Commerce Act: Astrazeneca v. Commerce Commission

Pharmaceutical companies are given special exemptions from the general provisions of anti-trust law when dealing with Pharmac. The Commerce Commission cannot use its investigative powers to go on general “fishing expeditions” in relation to negotiations over funding of drugs.

The Commerce Act 1986 prohibits restrictive trade practices which may limit competition. The Commerce Commission has power to investigate and prosecute.

Pharmac is in an unusual position. As the sole purchaser of drugs for the health service it is a monopsonist: a monopoly buyer. Legislation establishing Pharmac exempts it from Commerce Commission oversight when negotiating contracts for the bulk supply of medicines.

But Pharmac found the Commission to be a useful ally when negotiations with Astrazeneca over supply of beta-blocker drugs fell apart.

In 2007, with Astrazeneca product Betaloc IV about to come off-patent, the pharmaceutical company sought to commit Pharmac to a long-term contract by tieing further supply to the continued supply of another Astrazeenca product, Betaloc CR.

Pharmac went on the offensive with a press campaign accusing Astrazeneca of acting in an anti-competitive manner by attempting to tie supply of one product to another and holding patients to ransom as a result. If Pharmac agreed, Astrazeneca would retain a protected market for Betaloc IV even when generic competitors arrived and patients would be forced to pay a part charge for use of the Astrazeneca product.

The Commerce Commission swung into action, commencing an investigation and issuing a section 98 notice demanding Astrazeneca provide specific information. It alleged the company was acting in an anti-competitive manner in its negotiations.

The Supreme Court ruled that the specific wording of the legislation establishing Pharmac exempted not only Pharmac from the anti-competitive provisions of the Commerce Act, but also exempted any pharmaceutical companies in their negotiations with Pharmac.

It further ruled that the Commission can only issue a s.98 notice when it has some objective evidence of a breach of the Act. It cannot act on a suspicion or whim and then justify its actions retrospectively on the basis of anything found following an investigation.

The section 98 notice served on Astrazeneca was invalid. The court was told that by the time the case got to the Supreme Court, Astrazeneca had responded to the Commission’s enquiries. The Commission said it had closed its investigation, finding no breach of the Commerce Act.

Pharmac’s published policies make it clear that cross deals or bundled arrangements might be approved.

Astrazeneca v. Commerce Commission – Supreme Court (26.8.09)

12.09.002

Employment: Finau v. Atlas Specialty

Employees cannot be forced to cover for striking colleagues, they must agree to taking on the work.

The Court of Appeal ruled that Atlas Specialty incorrectly suspended two employees who refused to operate machinery when the regular operators were on strike. The two were entitled to arrears of wages for an unlawful suspension.

The dispute arose during wage negotiations in 2005. Staff who normally operated a coil slitter were on strike. Atlas asked two employees who were not on strike to handle the machine. They were competent to do the work, and regularly operated the coil slitter when the regular operators were on leave or away sick. They refused to do their colleagues work during the strike, and were immediately suspended.

The legal issue centred on the manner in which an employer could use strike breakers.

The employer argued that any employee who normally undertook the work in question could be required to do the strikers’ work.

The Court of Appeal said the Employment Relations Act 2000 prohibits the use of new employees, or contractors, to break a strike, but does allow existing employees to do the work – provided they agree to do so.

Employers argued this meant strikes could never be broken: employees would always refuse to cover for striking colleagues. The Court said there are other options: employees refusing to provide cover might carry out work being done by other existing employees who in turn might cover for the striking workers.

Finau v. Atlas Specialty – Court of Appeal (7.8.09)

10.09.003