Commission action against Glaxo Wellcome

United Kingdom

The Commission has sent a Statement of Objections to Glaxo Wellcome concerning its new sale conditions for pharmaceutical products in Spain. Glaxo Wellcome charges its Spanish wholesalers prices set down by Spanish regulations when the products are destined for sale in Spain and voluntarily notified this arrangement to the Commission in 1998. By contrast, when the products are exported from Spain, Glaxo Wellcome charges a higher price, which it sets itself. In September 1998, the Commission sent an informal warning letter to Glaxo Wellcome stating that the system restricted competition and impeded parallel trade.

The Commission observed that the export price levels set by Glaxo Wellcome are based largely on Glaxo Wellcome’s UK prices levels. The company’s intention is to protect the UK market where prices are higher than in the rest of the EU and the national legislation favours parallel imports. Glaxo Wellcome’s main argument is that the Spanish price is dictated by the Spanish authorities and is consequently artificially low. Therefore, the only price that it can determine is the export price. In the absence of intervention by the Spanish authorities, there would be no double pricing and no price differentiation.

Glaxo Wellcome also claims the benefit of an exemption from EC competition rules on the ground that its system allows it to increase its profits and to invest, under the best conditions, in the research and development of innovative new products. The Commission stated that such considerations cannot be used as a justification for obstructing parallel exports or imports within the EC. At this stage, the Commission envisages banning the new conditions of sale in a formal decision against Glaxo Wellcome. (IP/99/522)