#Footnote47))

60.      For the following reasons, my view is that the complaint made by the appellants cannot succeed.

61.      As it is clear in paragraph 53 of the judgment under appeal, which is not contested by the appellants, the General Court, by citing paragraphs 83 and 87 of the judgment in *Generics (UK)*, correctly established the principle that it is for the Commission to demonstrate that, in the relevant context, the non-compete and non-challenge clauses concluded in the context of the settlement agreement gave rise to an agreement that restricts competition by object and therefore to demonstrate that it is plain from the examination of that agreement that the transfers of value provided for therein cannot have any explanation other than the commercial interest of both the holder of the patent at issue and the party allegedly infringing the patent not to engage in competition on the merits.

62.      The appellants maintained, at first instance, that the commercial transactions in the settlement agreement had a plausible explanation other than solely serving as consideration for the restrictive clauses. The General Court therefore ascertained, as shown in paragraph 61 of the judgment under appeal, whether, for each of the commercial transactions provided for in the settlement agreement, the Commission erred in its assessment by concluding that the purpose of that transaction was to serve as a transfer of value from Cephalon to Teva in consideration for Teva’s commitment not to independently enter the market for generic medicines and not to compete with Cephalon on modafinil.

63.      After conducting a detailed analysis of the contested decision, the General Court came to the conclusion, in paragraph 162 of the judgment under appeal, not contested by the appellants, that the Commission had applied the appropriate legal test by establishing that each of the commercial transactions provided for in the settlement agreement had no other purpose than to increase the level of the overall transfer of value to Teva under the settlement agreement with a view to inducing it to agree to the restrictive clauses. ([48](#Footnote48))

64.      It follows that, contrary to the appellants’ submissions, it is not clear from the analysis conducted by the General Court in the judgment under appeal that it required that the appellants show another explanation to be certain, but rather that the explanations put forward by them were not considered as being plausible in nature. The General Court did not therefore reverse the burden of proof and did not commit an error in law by ruling that the Commission had duly proven, as required by the judgment in *Generics (UK)*, that the transfers of value conducted in the context of the associated transactions could only be explained by the commercial interests of Teva and Cephalon in not engaging in competition on the merits.

(c)    ***The appellants’ argument concerning the General Court establishing a test that was impossible for the parties to demonstrate***

(1)    *Summary of the arguments of the parties*

65.      The appellants complain that the General Court did not correctly apply the test established in paragraph 43 of the judgment under appeal, in order to ascertain whether the commercial transactions contained in a settlement agreement could have any explanation other than the commercial interest of both the patent holder and the party allegedly infringing the patent not to engage in competition on the merits. In this regard, they point out that, at the time when the settlement agreement was concluded, they were involved in global litigation relating to Cephalon patents protecting modafinil, and that, ‘in the absence of the settlement agreement’ they would have continued with their litigation. In that situation, Cephalon would have had no interests in concluding any commercial transaction with Teva in relation to the subject of the litigation and would have had only limited interest in concluding any sort of agreement, as the Commission itself acknowledged in paragraph 794 of the contested decision.

66.      The appellants also criticise the General Court for having established a test that is impossible to meet in practice. According to them, this test, as it was applied by the General Court, necessarily precluded the conclusion of commercial transactions concomitantly with a settlement agreement, which they claim is in direct contradiction with the judgment in *Generics (UK)*.

67.      Finally, they submit that the relevant question to be asked in this context was in this case whether, assuming Teva and Cephalon had settled their litigation, there was a plausible explanation for each of the commercial transactions.

(2)    *Assessment*

68.      I would like to point out, first, that this argument is based partly on the argument, which has already been analysed in points 56 to 58 of this Opinion, that the General Court envisaged examining the commercial transactions ‘in the absence of the settlement agreement’. In so far as, as explained in the aforementioned paragraphs, that argument is based on an erroneous reading of the judgment under appeal, there are grounds to dismiss it.

69.      Second, it should be clarified that the ‘overall assessment’ that the General Court was bound to conduct did not concern the question as to whether the appellants would have concluded a given commercial transaction independently of the settlement agreement, but aimed to determine whether the *commercial transactions contained in the settlement agreement* could have any explanation other than the commercial interest of the appellants not to engage in competition on the merits, as clearly shown in paragraph 43 of the judgment under appeal. This is precisely the analysis that the General Court conducted without deviating from the test laid out in paragraph 43, as shown by paragraphs 61 and 162 of the judgment under appeal. ([49](#Footnote49))

70.      Third, contrary to the appellants’ submissions, it is not clear from the judgment under appeal that the General Court precluded the conclusion of commercial transactions concomitantly with a settlement agreement. To the contrary, the General Court did recognise this possibility by analysing the package of agreements concluded between the parties in the context of the settlement agreement for their litigation. ([50](#Footnote50))

71.      Fourth, I note that the relevant question, in the present case, to establish a restriction of competition by object, is whether the commercial transactions concluded in the context of a settlement agreement can be explained in a plausible manner, in the sense that their aims must not be to restrict or distort competition on the market by inducing a potential competitor not to enter the market in exchange for an unjustified transfer of value. In the present case, while it is not clear based on reading paragraphs 45 and 46 of the judgment under appeal in isolation, it can be established that this was the analysis conducted by the General Court, as shown by paragraphs 61 and 162 of the judgment. ([51](#Footnote51))

72.      In the light of the above, I consider that the General Court did not err in law and that the first part of the first plea in law of the appeal must therefore be dismissed.

3.      ***The second part of the first ground of appeal***

73.      In the second part of the first ground of appeal, the appellants maintain that the judgment under appeal erred in law on the basis of its insufficient and contradictory statement of reasons relating to the application of the second prong of the test set out in the judgment in *Generics (UK)* which concerns taking into account pro-competitive factors when establishing a restriction of competition by object. ([52](#Footnote52))

74.      I would like to clarify, as a preliminary point, that the appellants do not call into question the entirety of the statement of reasons set out by the General Court when dismissing the third part of their first plea at first instance [relating to the second prong of the test established by the judgment in *Generics (UK)**].*([53](#Footnote53)) More specifically, in the context of the second part of the first plea, they only contest the statement of reasons set out by the General Court in paragraphs 182 and 183 of the judgment under appeal when dismissing the arguments that they had put forward to demonstrate that the pro-competitive effects arising from the settlement agreement clearly arose from the merger decision.

75.      Before conducting an analysis of the merits of this part, on a preliminary basis it is appropriate to dismiss the Commission’s allegations, expressed in its rejoinder, that the arguments put forward by the appellants concerning the contradictory nature of the General Court’s reasoning should be declared inadmissible, in so far as they are ‘new’. The contradictory nature of this statement of reasons has already been raised in the context of the appeal and the arguments in the reply related to this aspect of the second part only respond to those expressed by the Commission in its response.

76.      It is also important, on a preliminary basis, to look into the effectiveness of that part of the plea. Even presuming that the statement of reasons in paragraphs 182 and 183 of the judgment under appeal is not sufficient or is contradictory, such a finding could not, in my view, result in that judgment being set aside. As the Commission has stated, in the context of that part of the plea, the appellants have only challenged one element of the statement of reasons on which the General Court relied to dismiss the third part of the first plea, which was raised at first instance. More specifically, the appellants do not contest the reasoning used by the General Court in paragraphs 177 to 180 and 186 to 190 of the judgment, which could be sufficient, in itself, to dismiss the second part of the first plea. It is clear from the analysis conducted by the General Court in the aforementioned paragraphs that it examined and dismissed the arguments based on the mainly pro-competitive nature of the settlement agreement, having ruled that the entry of Teva into the modafinil markets should be characterised ‘as a delayed, controlled and limited entry into those markets, rather than an early entry’ as the appellants had maintained ([54](#Footnote54)) and that establishing the existence of a restriction of competition by object could not be rebutted due to the alleged ancillary nature of the restrictive clauses. ([55](#Footnote55)) It has to be said, in this regard, that while at least in part it concerns points of law that could be contested before the Court at the appeal stage, this assessment by the General Court is not called into question by the appellants in this appeal.

77.      It follows that the second part of the first plea in law must be held to be ineffective.

78.      However, assuming that the Court considers that the effectiveness of this part is not called into question by the above considerations, in the following points I will analyse the merits of that part, in the alternative.

79.      In that regard, I would emphasise that, although, in the judgment in *Generics (UK)*, the Court ruled that settlement agreements that involve pro-competitive effects that give rise to reasonable doubt as to whether they are sufficiently harmful to competition cannot constitute restrictions by object, ([56](#Footnote56)) this position has been clarified in its recent judgments in *European Superleague Company*([57](#Footnote57))and *Servier*. It is clear from these judgments that it is not necessary to take into account any positive or pro-competitive effects of conduct in order to determine whether it should be characterised as a ‘restriction of competition by object’ under Article 101(1) TFEU, including in the context of any examination of whether the conduct at issue reveals the degree of harm required in order to be characterised as such. ([58](#Footnote58))

80.      Having made that clarification, it is appropriate to examine the arguments made by the appellants regarding the alleged contradictory and insufficient nature of the General Court’s statement of reasons.

81.      According to them, paragraphs 182 and 183 of the judgment under appeal fail to provide a sufficiently motivated reasoning to establish that the merger decision does not include evidence of pro-competitive effects underlying the settlement agreement. ([59](#Footnote59)) Consequently, in their view the General Court does not substantiate its allegation that this decision failed to cast a reasonable doubt on the existence of a sufficient degree of harm to competition caused by the agreement.

82.      For the reasons given below, my view is that the arguments raised by the appellants in support of the second part of the first ground of appeal must be dismissed.

83.      I would like to point out, first, that the contested decision and the merger decision were based on different assessment frameworks, as the General Court rightly held in paragraph 182 of the judgment under appeal. Therefore, in the contested decision, the Commission evaluated the restriction of competition caused by the settlement agreement pursuant to Article 101(1) TFEU, while the merger decision evaluated the probable impact of the *merger* on competition from 2011 onwards [therefore a prospective evaluation], taking for granted the settlement agreement.

84.      Second, I would like to state that, contrary to the appellants’ assertions, the ‘“benefits stemming” from the settlement agreement’ referred to in the first sentence of paragraph 183 of the judgment under appeal cannot be considered as an acknowledgement of the fact that the settlement agreement in itself had pro-competitive effects. By using these terms, the General Court only established that, in October 2011, in other words from the point when the Commission conducted an analysis of the merger between Teva and Cephalon, the settlement agreement had placed Teva in a more favourable competitive position than the other manufacturers of generic medicines, who were facing pending legal actions relating to patents. ([60](#Footnote60)) In addition, contrary to what the appellants claim, it is not clear from paragraph 183 of the judgment that the General Court indicated that the Commission had acknowledged, in the merger decision, that Teva had taken advantage of benefits arising from the settlement agreement that it would not have received in the absence of the settlement, as that aspect was not examined in the context of that decision. Moreover, contrary to what the appellants maintain, the word/term ‘despite’ used in the third sentence of paragraph 183 of that judgment does not refer to the ‘benefits’ but to the settlement agreement.

85.      It is clear from the foregoing analysis that the arguments put forward by the appellants in support of the second part of the first ground of appeal are based mainly on an erroneous reading of paragraphs 182 and 183 of the judgment under appeal that cannot be accepted, and in particular, on the erroneous premiss that the merger decision had acknowledged pro-competitive effects associated with the settlement agreement. In addition, it is clear that the ‘benefits’ mentioned in paragraph 183 of the judgment, which relate to the merger analysis, are not relevant to establishing whether the settlement agreement produced pro-competitive effects, within the meaning of the judgment in *Generics (UK)*, compared with the situation that would have prevailed in the absence of the agreement. The General Court cannot, therefore, be criticised for giving an insufficient and contradictory reasoning.

86.      In the light of the above, I propose dismissing the second part of the first plea as ineffective or, in any case, as unfounded.

4.      ***Final observations on establishing a restriction of competition by object***

87.      By way of a conclusion to the analysis of the first ground of appeal, I would like to add a few final observations regarding the tests for establishing a restriction of competition by object in relation to the settlement agreement, in particular, in the light of the recent judgments handed down by the Court on 27 June 2024([61](#Footnote61)), which, while confirming the case-law arising from the judgment in *Generics (UK)**,* provided some useful clarifications that are not irrelevant to this case.

88.      I would like to point out in that regard that, as is apparent from the case-law recalled in particular in paragraphs 36 and 37 of this Opinion, a refusal of or delay in the market entry of generic medicines in exchange for transfers of value by the manufacturer of originator medicines in favour of the manufacturer of those generic medicines must be regarded as constituting a restriction of competition by object *where those transfers of value can have no explanation other than the* *commercial interest of those manufacturers of medicinal products not to engage in competition on the merits*.

89.      For the purposes of that analysis, it is necessary, in each individual case, to assess whether the net gain from the transfers of value was sufficiently large to actually act as an incentive to the manufacturer of generic medicines to refrain from entering the market concerned and, therefore, not to compete on the merits with the manufacturer of originator medicines, without it being required that the net gain necessarily be greater than the profits which the manufacturer of generic medicines would have made if it had been successful in the patent proceedings. ([62](#Footnote62))

90.      The Court has found that to be the case, in particular, when transfers of agreed amounts as part of a settlement agreement do not correspond to or are not associated with compensation for costs or disruption associated with the litigation between the parties concerned, ([63](#Footnote63)) when the amounts corresponding to remuneration for the supply of goods or services to the manufacturer of originator medicines prove to be unjustified or excessive, ([64](#Footnote64)) or when non-compete or non-challenge commitments provided for in a settlement agreement concern different markets or go beyond the scope of application of the patent that was initially contested and of the markets covered by it. ([65](#Footnote65))

91.      I would like to point out, in that regard, that the General Court ruled that the Commission was entitled to find, in the contested decision, that certain agreements concluded between Teva and Cephalon had contributed to an unjustified transfer of value ([66](#Footnote66)) and that the level of the transfer of value made through a series of transactions concluded between them had contributed to or could only be explained by the fact that it constituted consideration for the acceptance by Teva of the restrictive clauses. ([67](#Footnote67)) The General Court also found in paragraphs 151 and 152 of the judgment under appeal that Teva obtained payment of an amount of EUR 5.57 million from Cephalon for no consideration and that that amount was not linked to any costs incurred by Teva, which meant that the payment could not correspond ‘in fact to compensation for the costs of or disruption caused by the litigation’, as required by the case-law of the Court([68](#Footnote68)). I would also like to clarify that, in paragraph 202 of the judgment, the General Court found that the non-compete commitment went beyond the scope of application of the patents owned by Cephalon, concluding in paragraph 204 of the judgment that ‘the purpose of the settlement agreement was to keep Teva out of the modafinil markets through transfers of value of an overall level that was sufficiently high to induce Teva to postpone its independent efforts to enter those markets.’

92.      Whereas first, the legal test on which the General Court based its assessment to establish a restriction of competition by object is not called into question by the above analysis, I propose dismissing the first plea. Second, the appellants do not contest the General Court’s conclusion in paragraph 162 of the judgment under appeal that each of the commercial transactions provided for in the settlement agreement had no other plausible explanation than inducing Teva, through a transfer of value, not to compete with Cephalon on the merits, ([69](#Footnote69)) my opinion is that the General Court was entitled to characterise this agreement as a ‘restriction of competition by object’, within the meaning of Article 101(1) TFEU.

B.      **The second ground of appeal**

93.      In support of the second ground of appeal, the appellants claim that the General Court made a series of errors in law in the examination of the anti-competitive effects of the settlement agreement. ([70](#Footnote70))

94.      I would like to recall that the anti-competitive object and anti-competitive effect of an agreement constitute not cumulative but alternative conditions for applying the prohibition laid down in Article 101(1) TFEU. An agreement is therefore prohibited, regardless of its effects, where its objective is anticompetitive. It follows that taking into consideration the effects of an agreement is unnecessary when it is established that the agreement has as its object the prevention, restriction or distortion of competition within the internal market. Taking into account the above comments and in particular the finding in paragraph 91 of this Opinion, I do not consider it to be necessary to examine the second ground of appeal relating to the anti-competitive effects of the settlement agreement.

VII. **Conclusion**

95.      In the light of the foregoing considerations, I propose that the Court should rule as follows:

–        dismiss the appeal, and

–        order Teva Pharmaceutical Industries Ltd and Cephalon Inc. to bear their own costs and to pay those incurred by the European Commission.

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[1](#Footref1)      Original language: French.

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[2](#Footref2)      OJ 2021 C 32, p. 7. The consolidated version of the Commission decision (available only in English) is available at: https://ec.europa.eu/competition/antitrust/cases/dec\_docs/39686/39686\_4072\_5.pdf.

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[3](#Footref3)      Judgment of 30 January 2020, in *Generics (UK) and Others* (C‑307/18 P, the ‘judgment in *Generics (UK)*’, EU:C:2020:52).

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[4](#Footref4)      See, in this respect, judgments of 25 March 2021, in *Lundbeck* v *Commission* (C‑591/16 P, *the ‘judgment in* *Lundbeck**’, EU:C:2021:243*); *Sun Pharmaceutical Industries and Ranbaxy (UK)* v *Commission* (C‑586/16 P, EU:C:2021:241); *Generics (UK)* v *Commission* (C‑588/16 P, EU:C:2021:242); *Arrow Group and Arrow Generics* v *Commission* (C‑601/16 P, EU: C:2021:244); *Xellia Pharmaceuticals and Alpharma* v *Commission* (C‑611/16 P, EU:C:2021:245), and *Merck* v *Commission* (C‑614/16 P, EU:C:2021:246).

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[5](#Footref5)      See, in that regard, judgments of 27 June 2024, in *Servier and Others* v *Commission* *(**C*‑*201/19 P**, the* ‘judgment in *Servier*’*, EU:C:2024:552);* Lupin v Commission (C‑144/19 P, EU:C:2024:545); Commission v KRKA (C‑151/19 P, EU:C:2024:546); Niche Generics v Commission (C‑164/19 P, EU:C:2024:547); Unichem Laboratories v Commission (C‑166/19 P, EU:C:2024:548); *Commission* v *Servier and Others*  (C‑176/19 P, EU:C:2024:549); Mylan Laboratories and Mylan v Commission (C‑197/19 P, EU:C:2024:550); Teva UK and Others v Commission (C‑198/19 P, EU:C:2024:551), and Biogaran v Commission (C‑207/19 P, EU:C:2024:553).

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[6](#Footref6)      OJ 2014 C 46, p. 1.

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[7](#Footref7)      Council Regulation of 20 January 2004 on the control of concentrations between undertakings (‘the EC Merger Regulation) (OJ 2004 L 24, p. 1).

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[8](#Footref8)      Article 1 of the contested decision.

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[9](#Footref9)      Article 2 of the contested decision.

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[10](#Footref10)      Judgment under appeal, paragraphs 27 to 205.

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[11](#Footref11)      Judgment under appeal, paragraphs 30 to 57.

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[12](#Footref12)      Judgment under appeal, paragraphs 58 to 166.

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[13](#Footref13)      Judgment under appeal, paragraphs 167 to 191.

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[14](#Footref14)      Judgment under appeal, paragraphs 192 to 205.

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[15](#Footref15)      Judgment under appeal, paragraphs 206 to 255.

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[16](#Footref16)      Judgment under appeal, paragraphs 256 to 274.

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[17](#Footref17)      Judgment under appeal, paragraphs 275 to 307.

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[18](#Footref18)      Judgment under appeal, paragraphs 308 to 311.

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[19](#Footref19)      Judgment in *Generics (UK)**,* paragraph 87.

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[20](#Footref20)      Judgment in *Generics (UK)**,* paragraph 111.

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[21](#Footref21)      Judgment in *Generics (UK)*, paragraph 67 and the case-law cited.

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[22](#Footref22)      Judgment in *Generics (UK)*, paragraphs 84 and 85.

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[23](#Footref23)      Judgment in *Servier*, paragraph 163 and the case-law cited.

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[24](#Footref24)      Judgment in *Generics (UK)*, paragraphs 86 and 92.

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[25](#Footref25)      Judgment in *Servier*, paragraph 164.

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[26](#Footref26)      See judgments in *Generics (UK)*, paragraphs 87 to 94, *Lundbeck*, paragraphs 114, 115 and 134, and *Servier*, paragraph 165.

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[27](#Footref27)      See judgment in *Lundbeck*, paragraph 131 and the case-law cited.

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[28](#Footref28)      See, to that effect, judgments in *Generics (UK)**,* paragraph 81 and the case-law cited; as well as *Servier**,* *paragraphs 84**, 105, 293 and 350.*

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[29](#Footref29)      That would be the case, for example, when those commitments are based on recognition of the validity of the patent in question by the parties to the agreement.

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[30](#Footref30)      See, to that effect, case-law cited in point 38 of this Opinion. See also the Opinion of Advocate General Kokott in *Generics (UK) and Others* (C-307/18, EU:C:2020:28, points 114 to 119 and the case-law cited).

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[31](#Footref31)      See judgment in *Servier*, paragraph 294.

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[32](#Footref32)      See points 34 to 39 of this Opinion.

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[33](#Footref33)      See, to that effect, judgments in *Generics (UK)*, paragraphs 87 and 88, as well as *Lundbeck*, paragraph 114 and the case-law cited.

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[34](#Footref34)      While paragraphs 45 and 46 of the judgment under appeal could be understood when read in isolation as meaning that the General Court envisaged an abstract analysis of the restrictive clauses, by examining the hypothetical scenario based on comparing ‘what had actually happened with what would have happened absent the restrictive clauses’, that is actually not the case, as demonstrated both by the description in paragraphs 43 and 44 of that judgment, of the analysis that it envisaged conducting and by the description of the one it actually conducted, in the light of paragraphs 61 to 162 of that judgment. See also, in this respect, points 57 and 58 of this Opinion.

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[35](#Footref35)      In other words, the analysis aimed, according to paragraph 61 of the judgment under appeal, to determine whether Teva could have obtained the same economic benefits arising from the commercial transactions in the absence of a commitment not to enter into competition with Cephalon on the modafinil markets and not to challenge its secondary patents. See also, in this regard, contested decision, recital 700.

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[36](#Footref36)      See, in that respect, judgments of 11 September 2014, in *CB* v *Commission* (C‑67/13 P, EU:C:2014:2204, paragraphs 53 and 54 and the case-law cited), and of 2 April 2020, in *Budapest Bank and Others* (C‑228/18 EU:C:2020:265, paragraphs 82 and 83).

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[37](#Footref37)      The criticism by the appellants that the General Court did not explain how the legal test laid down by the Commission was not equivalent to a counterfactual analysis should be dismissed, in so far as it took care to specify, in paragraphs 47 to 50 of the judgment under appeal, the reasons why the approach described in paragraphs 45 and 46 of the judgment, which is challenged by the appellants, did not fall within the assessment of the effects of the settlement agreement.

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[38](#Footref38)      See, in this regard, judgment of 27 June 2024, in *Commission* v *KRKA* (C‑151/19 P, EU:C:2024:546, paragraph 316 and the case-law cited as well as paragraph 318).

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[39](#Footref39)      In the same way, it appears from reading the contested decision that first, the factors taken into consideration by the Commission for the purposes of its evaluation of whether there was a restriction by object were not taken into consideration for the purpose of assessing the actual or potential anti-competitive effects of the settlement agreement, and that, second, the counterfactual method used in the context of analysing the effects of the practice at issue was not used to establish the anti-competitive object. See, in this regard, contested decision, paragraphs 707 and 1036.

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[40](#Footref40)      In this regard, it is important to clarify that the General Court found in paragraph 163 of the judgment under appeal that ‘it is not disputed that those transactions were negotiated concomitantly and in an interrelated manner.’ It must also be noted that the settlement agreement was concluded as a single, legally binding agreement forming the basis of all the acts concluded by the appellants. Moreover, it is apparent from the course of the negotiations, as analysed by the Commission in the decision [at issue] on the basis of the evidence, that both Cephalon and Teva sought to find a combination of transactions representing a certain overall value that was sufficiently beneficial for Teva to accept the restrictive clauses’.

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[41](#Footref41)      That also appears to be the analysis held in the judgment in *Servier**,* in which the Court ruled in paragraph 294 that due to the close links between the non-challenge and non-marketing clauses laid down in the settlement agreement and the commercial transactions concluded between the parties, it was essential to examine those clauses not separately but as forming a whole. See also, in that regard, judgment of 27 June 2024, in *Lupin* v *Commission* (C‑144/19 P, EU:C:2024:545, paragraph 67).

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[42](#Footref42)      See also, in this regard, points 58, 62 and 63 of this Opinion.

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[43](#Footref43)      Regardless of their own interpretation of paragraph 46 of the judgment under appeal, the appellants did not identify any other paragraph of the judgment that could back up their position, only referring to paragraphs 705 and 783 of the contested decision, which, according to them, show that in the mind of the Commission, finding out whether the commercial transactions at issue would have been concluded *‘absent the restrictive clauses’* or *‘absent the settlement agreement’* represented interchangeable propositions. While it is true that the Commission appears to have used these two terms interchangeably on a few limited occasions in the contested decision, I do not, however, subscribe to the argument made by the appellants. There are grounds for finding, in fact, that section 6 of that decision, on establishing a restriction of competition by object, which includes the paragraphs of the contested decision to which the appellants refer, is based on a detailed analysis of the various agreements negotiated and concluded by the parties. In the context of this analysis, the Commission treated those agreements as forming a contractual package, due to the indissociable links between them, in order to establish that the transactions provided for in the settlement agreement and the associated transfers of value conducted by means of the commercial transactions constituted an incentive for Teva to accept the restrictive clauses and, therefore, to refrain from entering the market independently and competing with Cephalon on the merits. See, in that respect, contested decision, paragraphs 588, 595, 678, 693 and 694 to 707.

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[44](#Footref44)      Judgment in *Generics (UK)**,* paragraph 111.

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[45](#Footref45)      Judgment in *Generics (UK)**,* paragraph 89.

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[46](#Footref46)      The appellants refer in this regard to the judgment of 7 January 2004, *Aalborg Portland and Others* v *Commission* (C‑204/00 P, C‑205/00 P, C‑211/00 P, C‑213/00 P, C‑217/00 P and C‑219/00 P, EU:C:2004:6, paragraph 57).

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[47](#Footref47)      In their response, the appellants claim that even if it were to be considered that the judgment under appeal did not reverse the burden of proof by confirming the Commission’s finding that there was a restriction by object, the General Court distorted the legal test imposed by the Court in so far as it established a lower level of proof than that required by the judgment in *Generics (UK)* to find that there is such a restriction.

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[48](#Footref48)      In that respect, the General Court ruled, in the same paragraph of the judgment under appeal, that the Commission had examined, inter alia, for each commercial transaction, the rationale for the alternative explanations put forward by the appellants and the interest of both Cephalon and Teva in carrying out the related transfer of value. The General Court added that, in addition, the Commission was entitled to find that the package of commercial transactions was sufficient to induce Teva to accept the non-compete and non-challenge commitments.

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[49](#Footref49)      See, in this regard, points 60 to 62, 66, and 67 of this Opinion.

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[50](#Footref50)      See paragraphs 56, 61 and 162 of the judgment under appeal. With regard to the Commission’s assessment, it was not simply based on the general hypothesis according to which the appellants would not have concluded any type of commercial transaction until they had settled their patent litigation. On the contrary, the Commission examined in detail the specific circumstances surrounding the negotiation of the commercial transactions in order to determine whether, in the absence of the non-compete and non-challenge clauses, they would have concluded such transactions. See, in this regard, the contested decision, paragraphs 627 to 638.

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[51](#Footref51)      See also points 60 to 62, 66, 67 and 69 of this Opinion. It should be pointed out in this respect that, in their appeal, the appellants do not contest the findings of the General Court in paragraph 162 of the judgment under appeal that the Commission had established, without any errors, that each of the commercial transactions provided for in the settlement agreement had no other purpose than to increase the level of the overall transfer of value to Teva under the settlement agreement with a view to inducing it to agree to the restrictive clauses.

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[52](#Footref52)      Judgment in *Generics (UK)**,* paragraph 111.

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[53](#Footref53)      See judgment under appeal, paragraphs 167 to 191.

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[54](#Footref54)      See judgment under appeal, paragraphs 178 to 180.

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[55](#Footref55)      See judgment under appeal, paragraphs 186 to 190.

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[56](#Footref56)      Judgment in *Generics (UK)*, paragraphs 107 and 111. This is, however, on the condition that the pro-competitive effects prove to be relevant, suitable for the agreement concerned and sufficiently significant.

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[57](#Footref57)      Judgment of 21 December 2023 (C‑333/21, EU:C:2023:1011).

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[58](#Footref58)      See judgments in *Servier*, paragraphs 76, 77 and 145, as well as case-law cited; of 27 June 2024, *Commission* v *Servier and Others* (C‑176/19 P, EU:C:2024:549, paragraph 288), and of 21 December 2023, *European Superleague Company* (C‑333/21, EU:C:2023:1011, paragraph 166 and the case-law cited).

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[59](#Footref59)      In that regard, the appellants point out that, in the merger decision, the Commission had indicated that the settlement agreement allowed Teva to become the most significant competitor of Cephalon on the modafinil market, to the extent that the settlement agreement had removed the intellectual property barriers that made the entry of other manufacturers of generic medicines extremely uncertain in the short term. In their view, the competitive constraint exercised by Teva on Cephalon had been found to be so strong that the Commission had required Teva to divest its rights to produce and sell its modafinil product to remove the overlap between the parties to the merger.

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[60](#Footref60)      In addition, the General Court considered that, despite the settlement agreement and the clause relating to the ban on entering the market before 2012, Teva exercised a stronger competitive constraint over Cephalon than the other manufacturers of generic medicines. Nevertheless, this does not mean that if Teva had not signed the settlement agreement, it would have exercised a weaker competitive constraint in October 2011 than that which it actually exercised when the agreement was in force. This question was not, however, examined in the context of the merger decision. See, in this regard, contested decision, paragraph 1004.

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[61](#Footref61)      See, in that regard, judgments of 27 June 2024, *Lupin* v *Commission* (C-144/19 P, EU:C:2024:545); *Commission* v *KRKA* (C-151/19 P, EU:C:2024:546); *Niche Generics* v *Commission* (C-164/19 P, EU:C:2024:547); *Unichem Lboratories* v *Commission* (C-166/19 P, EU:C:2024:549); *Mylan Laboratories and Mylan* v *Commission* (C-197/19 P, EU:C:2024:550); *Teva UK and Others* v *Commission* (C-198/19 P, EU:C:2024:551); *Servier*, and *Biogaran* v *Commission* (C-207/19 P, EU:C:2024:553).

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[62](#Footref62)      See point 38 of this Opinion.

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[63](#Footref63)      See, to that effect, judgment in *Generics (UK)**,* paragraph 86.

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[64](#Footref64)      See, to that effect, judgment in *Servier**,* *paragraph 333**.*

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[65](#Footref65)      See, to that effect, judgment of 27 June 2024, *Commission* v *Servier and Others* (C-176/19 P, EU:C:2024:549, paragraph 211)*.*

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[66](#Footref66)      See judgment under appeal, paragraph 142, in relation to the UK distribution agreement.

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[67](#Footref67)      See, in this regard, judgment under appeal, paragraph 87, in relation to the licence to Teva’s IPRs, paragraph 106 of the judgment, regarding the modafinil API supply agreement; and paragraph 120 of the judgment, concerning the CEP-1347 transaction.

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[68](#Footref68)      See judgment under appeal, paragraph 157.

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[69](#Footref69)      In their appeal the appellants do not contest the fact that in the judgment under appeal the General Court dismissed the second part of the first plea invoked at first instance, alleging that the Commission did not demonstrate that the associated transactions could only be explained by the interest of the parties not to engage in competition on the merits.

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[70](#Footref70)      In the first part of the second ground of appeal, the appellants claim that the General Court failed to address a plea that they had raised at first instance, stating that since an agreement had actually been implemented, the Commission had to demonstrate that it had actual negative effects on competition, such as, for example, that the agreement actually removed potential competition from the market, rather than simply demonstrating that the agreement had the potential to remove that competition. In the second part of the second ground of appeal, the appellants maintain that the General Court contradicted its own judgment of 12 December 2018, in *KRKA* v *Commission* (T‑684/14, EU:T:2018:918, paragraphs 358, 359 and 361), thus upholding an approach which, in essence, abolishes the distinction between by-object and by-effect restrictions.

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