Cinven v Advanz Pharma Corp & Anor [2025] EWCA Civ 578

“…Between 2007 and 2017, a single undertaking consisting of Mercury Pharmaceuticals Limited, Advanz Pharma Services (UK) Limited and Mercury Pharma Group Limited (“the Mercury Pharma Companies”) and, at various points, the Hg Appellant, the Cinven Appellants and Advanz Pharma Corp Limited (“Advanz Pharma Corp”), was the sole supplier of 20mcg liothyronine sodium tablets (“Liothyronine Tablets”) in the UK. This single undertaking as it existed at any particular point is referred to in this Judgment as “Advanz”.”

“97. … (i) The basic test for abuse, which is set out in the Chapter II prohibition and in Article 102, is whether the price is “unfair”

“121. The fourth main issue on the appeal [in Phenytoin] was as to the extent to which the Tribunal was bound by the CMA’s margin of manoeuvre or discretion in exploring factual matters. Green LJ noted that the CMA had a “margin of manoeuvre” (the terms used by the Court of Justice in Latvian Copyright) or “appreciation” or “discretion” which flowed from the fact that the legal test under Section 18(2)(a) CA 1998 and Article 102(a) is broad brush and necessarily confers a significant latitude upon a competition authority as to the methods and evidence bases that it resorts to in order to prove an abuse of unfair pricing. He continued as follows: “136. But this is quite different in principle to the question whether the Tribunal, as a supervisory judicial body, must pay deference to that exercise of judgment. Under the CA 1998 the Tribunal has a merits jurisdiction as to both law and fact and upon the basis of established case law it is not bound to defer to the judgment call of a competition authority. It is empowered under the legislation to come to its own conclusions on issues of disputed fact and law and can hear fresh evidence, not placed before the CMA, to enable it to do so.” 122. Green LJ held that the conferral of a merits jurisdiction upon the Tribunal flows from important legal considerations relating to the rights of defence and access to a court, under fundamental rights such as Article 6 of the European Convention on Human Rights, competition law being treated as a species of criminal law as a recognised in numerous cases. Green LJ summarised the case law as follows. “140. From case law it is possible to draw various conclusions about the role of judicial bodies in relation to the margin of appreciation of a competition authority: (i) for a (non-judicial) administrative body lawfully to be able to impose quasi-criminal sanctions there must be a right of challenge; (ii) that right must offer guarantees of a type required by Article 6; (iii) the subsequent review must be by a judicial body with “full jurisdiction”; (iv) the judicial body must have the power to quash the decision “in all respects on questions of fact and law”; (v) the judicial body must have the power to substitute its own appraisal for that of the decision maker; (vi) the judicial body must conduct its evaluation of the legality of the decision “on the basis of the evidence adduced” by the appellant; and (vii), the existence of a margin of discretion accorded to a competition authority does not dispense with the requirement for an “in depth review of the law and of the facts” by the supervising judicial body.” 123. Green LJ went on to note that the conferral of a merits jurisdiction did not mean that the jurisdiction of the Tribunal is unfettered. The Tribunal should interfere only if it concludes that the decision is wrong in a material respect. Whether an error is material will be a matter of judgment for the Tribunal. The Court of Appeal dismissed the CMA’s appeal against the Tribunal’s finding that the CMA had conducted an insufficient examination of evidence of comparators and its appeal against the Tribunal’s conclusion that the CMA had failed to take proper account of patient benefit in its assessment of “economic value” as that phrase is used in paragraph [250] of United Brands. It was open to the Tribunal to reach a different conclusion to the CMA on these matters.” “136. But this is quite different in principle to the question whether the Tribunal, as a supervisory judicial body, must pay deference to that exercise of judgment. Under the CA 1998 the Tribunal has a merits jurisdiction as to both law and fact and upon the basis of established case law it is not bound to defer to the judgment call of a competition authority. It is empowered under the legislation to come to its own conclusions on issues of disputed fact and law and can hear fresh evidence, not placed before the CMA, to enable it to do so.” “140. From case law it is possible to draw various conclusions about the role of judicial bodies in relation to the margin of appreciation of a competition authority: (i) for a (non-judicial) administrative body lawfully to be able to impose quasi-criminal sanctions there must be a right of challenge; (ii) that right must offer guarantees of a type required by Article 6; (iii) the subsequent review must be by a judicial body with “full jurisdiction”; (iv) the judicial body must have the power to quash the decision “in all respects on questions of fact and law”; (v) the judicial body must have the power to substitute its own appraisal for that of the decision maker; (vi) the judicial body must conduct its evaluation of the legality of the decision “on the basis of the evidence adduced” by the appellant; and (vii), the existence of a margin of discretion accorded to a competition authority does not dispense with the requirement for an “in depth review of the law and of the facts” by the supervising judicial body.”

“An appeal lies to the appropriate court— (a) from a decision of the Tribunal as to the amount of a penalty under section 36; (b) … (c) on a point of law arising from any other decision of the Tribunal on an appeal under section 46 or 47.”

“1.9 In October 2007, Advanz began applying this strategy to Liothyronine Tablets. At that time, the price of Liothyronine Tablets was £4.05 per 28 tablets and Liothyronine Tablets were already one of Advanz’s top ten most profitable products. 1.10 Advanz removed the ‘Tertroxin’ brand, re-launched Liothyronine Tablets as a generic product, and immediately implemented a price increase. As a result, Advanz nearly doubled the price of the drug overnight. Within a year of de-branding, Advanz had more than doubled its price again and by January 2009, its average sales price (‘ASP’) for Liothyronine Tablets had reached £20.48. Under HgCapital’s ownership (December 2009 to August 2012), the ASP of Liothyronine Tablets increased from nearly £21 per pack to nearly £46 per pack; under the Cinven Entities’ ownership (August 2012 to October 2015), this increased again to nearly £190 per pack. By July 2017, nearly 10 years after de-branding, Advanz had increased the ASP of Liothyronine Tablets from £4.05 to £247.87, representing a price increase of 6,021% since September 2007.”

“5.251 In coming to this conclusion, the CMA has had regard to the following factors: (a) The substantial disparity between Advanz’s prices and the economic value of its Liothyronine Tablets; (b) The competitive conditions prevailing during the Infringement Period, including the absence of alternative Liothyronine Tablet suppliers, lack of regulatory constraint, high demand inelasticity, high barriers to entry and lack of countervailing buyer power, enabled Advanz to sustain prices which bore no relationship to economic value; (c) The commercial purpose of Advanz’s pricing strategy, which was to exploit the lack of competitive pressure on its pricing resulting from the competitive conditions set out at (b) above; (d) The increases in price were significant, amounting to a 6,021% increase in Advanz’s prices (from £4.05 to £247.87) between the decision to de-brand and Advanz’s highest price; and a 1,110% increase over the Infringement Period (from £20.48 to £247.87), with no material increase in production costs or innovation; (e) Advanz’s price increases have had a significant adverse impact on the NHS and patients; and (f) There is no independent or objective justification for the conduct.”

“Taking account of its prioritisation principles, the CMA decided to focus its Investigation only on prices of £20.48 per pack (the price in January 2009) and above. The CMA has not reached a conclusion on the exact level (above Cost Plus but below £20.48 per pack) at which Advanz’s prices became excessive and unfair as a matter of law. Therefore, although it is possible that prices somewhere above Cost Plus but below £20.48 per pack may have also been excessive and unfair, the CMA has limited itself to finding that Advanz’s prices were excessive and unfair when they reached at least £20.48 per pack. This means that the lowest price which is covered by the CMA’s infringement finding exceeds Cost Plus by 900% for the year 2009.”

“The CMA has decided for reasons of administrative priority not to pursue its investigation in respect of Advanz’s conduct during the period from 1 November 2007 to 31 December 2008 or following 31 July 2017. See Prioritisation principles for the CMA (CMA16), dated April 2014.”

“Cost Plus already includes a reasonable rate of return. However, as set out in paragraphs 5.65 ff above, not every price above Cost Plus would have been excessive and unfair.”

“7.134 To calculate the minimum direct financial benefit for each ownership period, the CMA has calculated the difference between its ‘enforcement price’ of (£20.48), that is the lowest price charged for Liothyronine Tablets during the Infringement Period that has been found to be excessive and unfair and Advanz’s actual selling prices during each of the different ownership periods of the Infringement. The resulting figures are then multiplied by the volumes sold in each ownership period. This results in a conservative estimate since profits based on prices that were lower than £20.48 could also be unlawful; the calculation also does not take into account any potential excess profits based on prices charged following the end of the Infringement Period.”

“325. Had we considered that Entry-Incentivising Prices were a useful benchmark, we would have taken the relevant Entry-Incentivising Price to be the £21 current in 2010 when Uni-Pharma commenced its entry attempt. Although it is not clear to what extent Uni-Pharma’s discontinuance was attributable to the discontinuance of the API or to the need to invest in the bioequivalence study, that price appears to have been considered by Uni-Pharma to be a viable price which merited significant work and costs.”

“33. The reason behind the extraordinary success of the pharmaceutical division in the difficult generics market in the UK is the efficacious management of its product portfolio within the regulation schemes in the UK: Trojan (i) manages to position its products in niches where competition is absent or very limited, (ii) optimally manages their products within the regulatory pricing schemes (branded and non-branded). Often their sales level stays under the radar screen of potential new entrants, thus protecting their business.”

“…niche products that fall under the radar of large players but above the size threshold of small generic companies. Furthermore, these products are difficult to manufacture thereby reducing the risk of new competitors.”

“… particularly beneficial reimbursement mechanism which, whilst effective for high volume products which is what the NHS cares about does allow for niche players to achieve good margins”

“Reimbursement for drug manufacturers is controlled by a small group within the DoH, who aim to minimise the NHS’ £11bn drug bill whilst ensuring drug availability The focus is on high volume drugs (patent and off-patent) as this is where the absolute quantum of savings is higher: niche products are typically below the radar […] Some of Mercury's products display price inelasticity, with no volume response from successive price increases.”

“Mercury therefore operates below the radar and capitalises on opportunities to achieve volume and pricing growth even in such a heavily regulated market.”

“All these products are life saving products and exclusively marketed by Mercury Pharma only. There is no other substitute in UK market for these products. After de-branding ... we have increased the prices continuously in last 3 to 4 years. We have also changed the pack sizes of the products without reducing the prices. Few of the examples are like ... Liothyronine, where we have reduced the pack size from 100 to 28 ... we could continue increasing the prices [year on year] subject no other company introduces these molecules. Since these are de-branded therefore they do not have any PPRS liability also.”

“… the business’s ‘primary “tail wind” is price increases passed on the payor because of the oligopolistic nature of most segments it operates in, rather than a real growth in volume for each drug’ and the business model relied upon the ‘European healthcare systems … under very strong pressures [not reacting because] “it is too below the radar screen/noise”.”

“Attractive position - niche off-patent products insulated from key pharma risks – No R&D spend or patent cliff – Little/no competition - pricing/margin power – Strong entry barriers mean position sustainable.”

“Manufacturing Process • Products require complex manufacturing process and have difficult to determine formulations Regulatory Approval • Competitors entering market need to obtain new marketing authorisations • Process is costly and can be time-consuming (c.3-4 years)”

“A presentation document headed “UK key molecules” forecast loss of volumes in 2017 offset by increased prices, achieving year on year revenue gains in the period 2015 to 2018. This was consistent with the strategy adverted to in an email dated 31 May 2013, some two years earlier, in which Mr Beighton advocated a price increase in relation to another drug (Prednisolone): “… because I am pretty sure that we are going to get competition within the next year or so. I know of at least [one other supplier] that are developing. Therefore we should take what we can from it now. I think Liothyronine may be a similar story…” “… because I am pretty sure that we are going to get competition within the next year or so. I know of at least [one other supplier] that are developing. Therefore we should take what we can from it now. I think Liothyronine may be a similar story…”

“67. The price increases also attracted adverse scrutiny in the press. An article in the Times dated 5 June 2016 reported that doctors had been encouraged to stop prescribing Liothyronine after the price of a tablet shot up from 16p to £9.22. The article was forwarded within Advanz, prompting concern that the change of guidance might impact on sales. In response to an internal enquiry as to what was meant by the reference in the article to the NHS encouraging doctors to stop prescribing Liothyronine, and whether there would be a big impact, the answer was as follows: “Business as usual. We have seen a very small volume decline over the last 18 mths but it is very small (1-2%). So we characterise the market and volumes as flat!” 68. A subsequent internal email dated 29 June 2016 commented as follows: “[…] In short -- nothing new. The most important thing about this is the date. [The] ... DROP-List is published every year. It was published a year ago and our volumes remain flat. Thus, it has had no impact on the sales volumes.” “Business as usual. We have seen a very small volume decline over the last 18 mths but it is very small (1-2%). So we characterise the market and volumes as flat!”

“68. The starting-point here must be the protective purpose of Article [102]. The provision forms part of a system designed to protect competition within the internal market from distortions […]. Accordingly, Article [102], like the other competition rules of the Treaty, is not designed only or primarily to protect the immediate interests of individual competitors or consumers, but to protect the structure of the market and thus competition as such (as an institution) […] In this way, consumers are also indirectly protected. Because where competition as such is damaged, disadvantages for consumers are also to be feared.”

“The evolution of prices for Liothyronine Tablets indicates that prices do not adjust immediately to competition. Instead, they show a degree of “stickiness”.”

“Agree. [Valletti ¶68] This point is considered in the Decision at paragraph 5.311. Recent price data submitted by the CMA to the Tribunal confirm the aspect of “stickiness” in this market: prices keep decreasing continuously by about 30% a year and are expected to decrease further.”

“Agree with a qualification: Liothyronine prices have adjusted over time (as opposed to quickly reaching a single price). However, I do not agree that the fact that prices have not reached their minimum level can be viewed as evidence that there is not workable or effective competition. [Bennett 1 ¶79].”

“103. [Counsel] drew our attention to various features of pharmaceutical markets recognised in the literature, to support the submissions of the CMA favouring a wide margin of appreciation for competition authorities and the importance of ex post intervention. The OECD Paper explains why such ex post intervention is relatively unusual but also how it can be very important in certain types of case. Medicines are subject to a "dense and comprehensive" regulatory framework that recognises the limited ability of competition enforcement agencies to lower prices. The framework is less comprehensive in relation to off-patent drugs, where inter-brand competition is relied upon to contain prices. But competition concerns can arise even in the off-patent sector where there can remain an absence of therapeutic and inter-brand competition even upon expiry of patents. This can lead to a "lack of price elasticity of demand, particularly as regards 'essential' drugs". These developments appear, observationally, to have occurred in tandem with the emergence of business strategies that identified market segments where prices could be successfully increased. Companies identify niche essential drugs that are not under patent but whose market is so small that no competitors will enter the market, or where supply is limited for regulatory or contractual reasons. In its submissions the CMA identified analogous factors specific to the drug in question in these proceedings which it contended made the present case apt for ex post intervention. These included that phenytoin was not in patent. It is an "old" product first marketed in 1938 which was used for a declining patient population but where the suppliers benefited from regulatory clinical guidance which substantially precluded switching even between clinically identical, molecular, substitutes. This served to maintain barriers to switching and inter-brand competition and was an important factor in establishing the dominant positions of Pfizer and Flynn in their respective markets and their power over price. 104. These features served to distinguish the present case from other markets where patent expiry removed the principal obstacle to market entry. Where there are no material barriers to entry high prices can act as a magnet to entry which, in due course, drives prices down. Many markets are thus self-correcting. In the absence of entry barriers regulatory intervention can risk prolonging a monopoly situation by blocking efficient signals which would otherwise promote market entry. A belief in market forces "…is often bolstered by the (perceived high) likelihood of regulatory failure, a risk which is compounded in the case of price regulation". The investigation of ex post cases of alleged excessive pricing faces significant difficulties in terms of data availability and analysis, identifying appropriate assessment standards, and of designing and implementing suitable remedies: "This has led some to consider that the identification of excessive prices is a 'daunting, if not, impossible task'… The issues are still more extreme when trying to set clear rules that allow for ex ante compliance with excessive pricing rules. The key problem here is that it is not clear what the appropriate benchmark should be.". In written submissions the CMA argued that the economic difficulties in applying competition law to excessive pricing must not be allowed to render "…the law a dead letter". It was the task of the competition authority to exercise its judgment as to when ex post intervention was apt, and courts should avoid articulating rules which made this inherently difficult task unworkable or excessively difficult. 105. The pharmaceutical companies cited the OECD Paper because it described the many different approaches which authorities use to evaluate whether prices are exploitative/unfair. The OECD Paper cites United Brands as laying down the seminal test in the EU and observes that European competition authorities and courts have made use of a variety of different methods, all said to be consistent with the case law, to determine whether a price is excessive and unfair. In some cases, a comparison between production costs and prices is used but price/cost analysis is not feasible in all cases due to lack of data or because the disputed price relates to an intangible good such as an IP right. Other methods are also used such as benchmarking "of some sort". Price-based benchmarks are used by comparing the investigated price with prices charged by the dominant firm in different markets or over time or by comparing the prices charged by the dominant firm and those charged by other firms, either in the same market or in other markets. Another benchmark focuses upon the profitability of the dominant firm by comparing such profits either with a normal competitive profit or the profits of other firms. Other methods are also identified. The guiding factor in each case is the availability and suitability of the evidence and data. Competition authorities often adopt a pick and mix or combinatorial approach to the evidence to be relied upon. There are no fixed rules, assumptions or presumptions. Everything depends upon the facts of the case.”

“321. … The test does not presuppose that the potential benefits of competition are such as to justify and render non-abusive whatever price is needed to incentivise other entrants to compete. Nor does the test require a comparison to be made between, on the one hand, the benefits of competition with, on the other hand, the harm resulting from excessive prices. If such a comparison were to be made, the CMA concluded in the Decision that the incremental improvements which have been made in the provision of Liothyronine Tablets since Teva and Morningside began to compete (assuming in the Appellants’ favour that these improvements would not have occurred had Advanz remained as sole supplier of Liothyronine Tablets), that is to say the availability of different dosages, a longer shelf life, a lactose free option and increased security of supply - were disproportionately small to justify the increase in prices needed to stimulate entry. We agree with that assessment. Liothyronine Tablets are an old and established drug with limited scope for improvement.”

“As to the further argument that Advanz’s price increases were not unfair because Advanz implemented them in the knowledge that they would lead to new entry, increased competition, and a subsequent reduction in prices, this argument would have validity in an effectively competitive market as mentioned … in Phenytoin: “Where there are no material barriers to entry, high prices can act as a magnet to entry which, in due course, drives prices down. Many markets are thus self-correcting.””

"…if it is above that which would exist in a competitive market and where it is clear that high profits will not stimulate successful new entry within a reasonable period. Therefore, to show that prices are excessive, it must be demonstrated that (i) prices are higher than would be expected in a competitive market, and (ii) there is no effective competitive pressure to bring them down to competitive levels, nor is there likely to be."

“Entry-incentivising prices are not the outcome of an effectively competitive process”

“Conclusion: Entry-incentivising Prices are not an informative benchmark for effectively competitive prices for Liothyronine.”

“Agree: in the presence of high fixed entry costs, entry-incentivising prices must necessarily be higher than affectively competitive prices. Moreover, accepting entry-incentivising prices as a relevant benchmark would amount to saying that an incumbent should be allowed to price higher, the higher the barriers to entry faced by potential competitors.”

“disagree: Entry incentivizing prices are relevant especially when taken in the round with other evidence.”

“Disagree. Although not direct evidence of competitive price levels, Entry-incentivising prices are still of interest (alongside other competitive benchmarks) in seeking in assessing whether prices actually charged were excessive.”

“A new 5mcg and 10mcg Liothyronine tablet emerged, which meant that patients themselves no longer had to divide the larger 20 mcg Liothyronine tablet. This is important clinically because patients themselves were attempting to give themselves a smaller dosage in a very rudimentary way: for example, using a knife to divide the tablet, or crushing the tablet in powder and estimating the relevant grams. As Liothyronine is extremely potent these approaches were far from efficacious, as obviously there is considerable scope for error. Indeed, the regulator, the MHRA, expressly asked Morningside to manufacture the smaller 5mcg and 10mcg dosage tablets to meet a “clear clinical need”

“165 That said, it must be recalled, in response to Question 10(b) and (c), that, in accordance with settled case-law, it is open to a dominant undertaking to provide justification for behaviour that is liable to be caught by the prohibition under Article 102 TFEU, in particular by establishing that the exclusionary effect produced by its conduct may be counterbalanced, or outweighed, by advantages in terms of efficiency that also benefit consumers (see, to that effect, judgment of 27 March 2012, Post Danmark, C-209/10, EU:C:2012:172, paragraphs 40 and 41 and the case-law cited). 166 To that effect, it is for the dominant undertaking to show that the efficiency gains likely to result from the conduct under consideration offset any likely negative effects on competition and the interests of consumers in the affected markets; that those gains have been, or are likely to be, brought about as a result of that conduct; that such conduct is necessary for the achievement of those efficiency gains, and that it does not eliminate effective competition, by removing all or most existing sources of actual or potential competition (judgment of 27 March 2012, Post Danmark, C-209/10, EU:C:2012:172, paragraph 42), and consequently that undertaking has to do more than put forward vague, general and theoretical arguments on that point or rely exclusively on its own commercial interests.”

“162. To that effect, it must also be recalled that, while, for the purposes of application of Article 102 TFEU, there is no requirement to establish that the dominant undertaking has an anticompetitive intent, evidence of such an intent, while it cannot be sufficient in itself, constitutes a fact that may be taken into account in order to determine that a dominant position has been abused (see, to that effect, judgment of 19 April 2012, Tomra Systems and Others v Commission, C-549/10 P, EU:C:2012:221, paragraphs 20, 21 and 24). 163 In this case, the CMA and the referring court consider that the conclusion by GSK of the agreements at issue was part of an overall strategy pursued by GSK to maintain as long as possible its monopoly position in the United Kingdom paroxetine market. 164 Consequently, if those matters are established, any anticompetitive intent on the part of GSK must be taken into consideration by the referring court in order to assess whether the conduct of GSK must be characterised as ‘abuse of a dominant position’ within the meaning of Article 102 TFEU.”

“Assessment of the economic justification for a system of discounts or bonuses established by an undertaking in a dominant position is to be made on the basis of the whole of the circumstances of the case (see, to that effect, Michelin, paragraph 73). It has to be determined whether the exclusionary effect arising from such a system, which is disadvantageous for competition, may be counterbalanced, or outweighed, by advantages in terms of efficiency which also benefit the consumer. If the exclusionary effect of that system bears no relation to advantages for the market and consumers, or if it goes beyond what is necessary in order to attain those advantages, that system must be regarded as an abuse.”

“…the price of Liothyronine Tablets in February 2021 was a substantial outlier by comparison with the price of other generic drugs”

“It is likewise not necessary for us to speculate as to what will happen to the price of Liothyronine Tablets in the future or at what point they will become workably competitive. We have concluded that the February 2021 Post Entry price is not a valid comparator because it is contaminated by the pre-entry abusive pricing, not because prices have yet to converge to an equilibrium around direct costs.”

“240. The Decision found that the stickiness of generic prices was consistent with the fact that when prices are renegotiated, market participants will often take the Drug Tariff as a reference point. The Drug Tariff is itself constructed using a trailing average of market prices so price stickiness is to some extent built into the way prices are renegotiated.”

“263. …, the competitive response in a market depends on the behaviour of the market’s players, and they mutually reinforce each other. If an incumbent is not aggressive and does not lower prices significantly, then an entrant has no compelling reason to be particularly aggressive either. If instead an incumbent is aggressive and cuts prices significantly to try to win more sales, then the entrant will also have to respond by reducing prices aggressively, else it would lose sales. Advanz had tended to price above Teva and Morningside. In a market with inelastic demand in particular, the incentives to avoid competition are even stronger, as any fall in prices would not result in any increase in total quantities. In these circumstances, it was not surprising that prices have remained substantially above costs and have declined only slowly. This is an indication of what he termed ‘soft’ competition. This was in contrast to the typical generic path as shown in the Oxera study and the European Commission’s Pharmaceutical Sector Enquiry in which generic entrants significantly undercut the originator from the outset.”

“But because the drug tariff is reported with a degree of latency, there is always a trailing average in the market which itself generates something which could be called stickiness. But again, we would submit that in a workably competitive market, if stickiness means not a death spiral, that is consistent with workable competition. We do not expect firms in workably competitive markets to continuously get out a machine gun to their own foot, that is not how competition functions in this jurisdiction.”

“… one can see why a supplier doesn't want to get a machine gun under his or her foot and provoke a death spiral in the market.”

“The central legal error made by the Tribunal concerns its misapplication of the concept of “workable competition”. “Workable competition” cannot to be determined by a ‘Goldilocks’ assessment of whether the market has (yet) reached its lowest “stable” price or is free of “contamination” from past high prices. These are inherently vague, subjective, and in material respects unknowable, matters – a point the Judgment ironically makes a virtue of in refusing to “speculate as to what will happen to the price of Liothyronine Tablets in the future or at what point they will become workably competitive”. ([281]) Indeed, it is hard to see how a test based on “stabilised” prices is compatible with legal certainty. What would happen if prices stabilised in future at the levels the Tribunal considered not to be workably competitive? Would the price suddenly become fair? What if prices increased in future? How would the Tribunal ever know whether the terminal price point would ever be reached or by when it had been reached? How would the cause(s) of price rises or decreases be determined? In short, the Tribunal’s assessment is contrary to the principle of legal certainty, which is an essential component of the lawful definition of abusive conduct.”

“188 Next, it must be noted that, although the Community judicature has not yet explicitly ruled on the method to be applied in determining the existence of a margin squeeze, it nevertheless follows clearly from the case‑law that the abusive nature of a dominant undertaking’s pricing practices is determined in principle on the basis of its own situation, and therefore on the basis of its own charges and costs, rather than on the basis of the situation of actual or potential competitors. … 192 It must be added that any other approach could be contrary to the general principle of legal certainty. If the lawfulness of the pricing practices of a dominant undertaking depended on the particular situation of competing undertakings, particularly their cost structure — information which is generally not known to the dominant undertaking — the latter would not be in a position to assess the lawfulness of its own activities.”

“Advanz has applied to adduce updated Drug Tariff pricing data for the period October 2022 – November 2024 which provides further evidence that the £40 – £60 post-entry price range was not contaminated by the price charged in 2017. The updated pricing data confirms (a) that there could be no infringement for the period 2009 – 2013 because the prices charged during this time were within the range of workably competitive prices charged since October 2022; (b) the symmetry between the market entry incentivizing prices and the post-entry prices; and (c) that the CMA’s Cost-Plus is a poor benchmark for workable competition.”

“… the only conclusion is that the CMA’s Cost Plus benchmark is a remarkably poor benchmark for competitive prices” and it “… confirms … that there could be no infringement for the period 2009 – 2013 because the prices charged during this time were within the range of workably competitive prices charged since October 2022”: “The New Data are fundamental to a series of related issues that underpinned the Tribunal’s conclusions on unfair pricing. First, they fundamentally cast doubt on the CMA’s Cost Plus benchmark as a valid benchmark for fairness. The CMA’s case was that Liothyronine prices in a competitive market should be at, or proximate to, Cost Plus: see Decision, ¶5.285. The CMA’s Cost Plus figure was £4.94 based on a simple average figure for the period of alleged abuse. The New Data show that DT prices between October 2022 and November 2024 remained 10 to 15 times’ higher than the CMA’s Cost Plus figure. Moreover, the trend in the DT price since March 2024 is distinctly upwards, having risen from £40.10 in March 2024 to £75.92 as of November 2024. In these circumstances, the only conclusion is that the CMA’s Cost Plus benchmark is a remarkably poor benchmark for competitive prices, even allowing for the fact that, as noted, ASPs for generic drugs are typically 10-20% below the DT price. Since the CMA has no other specific benchmark to show unfairness, it follows that it has not discharged its burden of proof. Second, the New Data cast serious doubt on the basis for the Tribunal’s rejection of Liothyronine post-entry prices (“PEPs”) as a valid benchmark. As the Court is aware, the alleged infringement ended on 31 July 2017. Actual and potential competition from firms other than Advanz then immediately occurred, leading to material price falls in PEPs, substantial market share shifts, and the generation of substantial customer benefits in the form of new types of Liothyronine products (e.g., different doses, presentations, allergic versions).”

“The Court of Appeal shall have power to receive further evidence on questions of fact … but, in the case of an appeal from a judgment after trial or hearing of any cause or matter on the merits, no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds.”

“… first, that the fresh evidence could not have been obtained with reasonable diligence for use at the trial; secondly, that if given, it probably would have had an important influence on the result; and, thirdly, that it is apparently credible although not necessarily incontrovertible.”

“In our view, the time has now come to accept that a mistake of fact giving rise to unfairness is a separate head of challenge in an appeal on a point of law, at least in those statutory contexts where the parties share an interest in co-operating to achieve the correct result. Asylum law is undoubtedly such an area.”

“31. The CMA accepts that competition law is such an area: it is an area where the CMA has a shared interest in ensuring that decisions are taken on the best information and on the correct factual basis: see further R (Iran and others) v Secretary of State for the Home Department [2005] EWCA Civ 982 (“Iran”), para 30…. In the circumstances, if a mistake of fact giving rise to unfairness is identified, it is a ground of appeal which may be advanced under section 49(1) of the Competition Act 1998.”

“i) Making perverse or irrational findings on a matter or matters that were material to the outcome (“material matters”); ii) Failing to give reasons or any adequate reasons for findings on material matters; iii) Failing to take account and/or resolve conflicts of fact or opinion on material matters; iv) Giving weight to immaterial matters; v) Making a material misdirection of law on any material matter; vi) Committing or permitting a procedural or other irregularity capable of making a material difference to the outcome or the fairness of the proceedings; vii) Making a mistake as to a material fact which could be established by objective and uncontentious evidence, where the Appellant and/or his advisors were not responsible for the mistake, and where unfairness resulted from the fact that a mistake was made.”

“222. A multi-firm adjustment can make a significant difference to the end result. This is illustrated by the following table in Dr Bennett’s report (which uses the CMA’s cost assumptions): 223. Extending these examples further, with ten firms the Cost Plus would be £37.50 and with 70 firms £247.88 224. By the end of the hearing, the Appellants accepted that a single-firm Cost Plus calculation was appropriate for the purposes of the Excessive Limb of the United Brands test but maintained that a multi-firm adjustment was necessary for the purposes of the Unfairness Limb. 225. In the Decision, the CMA contended that a multi-firm adjustment was inappropriate both as a matter of economic logic and from the perspective of effective competition policy enforcement, for the following reasons. (1) The multi-firm adjustment is flawed because it is premised on the incorrect assumption that the CMA’s intervention threshold must leave room for entry by other competitors. In a market which is characterised by high entry costs relative to market size, as is the case for Liothyronine Tablets, applying a multi-firm adjustment would defeat the purpose of the law, which is to require companies with significant market power to exercise restraint. (2) Permitting an incumbent to charge a multi-firm price in such a scenario would be perverse in that it would enable an incumbent to recoup as pure economic profit the modelled costs of operating in a hypothetical multi-player market. This would result in significant harm to consumer welfare. The adjustment is also divorced from economic reality since the significantly higher prices produced by the adjustment bear no relationship to the incumbents’ costs or the products’ economic value.”

“Napp's whole argument based on “portfolio pricing”, impermissibly directs attention away from the specific product market which we are required to consider when deciding whether there is an abuse of a dominant position under section 18 of the Act. In our view, it is not appropriate, when deciding whether an undertaking has abused a dominant position by charging excessive prices in a particular market, to take into account the reasonableness or otherwise of its profits in other, unspecified, markets comprised in some wider but undefined “portfolio” unrelated to the market in which dominance exists.”

“It is not necessary for the Tribunal to determine whether the judgment in Napp is to be read as establishing a general principle that portfolio pricing can never be relevant to the question of whether a price of a particular product is abusive. We agree with the CMA that the portfolio pricing issue is a red herring in this case given the absence of evidence that Advanz was actually setting the price of Liothyronine on a portfolio basis, rather than increasing the price as a means of profit maximisation without reference to other products.”

“Advanz also argues that there can have been no abuse of a dominant position in this case as it did not act unilaterally, but rather the prices of Liothyronine Tablets were the outcome of agreement between Advanz and the DHSC/NHS.”

“… it is not the case that the DHSC/NHS considered Advanz’s price increases to reflect any enhanced value in the product, that it ‘approved’ Advanz’s prices as reflective of the economic value of Liothyronine Tablets, or that it made an informed decision not to intervene in those prices for that (or any other) reason. The CMA therefore rejects Advanz’s argument that ‘The DH’s/NHS’s willingness to pay and the informed decision it took not to intervene reflects the economic value that the DH/NHS ascribes to LIO.”

“In summary, the Tribunal concludes that Advanz did not intend to, and did not, provide the DHSC/NHS with sufficient information to make an informed assessment of the price increases and Advanz could not reasonably have inferred that the DHSC/NHS approved of the price increases.”

“Policy objectives 1.3 Consistent with section 36(7A) of the CA98, the twin objectives of the CMA's policy on financial penalties are: • to impose penalties on infringing undertakings which reflect the seriousness of the infringement; and • to ensure that the threat of penalties will deter both the infringing undertakings and other undertakings that may be considering anti-competitive activities from engaging in them. The CMA has a discretion to impose financial penalties and intends, where appropriate, to impose financial penalties which are severe, in particular in respect of agreements between undertakings which fix prices or share markets, other cartel activities and serious abuses of a dominant position. The CMA considers that these are among the most serious infringements of competition law. 1.4 There are two aspects to the deterrence objective. First, there is a need to deter the undertakings which are subject to the decision from engaging in future anti-competitive activity (often referred to as 'specific deterrence'). Second, there is a need to deter undertakings at large which might be considering activities contrary to any of Article 101, Article 102, the Chapter I or Chapter II prohibitions from breaching the law (often referred to as 'general deterrence').”

“Method of calculation 2.1 A financial penalty imposed by the CMA under section 36 of the CA98 will be calculated following a six-step approach: • Calculation of the starting point having regard to the seriousness of the infringement and the relevant turnover of the undertaking. • Adjustment for duration. • Adjustment for aggravating or mitigating factors. • Adjustment for specific deterrence and proportionality. • Adjustment if the maximum penalty of 10% of the worldwide turnover of the undertaking is exceeded and to avoid double jeopardy. • Adjustment for leniency, settlement discounts and/or approval of a voluntary redress scheme.”

“Finally, the CMA will consider whether the starting point for a particular infringement is sufficient for the purpose of general deterrence. In particular the CMA will consider the need to deter other undertakings, whether in the same market or more broadly, from engaging in the same or similar conduct.”

“Step 4 – adjustment for specific deterrence and proportionality 2.20 In considering whether any adjustments should be made at this step for specific deterrence or proportionality, the CMA will consider appropriate indicators of the undertaking's size and financial position at the time the penalty is being imposed. The CMA may have regard to indicators – including, where they are available, total turnover, profitability (including profits after tax), net assets and dividends, liquidity and industry margins – as well as any other relevant circumstances of the case. The CMA will generally consider three year averages for profits and turnover. The CMA may also consider indicators of size and financial position from the time of the infringement. 2.21 The penalty figure reached after steps 1 to 3 may be increased to ensure that the penalty to be imposed on the undertaking will deter it from breaching competition law in the future, given its specific size and financial position and any other relevant circumstances of the case. Such an increase will generally be limited to situations in which an undertaking has a significant proportion of its turnover outside the relevant market or where the CMA has evidence that the infringing undertaking has made or is likely to make an economic or financial benefit from the infringement that is above the level of penalty reached at the end of step 3. Where relevant, the CMA's estimate would account for any gain which might accrue to the undertaking in other product or geographic markets as well as the 'relevant' market under consideration. The assessment of the need to adjust the penalty will be made on a case-by-case basis for each individual infringing undertaking. 2.22 In addition, there might be exceptional cases where an undertaking's relevant turnover is very low or zero with the result that the figure at the end of step 3 would be very low or zero. In such cases, the CMA would expect to make more significant adjustments, both for general and specific deterrence, at this step. Such an approach may also be appropriate where the relevant turnover did not accurately reflect the scale of an undertaking's involvement in the infringement or the likely harm to competition. This might be the case, for example, in relation to bid-rigging cases or where an undertaking's turnover in the last business year before the infringement ended was unusually low. 2.23 In considering the appropriate level of uplift for specific deterrence, the CMA will ensure that the uplift does not result in a penalty that is disproportionate or excessive having regard to the undertaking's size and financial position and the nature of the infringement.”

“2.24 At this step, the CMA will assess whether, in its view, the overall penalty proposed is appropriate in the round. Where necessary, the penalty reached at the end of steps 1 to 3 may be decreased to ensure that the level of penalty is not disproportionate or excessive. In carrying out this assessment of whether a penalty is proportionate, the CMA will have regard to the undertaking's size and financial position, the nature of the infringement, the role of the undertaking in the infringement and the impact of the undertaking's infringing activity on competition.”

“It is an important part of effective deterrence that an undertaking should not be in a position to earn a profit from infringing competition law even after paying a penalty in respect of that infringement. Nor is it sufficient for any penalty to only neutralise an infringing undertaking’s direct financial gains resulting from an infringement. If the penalty imposed on an undertaking for a competition law infringement only neutralises the gains made (i.e. puts the undertaking in the same position as it would have been absent the infringement) there is little economic incentive for the undertaking not to infringe competition law again: at most, it would risk losing its gains if it was caught and sanctioned.”

“Taking these three considerations together, the CMA’s overriding criticism is that the CAT has failed to take into account factors identified in Step 4 of the Guidance, which it must have regard to when setting a penalty: s. 38(8) CA 1998… These factors are so obviously material to a decision fixing a penalty that anything short of direct consideration of them by the CMA or the Tribunal would not be in accordance with the purpose of s. 36(7A)(b) CA 1998.”

“This Court’s jurisdiction is governed by s.49(1) of the 1998 Act and is not limited (in relation to penalty) to errors of law by the CAT. But in a case where there is no real challenge to the primary findings of fact this Court is limited to a review of the penalties based on the material before the CAT. Given the specialist nature of the tribunal and its obvious expertise in these matters, an appeal against penalty is unlikely to be successful unless it can be shown either that the CAT erred in principle (which can include a failure to take relevant matters into account) or that, looked at overall, the penalties imposed were clearly disproportionate or discriminatory so as to be unjustifiable by any of the matters which the CAT either did or should have taken into account.”