The CNMC decides not to initiate sanctioning proceedings against Galderma Laboratories

The Spanish Markets and Competition Commission (CNMC) decided, by resolution of November 23, 2022 (reference S/0019/19), not to initiate sanctioning proceedings against Laboratorios Galderma, S.A. (Galderma), as it considers that there is not sufficient evidence of anti-competitive practices.

 Origin of the investigation

 On March 6, 2017, the CNMC received a letter from the owner of a website claiming that Galderma was allegedly engaging in practices contrary to article 1 of the Spanish Act for the Defense of Competition (LDC). In particular, that the laboratory was applying a dual pricing scheme, charging different prices to its customers for certain products depending on their final destination (physical or online resale). According to the complainant, Galderma had unilaterally changed the commercial conditions and discounts for the distributors of its products, with the aim of controlling the resale prices offered on the internet. Furthermore, Galderma allegedly threatened to cease the supply of the products—thus indirectly prohibiting their sale through the internet—if the distributors did not accept the changes.

According to the resolution, the products affected by the alleged anti-competitive practice were food supplements for hair, anti-aging and solar treatment from the brand INNEOV, and products for the dermatological treatment of androgenic alopecia from the brand LACOVIN.

After receiving the complaint, the CNMC launched an internal investigation, requesting certain information from Galderma to determine whether there was any indication of a prohibited practice. 

From a procedural point of view, it is significant in this case that the complainant sent a letter to the CNMC withdrawing its complaint in January 2020. The Competition Directorate accepted the complainant’s withdrawal but continued with the proceedings ex officio.

Resolution

After the conclusion of the internal investigation, the Competition Directorate recommended not to initiate sanctioning proceedings, and the CNMC Board confirmed this position.

According to the resolution, Galderma does not have standard distribution contracts. Instead, it applies to its customers the conditions that appear on the back of the invoices issued by the laboratory. After analyzing these conditions, the CNMC observed that there was no differentiation between the volume of physical versus online sales within each channel. Additionally, the CNMC found that Galderma applied a single list of recommended prices for all sales channels (both physical and online) and for the entire Spanish territory.

In this regard, it argues that Galderma is entitled to establish the recommended prices it considers appropriate, as long as the distributor retains the power to decide whether to follow or ignore this recommendation.

The CNMC concluded that both the commercial conditions and the recommended prices that the laboratory approved comply with the Vertical Block Exemption Regulation, so it decided to take no further action.

Conclusion

The decision not to initiate sanctioning proceedings against Galderma is the latest example of a series of complaints in recent years for competition infringements in the pharmaceutical sector that the CNMC has ended up dismissing, both regarding agreements between companies and unilateral conduct.  

With respect to agreements between companies, the CNMC dismissed cases (i) S/DC/0608/17 EAEPC VS LABORATORIOS FARMACÉUTICOS, concerning a complaint filed by a pharmaceutical association against six laboratories for alleged coordination in a dual pricing system aimed at hindering parallel trade within the European Union; and (ii) S/DC/0546/15 PFIZER/COFARES, in which Pfizer was reported for the same type of practice.

The CNMC has also closed complaints for alleged abuse of dominant position in recent years. For instance, cases S/0024/19 ABBVIE and S/0027/19 INHALADORES ASTRAZENECA, regarding exclusionary discounts and predatory prices that these laboratories allegedly applied. In both cases, the CNMC decided not to initiate sanctioning proceedings because neither the dominant position nor the existence of the three defining elements of abusive exclusion of competitors were proved: (i) objectively abusive nature of the conduct; (ii) lack of justification; and (iii) the actual or potential effect of preventing a competitor from accessing all or part of the market.

It is also worth mentioning case S/0049/19 ISDIN, which was recently closed by conventional termination. Under this mechanism provided for in the Act for the Defense of Competition, ISDIN, S.A. undertook a series of commitments to solve the relevant competition issues so that the CNMC would not declare that an infringement occurred and, therefore, would not impose any sanction.