Appeal court judgment (16 pages in French, PDF) reversing the Conseil de la concurrence decision that the pharmaceutical company GSK had committed predatory abuse through below-cost pricing of Zinnat (an antibiotic for surgery-induced infections).

The court endorses the Conseil's analysis of costs, including that GSK was not entitled to claim that the high transfer prices paid by its French business to its Swiss business (presumably for tax reasons) were irrelevant to the Akzo cost test.

The basis for the court's reversal of the finding of abuse is that the Conseil had not satisfactorily proved its assertion that below-cost pricing of one drug was part of a GSK strategy to establish a reputation for aggressivity so as to deter future competition in other markets. In reaching this view, the court relies on:

• The fact that other elements (e.g. threats to competitors, an intention to exclude) were present in the Akzo case and nothing similar is alleged here.
• Evidence from GSK that it had faced successful competitors in other markets, against the claim of a reputation for aggressive behaviour.

The matter may be appealed to the French supreme court (Court de cassation).

Comment, 22 April 2008: The Conseil's cost analysis, which survives the appeal court ruling, concluded that prices were below variable costs. The ECJ said at paragraph 71 of Akzo that “prices below average variable costs .... by means of which a dominant undertaking seeks to eliminate a competitor must be regarded as abusive”. I wonder whether the GSK case could have been decided on the basis of that first leg of the Akzo test: condemning the below-cost pricing behaviour simply because its object was to eliminate a competitor. But instead of that, the Conseil decided to launch into a general discussion (paragraphs 256-281 of the decision) on economic theories of predation and the alleged effects of GSK's strategy, drawing parallels with the strategy condemned in the Akzo case. That speculative section of the decision provided ample ammunition for GSK in this appeal. Franck

House of Lords judgment (about 10 pages) requiring the prosecution in the UK generic drugs cartel case to rephrase its indictement so as to match the offence of conspiracy to defraud as described in the Norris case. (The alleged cartel occurred before the creation of the Enterprise Act 2002 cartel offence.)