Would have, Could Have, Should Have: An Antitrust Tragedy in Three Parts

In July 2009, the European Commission issued its final report on the Pharmaceutical Sector Inquiry, describing a variety of routine commercial practices by innovative pharmaceutical and biotechnology companies which have allegedly prevented generic products from entering member state markets as soon as the Commission staff believed they should have. Although the Commission gave an obligatory nod to intellectual property rights, there is no doubt that the report betrayed an overwhelming preference by the Commission and its staff for enforcement actions that aimed to maximise the degree of generic entry and minimise the amount of time that branded pharmaceutical companies have to prevent generic companies from appropriating their inventions and investments.

For US readers, the report was not surprising in any respect, but this was not due to the conventional expectation that European competition law would be more restrictive than US antitrust law. Rather, the predictability of the report was due to the experience of the pharmaceutical and biotechnology industry with the broad-based and unprecedented assault on almost every aspect of these businesses by the Federal Trade Commission (FTC), state attorneys general and the private plaintiffs bar. The only arguable surprise was that the European Commission took so long to become active in an area that has witnessed – and in some ways precipitated – a revolution in how the US agencies, particularly the FTC, have approached the enforcement of antitrust law.

WOULD HAVE: THE ANTITRUST REVOLUTIONARY CONSENSUS OF THE 1980s AND 1990s

Perhaps this current attack on the pharmaceutical industry should be deemed a counter-revolution, not a revolution. After all, it represents an attempt to pull antitrust law back from a fundamental recognition in the 1980s – a revolution of its own at the time – that antitrust analysis must begin with a competitive benchmark for determining whether a transaction or practice has harmed, or is likely to harm, competition. That benchmark is the level of competition in the ‘but-for’ world – the world that would have existed in the absence of the transaction or practice. This is by no means a static definition – the Supreme Court had made clear in the 1970s that the butfor world is the reasonably predictable future that would exist in the absence of the practice under review. Though this mode of analysis is dynamic and predictive, the focus is on the probable, not the possible.