Chanelle Veterinary Ltd v Pfizer (Ireland) Ltd

• Jurisdiction: Ireland
• Judge: JUSTICE FRANCIS D MURRHY
• Judgment Date: 11 February 1999
• Neutral Citation: 1999 WJSC-SC 1000
• Court: Supreme Court
• Docket Number: No: 319/97,[1996 No.6107P
• Date: 11 February 1999

THE SUPREME COURT

O 'FLAHERTY J

MURPHY J

LYNCH J

No: 319/97

BETWEEN:

CHANELLE VETERINARY LIMITED

PLAINTIFF/APPELLANT

AND

PFIZER (IRELAND) LIMITED TRADING As PFIZER ANIMAL HEALTH AND By ORDER OF THE COURT PFIZER ANIMAL HEALTH SA

DEFENDANTS/RESPONDENTS

Abstract:

Commercial law - Contract law - Intellectual Property - Trade and Industry - Competition law - European law - Distribution agreement - Selective distribution agreement - Statutory interpretation - Whether concerted practice existed - Whether actions of party terminating distributor agreement anti-competitive - Whether supplier abusing dominant position - Competition Act, 1991 (No 24) sections 4 and 5.

The plaintiff had operated as one of the main wholesale distributors for the defendant. The defendant had terminated the distributorship agreement with the plaintiff. The plaintiff instituted proceedings claiming that the actions of the defendant were anti-competitive and were in breach of European law. The plaintiff sought, inter alia, an injunction to compel the defendant to recommence the supply its products on the original terms. The plaintiff contended that the distribution agreement constituted a selective or restrictive distribution system which was anti-competitive. The plaintiff's claim was dismissed and the plaintiff appealed. Murphy J, delivering judgment, held that there was no evidence to suggest the existence of a concerted practice to exclude a distributor engaged in competitive trading. The delisting of the plaintiff as a distributor was not anti-competitive. The plaintiff's appeal would be dismissed.

1 JUDGMENT OF MR JUSTICE FRANCIS D MURPHY DELIVERED THE 11TH DAY OF FEBRUARY 1999

2 The above named Plaintiff/Appellant (Chanelle) are wholesalers and distributors of veterinary products. A company associated with Chanelle - Chanelle Pharmaceutical Manufacturing Limited (CPML) manufactures pharmaceutical products.

3 The first named Defendants/Respondents are a subsidiary of Pfizer International Inc and carry on the business of importing and manufacturing animal health, veterinary and other pharmaceutical products. The secondly named Defendant, Pfizer SA, is a Belgian subsidiary of Pfizer International Inc.

4 The distribution of animal health products evolved significantly between the years 1980 and 1995. Pfizer was a main supplier in the Irish market. Other suppliers were Beecham Laboratories Ltd and Smith Kline French Ltd. Those companies merged in August 1990. In September 1992 the new company Smith Kline Beecham (Ireland) Ltd reorganised its distribution system. In or about the month of January 1995 Pfizer purchased the animal health business of Smith Kline Beecham World-wide but more particularly the business of Smith Kline Beecham (Ireland) Ltd. Pfizer products had been distributed exclusively by Caffrey & Mallon Ltd and, at that stage, the Smith Kline Beecham products were distributed by a number of wholesalers, including Chanelle. On the 1st December 1995 Pfizer issued an announcement explaining that it was appointing five distributors and/or wholesalers to distribute its products in the Republic of Ireland. The Appellants asserted (at paragraph 6 of the Statement of Claim herein) that they and the other distributors were appointed on the following terms:

• "(1) The agreement was a non-exclusive distributorship arrangement;

• (2) The First Named Defendant sold and delivered its products to the Plaintiff

• (3) The Plaintiff purchased the products from the First Named Defendant on 60 days end of month credit at a price which included delivery.

• (4) The products were delivered to the Plaintiff's central warehouse and were then distributed by the Plaintiff to the retail outlet;

  (5,) The margin on the purchases was 15% (from the published trade prices,): this was reduced to l2.% in December 1995.

• (6) The First Named Defendant paid the Plaintiff a fee of approximately 20o of turnover per annum for computer information on its customers; this fee was changed to a fixed fee of £1 0,000 in December 1995.

• (7) The territory was the State."

  Whilst it was not pleaded as a term it was common case that, in connection with the agreement, Pfizer operated a rebate scheme which Mr Justice O'Sullivan described in his judgment ( [1998] 1 ILRM 161 at pages 166-167) in the following terms:

  "In parallel with these arrangements Pfizer also operated a rebate scheme which was available to those who purchased their range of goods through the five appointed wholesalers. Depending on quantity the maximum rebate was boo. This rebate was paid month/v to end purchasers and was calculated on a rolling twelve month basis."

  Moreover, it was argued that the distribution agreements incorporated - either initially or subsequently - an important implied term to the following effect, namely:

  "None of the wholesale distributors shall be permitted to distribute a generic product which competes with the leading brand of Pfizer."

  On the 17th day of June 1996 Pfizer notified Chanelle that they, Pfizer, had decided to implement new distribution arrangements as from the 24th June 1996 and, that as from that date, Chanelle would no longer be a main wholesale distributor. Chanelle were given no reason for the termination of the agreement with them but have claimed that the purpose of dismissing (or de-listing) them was to exclude them from the distribution arrangement or to punish them for engaging in the supply, then recently announced, of a generic veterinary medicinal product called "Albex"which was in competition with a Pfizer product known as "Valbazan".It was suggested that the Pfizer product was particularly vulnerable to competition in as much as the patent therefor had then recently expired.

  The Plenary Summons herein was issued on the 10th July 1996. An undertaking was given by Pfizer to continue supplies to Chanelle (in lieu of an interlocutory injunction) on the 29th July 1996. An amended Plenary Summons and Statement of Claim was delivered on the 25th October 1996 and an amended defence delivered on the 31st October 1996. The relief claimed on the amended Statement of Claim was as follows:

  • "(a) A declaration that the agreements, decisions and concerted practices of the First and/or Second Named Defendants and other undertakings within the Pfizer group of companies world-wide and/or other persons or undertakings unknown at present to the Plaintiff in purporting to remove the said Plaintiff from the Defendants' distribution network, is prohibited by Article 85(1) of the Treaty of Rome and Section 4 of the Competition Act, 1991 and rendered void thereby;

  • (b) A declaration that the Plaintiff is entitled to participate in the Defendants' distribution network on the terms heretofore applying between the parties to these proceedings;

  • (c) A declaration that the action of the Defendants in purporting to remove the Plaint if from the said Defendants 'distribution network and/or terminate or breach the agreement between the Plaintiff and the Defendants constitutes an abuse of a dominant position within the relevant market contrary to Article 86 of the Treaty of Rome and section 5 of the Competition Act, 1991;

  • (d) A declaration that the First and/or Second Named Defendants have engaged in agreements, decisions or concerted practices which have as their object or effect the prevention, restriction or distortion of competition in the market contrary to Article 85 of the Treaty of Rome and Section 4 of the Competition Act, 1991;

  • (e) An injunction restraining the First and/or Second Named Defendant, their servants or agents, or any person acting in concert with them or otherwise howsoever from terminating or breaching the agreement between the Plaintiff and the First Named Defendant on the Plaintiff's status as a wholesaler/distributor of the Defendants' veterinary/animal health products;

  • (f) A mandatory order directing the Defendants to supply the Plaintiff with its veterinary product on the terms and conditions heretofore applying between the said parties;

  • (g) Damages (including exemplary damages) for all losses sustained by the Plaintiff arising out of the Defendants breach of Article 85 and Article 86 of the Treaty of Rome and Sections 4 and 5 of the Competition Act, 1991;

  • (h) Damages for breach of contract;"

    The proceedings came on for hearing in April 1997. An application by Pfizer for a non-suit was refused for the reasons set out in the judgment of Mr Justice O'Sullivan delivered on the 5th June 1997 and, on the 30th July 1997, the learned Trial Judge in his judgment of that date dismissed the Plaintiffs claim. It is from that judgment and the order made thereon that the Appellant appeals to this Court.

    The complexities of Competition Law - both domestic and European - were aggravated in the present case by misunderstandings which arose as to the extent of the business carried on by Pfizer and the nature of the rights and duties imposed on the wholesalers pursuant to the Distribution Agreement aforesaid. The contention of Chanelle that Pfizer occupied a dominant position in the relevant market was rejected and has not been pursued on appeal. In addition it had been understood until midway through the proceedings that the authorised distributors were precluded from reselling Pfizer products to anyone (and more particularly Chanelle) other than an end user or another authorised distributor. It emerged that this was not the case and in fact all of the Pfizer products would have been available to Chanelle though not necessarily on terms as advantageous as would have been available to the authorised agents. This aspect of the matter was further complicated by the fact that Chanelle would qualify for the benefit of the rebates payable under the provisions made by Pfizer in that behalf. Perhaps these factors go some way to explaining...