Pfizer Incorporated & Anor v The Competition and Markets Authority

Under Competition Act 1998, a price above Cost Plus is not automatically excessive, unlawful or presumed abusive. Cost Plus is a benchmark for identifying an excess. The decision maker must then assess fairness, economic value, possible justification and relevant comparative evidence.

No single methodology or category of evidence is mandatory. Specialist competition authorities have a margin of appreciation, but must fairly evaluate material evidence. On appeal, the Competition Appeal Tribunal must assess the challenged decision on its merits and by reference to the pleaded grounds. It must not mischaracterise the decision or infer bias merely from disagreement with its conclusions. A decision remade after setting aside an administrative decision must nevertheless be reached through a procedurally fair process.

Pfizer and Flynn appealed against the Competition Appeal Tribunal’s decision dated 20 November 2024, reported at [2024] CAT 65. The Tribunal had set aside the Competition and Markets Authority’s decision that the appellants abused dominant positions by imposing unfair prices for phenytoin sodium capsules, but then remade the decision and found infringement again.

The CMA appealed against the setting aside of its decision. Pfizer and Flynn appealed against the retaken decision, alleging jurisdictional error, substantive error and procedural unfairness. The central questions were whether the Tribunal had correctly understood the CMA’s analysis of Cost Plus, comparators, market power and commercial intention, and whether it could fairly remake the decision on a new analytical and evidential basis.

1. Disposition. The single judgment of Green, Snowden and Zacaroli LJJ granted the CMA permission to appeal and allowed its appeal. The appeals of Pfizer and Flynn against the CAT’s retaken decision were also allowed. The retaken decision and the entire CAT judgment were set aside. Consequential issues concerning reinstatement of the CMA decision and penalties were reserved for a separate ruling.
2. Applicable principles. The statutory test under section 18(2)(a) of the Competition Act 1998 is fairness. Cost Plus identifies a benchmark and any excess, but prices above it are not per se abusive. The CMA was not required in every case to identify a precise boundary between legitimate and illegitimate surplus. The CMA had fairly considered the evidence and had not adopted the erroneous approach attributed to it by the CAT.
3. Appeal and evidence. The CAT’s merits jurisdiction did not make the appeal a hearing de novo. It had to assess the substance of the CMA’s decision and whether any error was material. The Court of Appeal would intervene for an error of law, including misinterpretation of the decision, but not merely because a specialist tribunal had reached an evaluative conclusion with which the Court disagreed. The CAT had misread the CMA’s findings concerning the Pfizer/Flynn agreement, Cost Plus, ROCE, comparators, EU prices and price changes.
4. Specific errors. The CMA had not found an unlawful cartel or joint abuse of dominance. The agreement’s purpose and effect were nevertheless relevant factual evidence of abuse. The CAT wrongly treated the CMA’s consideration of business strategy and intention as irrelevant. It also wrongly inferred confirmation bias from alleged substantive errors, without applying the distinction between permissible predisposition and impermissible predetermination stated in Magill v Porter [2001] UKHL 67.
5. Retaken decision. The CAT had formal power under Schedule 8 to make a decision the CMA could have made after setting aside the CMA decision. That power remained subject to procedural fairness. Given the CAT’s findings of root-and-branch defects, its new analytical framework, and its provisional adverse conclusions, Pfizer and Flynn should have received notice and an opportunity to address the proposed case. The retaken decision was therefore procedurally unfair and had to be set aside.

• Court of Appeal (Civil Division) — Permission granted to the CMA; CMA appeal allowed; Pfizer and Flynn appeals against the retaken decision allowed; the CAT judgment set aside in its entirety.
• Competition Appeal Tribunal — The CMA decision was set aside and the CAT remade the decision, finding abuse by Pfizer and Flynn: [2024] CAT 65.
• Court of Appeal (Civil Division) — The first appeal upheld the need for further analysis of tablet comparators and medical benefits and remitted the matter: [2020] EWCA Civ 339.
• Competition Appeal Tribunal — The first CMA decision was upheld on market definition and dominance but set aside for further analysis of tablets and medical benefits: [2018] CAT 11.