French Competition Council vs. GSK France: who is the predator?

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Jeremy de Douhet, Axel Schulz, Jun 14, 2007

This article was originally published in Competition Policy Insight. It is republished here with permission.

On 14 March 2007 the French Competition Council issued a decision imposing a EUR 10 million fine on GlaxoSmithKline France (GSK France) for predatory pricing. The investigation was the result of a complaint by a generic manufacturer, Flavelab, and resulted in the first ever predatory pricing decision by the French Competition Council.

This decision is remarkable in several aspects. Firstly, the alleged predatory pricing did not take place in the market in which GSK was found to be holding a dominant position, but in another, allegedly related market. Secondly, in order to find a dominant position on the related market, the Competition Council adopted a very narrow product market definition, equal to ATC level 5. Thirdly, the accusation of predation was not based on GSK’s cost of production, but on the internal transfer price between GSK France and another subsidiary of the parent company GSK plc.

According to the decision, GSK France engaged in 1999 and 2000 in a predatory pricing strategy in the market for second generation injectable cephalosprines sold to hospitals. This market comprised GSK France’s product “Zinnat” and Lilly France’s product (Kefandol), as well as generic versions (the Zinnat market). Both GSK and Lilly