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The Competition Appeal Tribunal quashes CMA decision In Prochlorperazine

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The Competition Appeal Tribunal has handed down judgment in Advanz Pharma Corp and others v Competition and Markets Authority [2024] CAT 36, upholding appeals against the decision of the Competition and Markets Authority (CMA) finding that four companies had entered into or participated in an unlawful ‘market exclusion’ or ‘pay for delay’ agreement in relation to a generic pharmaceutical, prochlorperazine 3mg buccal tablets. It also held, in relation to related company director disqualification proceedings brought by the CMA, that the directors concerned were not directors of a company that had infringed competition law.

On 3 February 2022 the CMA adopted a decision under the Competition Act 1998 in which it found, following an investigation that lasted over four years, that two companies, Alliance (the incumbent supplier) and Lexon (a pharmaceutical wholesaler, which was developing its own generic pharmaceuticals, including prochlorperazine) had, in 2013, entered into a ‘market exclusion’ or ‘pay for delay’ agreement under which Alliance would, via a third-party distributor, Focus, compensate Lexon for staying out of the market and not selling its own prochlorperazine product, which it was developing with a manufacturer of generic medicines, Medreich.  The CMA found that Alliance and Lexon implemented this ‘pay for delay’ agreement by entering into separate distribution agreements with Focus, under which Focus would share with Lexon its profits from selling Alliance’s product. The CMA found that the Alliance/Lexon agreement was unlawful and that Focus and Medreich had also participated in it. It imposed fines totalling £35.3m on the companies, as well as on Cinven, Focus’ former parent company. The fine imposed on Lexon was £7.3m. The CMA also brought director disqualification proceedings in the High Court against seven directors, including Lexon’s former managing director, Mr Pritesh Sonpal, under the Company Directors Disqualification Act 1986.

The CMA’s decision was appealed to the Tribunal by the companies involved, other than Medreich, which had been granted leniency by the CMA. The related disqualification proceedings were transferred to the Tribunal and heard alongside the appeals. The trial took place over 21 days between June and August 2023.

On 23 May 2024, the Tribunal (chaired by Lord Ericht) handed down its unanimous judgment, quashing the CMA’s decision and the fines imposed by it, other than on Medreich (which did not appeal). It found that the CMA (which did not lead any witness evidence of its own) had failed to prove, on the balance of probabilities, that Alliance and Lexon had entered into the ‘market exclusion’ agreement and that the documentary and witness evidence showed that there was no such agreement. It found that the CMA had made material errors in its assessment of the factual evidence. Accordingly, none of the four companies, including Lexon, had been a party to or had participated in, an unlawful ‘pay for delay’ agreement and none had infringed competition law. The Tribunal therefore also dismissed the director disqualification proceedings.

Matthew O’Regan (instructed by Maitland Walker LLP and led by Aidan Robertson KC) acted for Lexon and Mr Sonpal.

The judgment is available here