Misinformation, disparagement, opacity and throttling – how far does the ‘special responsibility’ go?

What links a multiple sclerosis drug ingredient, trains tickets in the South of England and iPhone batteries? Very little you might say? But in fact these subjects are all bound up in what some believe to be an ongoing extension to the frontiers on the law on abuse of dominance.

Just how far does the ‘special responsibility’ of a dominant company go? Developments this year in the European Commission’s Copaxone case as well as UK private actions in relation to Boundary Fares and iPhone battery ‘throttling’ appear to shed some light on the direction of travel.

EU disparagement case against Teva

On 12 October 2022 the European Commission issued a Statement of Objections against Teva in its investigation into a potential abuse of dominance regarding glatiramer acetate – the active ingredient used in the best-selling multiple sclerosis drug, Copaxone.

Teva is accused of having gamed the patent system to extend its dominance in multiple sclerosis treatment. According to the Commission, Teva’s practices involve ‘gaming the patent system’ by making ‘small add-ons’ before patents expire. This potentially ‘prolongs legal uncertainty to the benefit of the patent holder, and can effectively block or delay entry of generic or generic-like medicines’.

The Commission’s work on ‘pay for delay’ in pharmaceutical markets merits its own separate blog and has already discussed by my colleague Stijn Huijts here. However the more novel aspect of Copaxone appears to be the Commission’s allegations on ‘disparagement’.

The Commission accused Teva of implementing a systematic disparagement campaign against a rival’s drug. Margrethe Vestager said that Teva ‘may have spread misleading information to discredit its closest competitor, to the detriment of patients and public health systems across the EU’. The Commission appears to believe that Teva’s campaign has sought to cast doubt in the mind of healthcare professionals over the safety and usefulness of rival drugs.

The French Competition Authority’s 2013 disparagement case against Sanofi shows the European Commission is not the only authority to have looked at this type of conduct. That case also prompted a private damages action which is ongoing (see Stijn Huijts blogpost on that case here). But it is still a relatively new theory of harm and precise detail on how the Commission will frame Teva’s conduct is not yet in the public domain.

Disparagement as such is not referred to as prohibited conduct in the Article 102 Guidance. However it is well understood that the categories of abusive conduct in the guidance are not exhaustive.  The Commission may argue that Teva’s conduct was not ‘competition on the merits’ (this was the approach it took in relation to misleading information provided to a patent office in its 2005 Astrazeneca decision). Or alternatively it may suggest the ‘special responsibility’ of a dominant company requires it not to disparage rivals.

The Copaxone case shows the European Commission continuing to push at the frontiers of abuse of dominance law. Though we need to await the decision to learn the exact formulation.

Opacity as an abuse in the UK

In the UK, new abuse of dominance theories of harm are currently making the headlines in standalone private actions being brought at the Competition Appeal Tribunal (CAT).

This is most evident in the Boundary Fares cases certified last year. In July 2022 the Court of Appeal upheld the certification decisions. The allegation in those cases is essentially that the dominant train companies were not transparent with consumers about the best available tickets for their journeys and that as a result many customers effectively paid twice for the same service. This was said to amount to the imposition of ‘unfair’ trading conditions under Chapter II of the Competition Act 1998.

The CAT and Court of Appeal referred to Michelin [1985] as an authority for the principle that a lack of transparency can be an important factor in rendering unlawful that which might otherwise be lawful.  The Michelin case related to rebates. The amount a customer could obtain under a Michelin rebate was unclear. The rebate system applied after the event. This resulted in varying and uncertain amounts being paid back to dealers. The practical effect of this uncertainty was that dealers became unwilling to switch away from Michelin.

Relying in part on this precedent, the Court of Appeal concluded in Boundary Fares that if a dominant company charges a consumer for a service they do not use or need or want, it imposes terms which give the dominant undertaking an advantage to which it is not entitled. This might be unfair and there might be an abuse of dominance (and therefore appears to meet the ‘arguable case’ threshold).

Does there need to be a causal connection between unfair conduct and a dominant position?

Another apparently novel aspect of the Boundary Fares judgment was the Court of Appeal’s statement that it is not always necessary to show that an abusively unfair term is causally connected to the dominant position (see paragraph 102). The Court referred to the German Federal Supreme Court’s judgment in Facebook which also confirmed this position.

The guidance on the lack of a need for a causal link between dominance and conduct may prove helpful to claimants in other cases where conduct that falls outside a traditional view of a competition law abuse is pleaded as an abuse of dominance before the UK CAT.

The iPhone battery ‘throttling’ case launched in June 2022 might fall into this category. Here, the claim concerns iPhone software upgrades that appear to have led to iPhone battery life reducing. The allegation is that this made iPhones less useful and encouraged consumers to buy newer versions of the iPhone more quickly than they would have done absent the battery problem. Apple is essentially accused of denigrating its own product.

Outside the UK, cases in relation to iPhone battery throttling have been brought using consumer laws rather than under competition laws (see for example the cases in Italy and the US).  But there is currently no class action regime for consumer cases in the UK.  So, perhaps in order to bring this as a class action, the case has been framed as an abuse of dominance.

Was the alleged throttling of iPhone batteries linked to Apple’s dominance? Could a business that did not have Apple’s brand loyalty have kept customers after such a reduction of the quality of their product? These are questions that will of course still be relevant. But the Court of Appeal’s recent statement in Boundary Fares that there is no need for a causal connection between conduct and dominance means they are perhaps less important questions than they might otherwise have been.

Is everything a dominant company does now an abuse?

Big companies might now feel that as soon as they are labelled ‘dominant’ everything they do can be framed as an abuse. Can an inadvertent breach of consumer or data law amount to an abuse of dominance? What about an ill-judged comment about a rival?

While the cases described above might suggest that all of such conduct is in scope, a note of caution is required. The European Commission’s disparagement case against Teva has been widely reported on. But a press release and the issue of a Statement of Objections is quite different to an infringement decision that has been upheld at Court.

Similarly, the UK Court of Appeal’s Boundary Fares judgment does not establish an infringement of competition law. It relates only to certification. It confirms that there is an ‘arguable’ case and the ‘strike out’ threshold does not apply. But it could be several years before a precedent emerges that shows opacity around sales of train tickets is an infringement of competition law. The iPhone battery ‘throttling’ case in the UK is also very much in its infancy.

Potentially dominant companies should be reminded of the ‘special responsibility’. Attention should be paid to consumer law and data laws. But in spite of some of the noise, we have a bit further to go before there are new binding precedents for disparagement, opacity and throttling as abuses of dominance.

Photo by Krivec Ales on Pexels.com

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