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CADE’s General Superintendence concludes investigation of sham litigation cases

Anticompetitive conduct

The agency suggests the condemnation of pharmaceutical companies and filed the investigation against cosmetic producer
published: Aug 20, 2014 10:00 AM last modified: May 02, 2016 05:58 PM

The General Superintendence of the Administrative Council for Economic Defense – CADE published an opinion on 20 August 2014 recommending the condemnation of the companies Eli Lily do Brasil Ltda. and Eli Lily and Company for the infringement of sham litigation within the judiciary aiming at hindering free competition (Administrative Proceeding no. 08012.011508/2007-91).

The opinion indicates that the company tried to maintain its position as the exclusive trader of the Gemzar medicine filing contradictory and misleading legal actions within the judiciary and the public administration. Eli Lily’s strategy was to improperly obtain and extend its temporary monopoly of the medicine’s active principle, the gemcitabine hydrochloride, which is used in patients with cancer.

The Superintendence’s opinion states that after the National Industrial Property Institute – INPI repeatedly refused to grant the patent of the medicine to the Eli Lily, the company sought the judiciary to obtain the product’s exclusivity right, even with the knowledge that the active principle was in the public domain.

According to the investigations, the pharmaceutical industry tried to illegally change the original scope of the patent application. The company also sought to prevent the INPI to render a final decision on the exclusivity with a preliminary injunction request in the Regional Federal Appellate Court of the 2nd Region – TRF da 2ª Região. At the same time, stating that INPI was taking too long to reach a conclusion on the matter, the company succeeded to obtain the temporary monopoly of the product within the TRF of the 1st Region. Furthermore, Eli Lily filed suits with the same anticompetitive purpose in different small courts, appealing against unfavorable decisions.

In 2011, by an action for relief from judgment, the Judiciary recognized the rejection to the company’s rights and cancelled the previous judicial decisions.

The investigation began after a complaint of the Brazilian Association of Generic Medicines Industry – Pró Genéricos. According to the entity, during the period of monopoly by Eli Lily’s companies, the São Paulo State Health Secretariat was forced to acquire the gemcitabine hydrochloride for BRL 589. After the revocation of the preliminary injunction, which prohibited other competitors to offer the product, the cost of the medicine decreased to BRL 189.

The General Superintendence’s opinion also stated that as a result of its practices, Eli Lily managed to obtain, between 2007 and 2008, the undue monopoly of the commercialization of gemcitabine hydrochloride in the Brazilian market. This resulted in fewer options of traders of the medicine and higher prices, which generated serious damages to the consumers.

The proceeding is now to be tried by CADE’s Tribunal, which is responsible for the final decision. In case of condemnation, the company could pay a fine of 0,1% to 20% of its turnover.

Other investigation – On 20 August 2014, the General Superintendence also published an opinion recommending the filing of the Administrative Enquiry no. 08012.003303/2011-18, opened against Niely do Brasil Industrial Ltda. to investigate the infringement of sham litigation.

The investigation began after the complaint by Vargas Marcas e Participações Ltda. and by Phitoteraphia Biofitogenia Laboratorial Biota Ltda., which claimed that Niely would have abused its right of petition within the judiciary, which resulted in anticompetitive effects.

Both companies, producers of hair products, informed their ownership of the label “Gold” and that judicial actions filed by Niely prevented them to create a cosmetic named “Novex Gold”. Niely plead to have the exclusive right over the term printed in golden packages and it accused the other companies of unfair competition.

After analyzing the case, the General Superintendence understood that the judicial actions filed by Niely are not clearly unfounded and misleading, neither generate conditions to exclude or damage the competing companies. Thus, it concluded that the case is a private dispute with no potential sensitive impacts to the final consumer. Under these conditions, the Superintendence also concluded that CADE does not have the competence to decide over esthetic aspects of the companies’ products packages and filed the enquiry.

If there are no appeals against the General Superintendence’s decision and if the case is not called up by CADE’s Tribunal, the administrative enquiry will be definitely filed in 15 days after the opinion has been published.