Zizhu Pharmaceutical monopolized, appeal failed and was fined.
Compiled from The Paper
Case review
Zizhu Pharmaceuticals is not a publicly listed company, but the two emergency contraceptives involved in this case — Jinyuting and Yuting (Levonorgestrel Tablets 1.5mg, Levonorgestrel Tablets 0.75mg*2) — are well known to many people because of advertising.
The Beijing Municipal Administration for Market Regulation stated that from 2015 to 2021, Zizhu Pharmaceutical reached monopoly agreements with first-level and second-level distributors nationwide to fix and limit the sales prices of the drugs Jinyuting and Yuting by signing agreements, issuing price adjustment letters, and making commitment letters. They implemented these fixed and limited price monopoly agreements through measures such as refining sales management systems, commissioning data companies to monitor distributor sales prices, and strengthening internal supervision.
On May 24, 2023, the Beijing Municipal Administration for Market Regulation made a penalty decision on Zizhu Pharmaceutical for reaching and implementing a monopoly agreement in accordance with the law, ordering Zizhu Pharmaceutical to stop the illegal activities and imposing a fine of 12.6436 million yuan, which is 2% of its domestic sales in China for 2020.
The aforementioned behavior of controlling sales prices is not uncommon in the pharmaceutical industry. Some industry insiders have pointed out that the penalty imposed on Zizhu Pharmaceutical this time serves as a warning to the entire industry, and compliance issues cannot be emphasized enough. According to the administrative penalty decision, Zizhu Pharmaceutical submitted a written statement of defense after receiving the "Notice of Administrative Penalty." However, the defense statement was ultimately not accepted. The Beijing Municipal Administration for Market Regulation considered that Zizhu Pharmaceutical failed to prove that the agreement reached fell under the circumstances of Article 15 of the previous version of the Anti-Monopoly Law, nor did it prove that the agreement did not have the effect of eliminating or restricting competition.
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[1] The People's Republic of China
Anti-Monopoly Law
Article 13
It is prohibited for operators with competitive relationships to reach the following monopoly agreements:
(1) Fixing or changing the prices of goods;
(2) Restrict the production quantity or sales quantity of goods;
(3) Dividing the sales market or the raw material procurement market;
(4) Restrict the purchase of new technologies and new equipment, or restrict the development of new technologies and new products;
(5) Jointly boycott transactions;
(6) Other monopoly agreements recognized by the antitrust enforcement agencies of the State Council.
The term 'monopoly agreement' as used in this Law refers to agreements, decisions, or other concerted actions that exclude or restrict competition.
Article 14
It is prohibited for operators to reach the following monopoly agreements with trading counterparts:
(1) The price set for reselling goods to a third party;
(2) Restricting the minimum price at which goods can be resold to third parties;
(3) Other monopoly agreements recognized by the antitrust enforcement agencies of the State Council.
Article 15
If the operator can prove that the agreement reached falls under one of the following situations, the provisions of Articles 13 and 14 of this Law shall not apply.
(1) For improving technology and researching and developing new products;
(2) To improve product quality, reduce costs, and enhance efficiency, by unifying product specifications and standards or implementing specialized division of labor;
(3) To improve the operational efficiency of small and medium-sized operators and enhance their competitiveness;
(4) In order to achieve energy conservation, environmental protection, disaster relief, and other social public interests;
(5) Due to the economic downturn, to alleviate the severe decline in sales or obvious overproduction;
(6) To safeguard legitimate interests in foreign trade and foreign economic cooperation;
(7) Other circumstances as prescribed by law and the State Council.
In the cases listed in items one to five of the preceding paragraph, where the provisions of Articles 13 and 14 of this Law do not apply, the operator shall also prove that the agreement reached will not seriously restrict competition in the relevant market and can allow consumers to share the benefits arising therefrom.
[1] The author's perspective
Recently, the official website of the State Administration for Market Regulation released the "2023 Typical Cases of Special Antitrust Enforcement Actions in the Field of People's Livelihood (First Batch)." Among the 13 typical cases published, 5 are related to pharmaceuticals, with 7 pharmaceutical companies named, including two listed companies, Yuanda Pharmaceutical and Northeast Pharmaceutical. The involved drugs cover both active pharmaceutical ingredients and finished drugs, including popular categories such as contraceptives, oncology drugs, and rare disease drugs.
It can be seen that due to the professionalism and particularity of the pharmaceutical industry, monopolistic behavior is quite common among pharmaceutical companies. However, using one's advantages to suppress peers or infringe on consumer rights is unacceptable.
