Lithuanian Competition Authority Fines Pharmacy Association and Individual Firms for Collusion while Participating in Margin-setting Procedure
According to the attached press release of yesterday’s date, the Lithuanian competition authority (Konkurencijos Taryba or KT) levied total fines of more than EUR 72 million on the Lithuanian Pharmacy Association and 8 individual pharmaceutical companies. While KT imposed a record fine, the allegedly cartel-like conduct that prompted the fine is unusual and raises delicate questions regarding the borderline between legitimate collective advocacy and illegitimate collusive behaviour. The public version of the actual decision of KT and the judgment on appeal which the Regional Administrative Court of Vilnius is expected to deliver will hopefully clarify the dividing line between these two types of conduct.
KT accuses the pharmaceutical firms of having coordinated their wholesale and retail margins on reimbursable medicines while each pretended to have used only its own operating costs. The margins were transmitted to the Ministry of Health (Ministry) which approved them on the basis of the submitted data. The firms at issue also prepared a budget for a model or prototype pharmacy which supposedly showed that the margins which they had in mind were necessary to ensure the pharmacy’s survival.
According to KT, the agreement on the margins restricted competition at the wholesaler and retailer levels. It also impacted the decision-making of the Ministry. According to KT, if the firms had independently supplied the requested information to the Ministry and had refrained from coordinating the margins, these margins would probably have been lower. KT maintained that the binding character of the approved margins did not change this analysis.
KT not only imposed sizeable fines but also recommended that the government should adapt the regulatory framework and thus reduce the scope for collusion.