Cinven v Advanz Pharma Corp & Anor

In an excessive-pricing case, workable competition is a description of normal and sufficiently effective competition, not a bright-line legal test. A competition authority may use Cost Plus, supported by relevant comparators, to establish unfair pricing. It must fairly evaluate responsive evidence, but entry-incentivising, post-entry and hypothetical multi-firm prices are not mandatory or decisive benchmarks.

Post-entry prices may remain distorted by an earlier abuse. Their evidential value depends on whether the market has reached sufficiently effective competition, not simply on the passage of time or a temporary price level. Passive or uninformed customer conduct does not neutralise an abuse. For specific deterrence, the penalty guidance requires assessment of the undertaking’s size and global financial position, not merely the excess of the penalty over the direct financial gain.

The CMA found that the single undertaking known as Advanz abused its dominant position by charging excessive and unfair prices for generic Liothyronine tablets supplied to the NHS, contrary to Competition Act 1998, section 18. The price rose from about £20 per pack in January 2009 to about £247 in 2017, while the CMA’s average Cost Plus figure was £4.94.

The Competition Appeal Tribunal dismissed the companies’ merits appeals in [2023] CAT 52, save that it removed a specific-deterrence uplift from the financial penalties. Cinven and Advanz sought permission to appeal the pricing findings. The CMA sought permission to appeal the removal of the £14.8 million uplift imposed on Cinven.

The central questions were whether alternative pricing evidence displaced Cost Plus as the proper basis for unfairness, and how the CMA’s penalty guidance governed specific deterrence.

1. The CMA’s penalty appeal was allowed. Permission to appeal was refused on the companies’ proposed pricing, acquiescence and burden-of-proof grounds. The Court reinstated the full £51.9 million penalty imposed by the CMA on Cinven.

2. Fairness under section 18 is the statutory test. The expression workable competition, drawn from CMA v Flynn Pharma [2020] EWCA Civ 339, is not a mandatory structural test under which any price generated after the cessation of dominance, in the absence of collusion and with surmountable entry barriers, is necessarily fair. Market structure is potentially important evidence, but it is not dispositive.

3. Cost Plus was a lawful and sufficient methodology in this case. It could be used although calculated from the dominant undertaking’s own costs in an uncompetitive market. The CMA and CAT also cross-checked it against valid and meaningful comparators. The CAT had fairly evaluated, but permissibly rejected, the alternative benchmarks.

4. Entry-incentivising prices were not a legal ceiling below which an excessive price became lawful. Such prices may be evidence, but they can reflect the high entry barriers and subjective commercial assessments of a prospective entrant rather than effective competition. The CAT was entitled to find that £21 was a viable entry price for Uni-Pharma on the alternative hypothesis that such evidence was useful.

5. Nor were post-entry prices a valid comparator merely because entry had occurred or prices had temporarily settled. Earlier abusive prices could continue to contaminate the market. The CAT was entitled to find that the gradual decline from the exceptionally high entry price, high margins, price stickiness and soft oligopolistic conditions meant that the February 2021 price did not reflect sufficiently effective competition.

6. The NHS had not made an informed acceptance of the increases. In any event, passive acquiescence by a purchaser without countervailing buyer power could not turn exploitative unilateral conduct into lawful conduct or displace the CMA’s statutory enforcement role.

7. Under Step 4 of the CMA’s penalty guidance, specific deterrence requires the Step 3 penalty to be assessed against the undertaking’s overall size and financial position, including its global turnover and turnover outside the relevant market. The CAT erred by treating the penalty’s 8.6% excess over Cinven’s minimum financial benefit as sufficient, without addressing that the Step 3 figure was de minimis relative to Cinven’s global turnover. Reputational harm and prospective NHS pricing powers did not answer that question.

• Court of Appeal (Civil Division) [2025] EWCA Civ 578: refused Cinven’s and Advanz’s applications for permission to appeal on the substantive pricing issues; granted the CMA permission to appeal on penalty and reinstated Cinven’s full CMA penalty.
• Competition Appeal Tribunal [2023] CAT 52: dismissed the merits appeals against the CMA’s abuse finding, save that it removed the specific-deterrence component of the penalties.
• Competition and Markets Authority: decision dated 29 July 2021 found an infringement of section 18 of the Competition Act 1998 in the supply of Liothyronine tablets and imposed financial penalties.