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Cite as: [2007] EWHC 565 (Ch)

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Neutral Citation Number: [2007] EWHC 565 (Ch)
Claim No HC06CO463

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Claim No HC06CO463
Royal Courts of Justice
The Strand
London WC2A 2LL
5th March 2007

B e f o r e :

MR JUSTICE DAVID RICHARDS
____________________

(1) AAH PHARMACEUTICALS LIMITED
(2) PHOENIX HEALTHCARE DISTRIBUTION LIMITED
(3) MAWDSLEY BROOKS AND COMPANY LIMITED
(4) MUNRO WHOLESALE MEDICAL SUPPLIES LIMITED
(5) F MALTBY AND SONS LIMITED
(6) NORCHEM LIMITED
(7) P.I.F MEDICAL SUPPLIES LIMITED
(8) SANGERS (MAIDSTONE) LIMITED Claimant
-v-
(1) PFIZER LIMITED
(2) UNICHEM LIMITED Defendant

____________________

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____________________

Mr P ROTH QC and Ms M Demetriou and Ms R Kreisberger appeared on behalf of the Claimants.
Mr C QUIGLEY QC and Mr B Rayment appeared on behalf of the First Defendant.
Mr N GREEN QC and Mr A Robertson appeared on behalf of the Second Defendant.

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

  1. MR JUSTICE DAVID RICHARDS: On Friday 2nd March 2007, at the end of a substantial hearing which took place as part of the daily interim applications list, I announced my decision that I refused to grant the interim injunctions sought by the claimants against Pfizer Limited.
  2. I considered it necessary to give an immediate decision because the injunction sought would have required Pfizer to continue to supply the claimants from Monday, 5th March, and there could not be uncertainty as to the outcome over the weekend. Because there was still waiting an urgent application in a different case which had to be heard that day, I was unable to give my reasons immediately. I now do so.
  3. This is an application for interim injunctions to restrain Pfizer Limited from terminating its supply agreements with the claimants and from refusing to supply the claimants with its prescription drugs.
  4. The case made by the claimants is that such termination and refusal would infringe Articles 81 and 82 of the EC Treaty and the prohibitions in chapter 1 and 2 of the Competition Act 1998.
  5. At this stage, the claimants seek injunctions over an effective hearing of their application for injunctions pending trial. The present application was issued on Tuesday, 27th February 2007 with Friday, 2nd March as its return date. When issued, it was supported by 15 witness statements which were subsequently supplemented by a further nine witness statements; with their exhibits they run to some 450 pages. As the claimants accept, Pfizer has not had an opportunity of responding fully to this evidence, but it has filed three witness statements.
  6. The termination of supplies by Pfizer arises in connection with arrangements it has made with UniChem Limited. UniChem was not named as a party, but on its application, which was not opposed, I ordered it to be joined as the second defendant. The arrangement between Pfizer and UniChem involves the appointment of UniChem as a logistics service provider, or, put more prosaically, a delivery agent, through which Pfizer will supply retail pharmacies and dispensing doctors with its prescription drugs.
  7. This arrangement is due to commence today, Monday, 5th March. Pfizer and UniChem have not disclosed the agreement but they have summarised its terms in evidence, and I am told by counsel for Pfizer that it contains no contractual restriction on Pfizer's right to sell to wholesalers such as the claimants.
  8. Equally, Pfizer has made clear since October 2006 that it would cease supplies to wholesalers, including the claimants, from March 2007, and that the last orders that it would fulfil were those placed on 23rd February 2007.
  9. The new arrangement with UniChem and the proposed termination of existing arrangements with wholesalers have been well-known for a considerable period. In April 2005 Pfizer announced its intention to supply the market through one or more logistics service providers to the exclusion of wholesalers. It invited tenders. Negotiations took place with the first and second claimants as well as UniChem, but UniChem emerged as the preferred and perhaps only bidder. In due course, a contract was made with it.
  10. On 28th September 2006, Pfizer announced its arrangements with UniChem, and on the same day it sent letters to wholesalers informing them of its intention to terminate supplies to them in March 2007. Pfizer stated in the letters that it would not accept orders placed by wholesalers after 23rd February 2007.
  11. On 19th October 2006, Pfizer submitted a briefing paper in relation to these arrangements to the Office of Fair Trading. Quite promptly, the claimants and others lodged complaints with the OFT. I will return shortly to the course of events as regards those complaints.
  12. The claimants are full-line pharmaceutical wholesalers. Their business is the stocking and supply of the full line of pharmaceutical products, in particular some 12,000 product lines of prescription-only drugs, to pharmacies and dispensing doctors. This is in contradistinction to short-line wholesalers who carry and sell only a restricted range of fast-moving products, approximately 2,000 product lines.
  13. The claimants constitute all the members of the British Association of Pharmaceutical Wholesalers, other than UniChem Limited, Sangts Pharmaceutical Distributors Limited, which supplies the Co-op, and Sangers Northern Ireland Limited, which hasentered into an arrangement with UniChem to distribute the Pfizer products under the new scheme in Northern Ireland.
  14. Pfizer is the primary UK operating subsidiary of Pfizer Incorporated, the world's largest pharmaceutical company. Pfizer currently supplies a wide range of prescription drugs in the United Kingdom, at a total value of some 933 million, representing around 10 per cent by value of total UK consumption. Amongst its products are Lipitor, which is currently the leading branded pharmaceutical drug in the world by sales, and Viagra. Pfizer has supplied the claimants for many years, and the claimants in turn as full-line wholesalers have been supplying Pfizer products to pharmacies and dispensing doctors.
  15. The present claim is brought with the support of a number of trade bodies and associations. These are the National Pharmaceutical Association, which represents all pharmacists in the United Kingdom; the Pharmaceutical Services Negotiating Committee, which represents all community pharmacies providing NHS pharmaceutical services in England and Wales, and which is recognised as the NHS representative body by the Secretary of State for Health; the Independent Pharmacy Federation, which represents all independent pharmacies in the United Kingdom; Cambrian Alliance, which represents independent pharmacies in Wales; Albapharm, which is a buying group for independent pharmacies across Scotland, northern England and Northern Ireland; the Dispensing Doctors Association, of which 2,626 of a total of 5,000 dispensing doctors in the UK are members; and finally the Scottish Pharmaceutical General Council. A number of these bodies and others have also made complaints to the OFT.
  16. As already mentioned, Pfizer's agreement with UniChem is the consequence of Pfizer's decision to sell direct to the retail market, rather than through wholesalers. The reasons for Pfizer's decision to implement this Direct To Pharmacy scheme are explained by David Watson, the head of trade management at Pfizer Limited, in paragraph 2.4 of his witness statement of 1st March. He states that the aims are, first, to provide a guaranteed source of genuine, correctly packaged and labelled Pfizer prescription medicines for the benefit of patients in the UK; secondly, to maintain ownership and control of Pfizer's prescription medicines up to the point of sale to Pfizer's customers; thirdly, to ensure there is better traceability of Pfizer prescription medicines in the UK; fourthly, to improve the management of stock in the UK, for example to ensure product availability in case of an interrupted supply to patients; and fifthly, to develop a new commercial value proposition and strategic approach to pharmacy.
  17. Pfizer's move to direct sales to the retail market does not stand alone. GlaxoSmithKline has operated its own Direct To Pharmacy scheme since 2005, but it is operated through a number of major wholesalers. AstraZeneca and Eli Lilly have announced reviews of their supply arrangements, and AstraZeneca has submitted tender packs for logistics supply arrangements.
  18. In its complaint to the OFT, the Independent Pharmacy Federation has made clear that, while they have concerns as to Pfizer's scheme, it is the prospect of AstraZeneca and other manufacturers also establishing similar systems which could threaten a breakdown of the distribution network. These schemes may raise, indeed almost certainly do raise, complex competition issues going to the whole way in which the market in pharmaceutical drugs is organised in this country. It is a market in which competition authorities have already taken a keen interest.
  19. Mr Watson described the principal features of the scheme as provided in the agreement with UniChem in his witness statement as follows.
  20. One, Pfizer retains ownership of Pfizer products at all times until they are delivered to the customers; two, all risks in the products remain with Pfizer; three, Pfizer does not sell stock to UniChem; four, UniChem operates a storage, ordering and delivery service on behalf of Pfizer and receives payment from Pfizer for the services it provides; five, UniChem retains stock for Pfizer which it stores in its 11 storage depots and it receives the stock direct from Pfizer's pre-wholesalers warehouse, which maintains large stocks of all Pfizer's prescription products; six, UniChem is required to maintain a level of stock of Pfizer products under controls set by Pfizer; seven, Pfizer at all times knows the volume of stock being kept at each depot and has control over the location of Pfizer products; eight, Pfizer authorises customers using a customer master file from which UniChem is permitted to supply or not permitted to supply when orders are placed for Pfizer products; nine, pharmacies and other customers order Pfizer products from UniChem using any one of a number of shop ordering systems; ten, UniChem pick and pack Pfizer products for the customers' orders which are delivered together with any other products ordered from UniChem acting in its separate capacity as wholesaler and any GlaxoSmithKline products under its own Direct To Pharmacy scheme; 11, a Pfizer invoice is delivered with the Pfizer products; 12, UniChem attempts to collect payment from the customers on Pfizer's behalf for a set period after which all bad debts are passed to Pfizer for Pfizer to attempt collection; 13, UniChem deals with product returns and recalls on behalf of Pfizer; 14, Pfizer operates a customer contact centre which deals with customer queries where they relate to Pfizer products, and UniChem operates a customer contact centre which deals with customer queries where they relate to deliveries.
  21. In paragraphs 4.6 and 4.7 of his witness statement, Mr Watson further describes the agreement. 4.6:
  22. "Under the agreement Pfizer retains a complete control of the service to be provided by UniChem. A series of electronic and manual interfaces between UniChem and Pfizer are used to show that UniChem is performing its obligations under the agreement. Pfizer also has a right to audit UniChem's performance of the services."

    4.7:

    "Pfizer wanted to ensure that UniChem maintains high standards in storing and delivering the Pfizer products. As a result the agreement requires UniChem to provide the services to a very high standard. UniChem is required to store Pfizer products according to Pfizer's requirements, which include requirements as to location, security, quality and health and safety."
  23. He goes on to explain that at a late stage of the negotiations UniChem sought a period of exclusivity as the logistics services provider. The agreement provides for complete exclusivity for 18 months. After 18 months, Pfizer is entitled to engage vertically integrated sales groups, in practice the first and second claimants, as LSPs, and after two years it can engage any LSP. The agreement has a term of three years.
  24. In their skeleton argument, counsel for the claimants summarised their case as follows:
  25. "(a) The termination of existing supply arrangements with the claimants will deprive them of an essential attribute of a full-line wholesaler since they will no longer be able to stock and supply the products of a major pharmaceutical manufacturer that accounts for 10 per cent of all Ethicals in the UK.
    "(b) Pfizer's agreement to supply only through UniChem distorts competition between UniChem and the claimants since UniChem will thereby become the only full-line wholesaler able, 1, to take orders for the full range of Ethicals and, 2, to deliver all those products in the same delivery to pharmacies and dispensing doctors.
    "(c) As regards Pfizer's products, Pfizer will thereby be reserving the downstream market of supply to pharmacies and dispensing doctors to itself, excluding all competition in the supply of those products.
    "(d) It will cause serious and irreparable damage to the claimants in that they will be placed at a considerable disadvantage in competing with UniChem for the custom of pharmacies and dispensing doctors, such that independent pharmacies and independent doctors in particular are likely to switch to UniChem for all their supplies. There is a considerable risk that such switching will take place prior to the OFT eventually taking a decision on the substantive issues, which on past precedent is likely to take at least a year."
  26. For these reasons, the claimants allege that the refusal to supply them breaches Article 82 of the EC Treaty and section 18 of the Competition Act 1998, and any understanding to that effect with UniChem breaches Article 81 and section 2 of the Competition Act. It was broadly on these bases that the claimants and those supporting them lodged their complaints with the OFT, the first such complaint being lodged on 1st November 2006. They also invited the OFT to take interim measures to prevent implementation of the scheme pending the outcome of a full investigation.
  27. The OFT possesses a jurisdiction in this respect which is parallel to that of the High Court. There was nothing wrong in principle with the claimants seeking remedies through the OFT, and it had the significant practical advantage from their point of view that they would not be required to give an undertaking in damages to compensate Pfizer and UniChem for any loss which they might suffer if it transpired that interim measures had not been justified.
  28. Under section 25 of the Competition Act, the OFT has power to conduct an investigation in any of the cases set out in the section. The relevant cases are in section 25(2) to (5) which provide as follows:
  29. "(2). The first case is where there are reasonable grounds for suspecting that there is an agreement which (a) may affect trade within the United Kingdom and (b) has as its object or effect the prevention, restriction or distortion of competition within the United Kingdom.
    "(3). The second case is where there are reasonable grounds for suspecting that there is an agreement which (a) may affect trade between member states and (b) has as its object or effect the prevention, restriction or distortion of competition within the community;
    "(4). The third case is where there are reasonable grounds for suspecting that the chapter 2 prohibition has been infringed;
    "(5). The fourth case is where there are reasonable grounds for suspecting that the prohibition in Article 82 has been infringed."
  30. Section 35 confers on the OFT the power to impose interim measures if it has begun an investigation under section 25 and not completed it. Section 35(2) and (3) provide:
  31. "(2). If the OFT considers that it is necessary for it to act under this section as a matter of urgency for the purpose (a) of preventing serious irreparable damage to a particular person or category of person or (b) of protecting the public interest, it may give such directions as it considers appropriate for that purpose.
    "(3). Before giving a direction under this section, the OFT must (a) give written notice to the person or persons to whom it proposes to give the direction, and (b) give that person or each of them an opportunity to make representations."
  32. If the OFT refuses to open an investigation under section 25 or to impose interim measures under section 35, an appeal lies to the Competition Appeal Tribunal.
  33. The requirement under section 25 to be satisfied that there are reasonable grounds for suspecting an infringement of Articles 81 or 82 or their domestic counterparts, and the requirement under section 35(2)(a) that the purpose of interim measures must be to prevent serious irreparable damage to a particular person or category of persons, are close approximations to two of the essential pre-requisites to the grant of any interim injunction.
  34. The course of events as regards the complaints lodged with the OFT is detailed in the evidence of Mr Maitland-Walker, the claimant's solicitor, and may be summarised as follows. The complaints were assigned to a case officer at the OFT, Andrew Bearne, who informed Mr Maitland-Walker on 29th November that their complaint was the subject of a preliminary investigation. Further submissions were made in December 2006 and there was regular contact by the complainants' solicitors to obtain updates on the preliminary investigation.
  35. On 9th January 2007 Mr Maitland-Walker sought confirmation that the OFT was going to investigate its complaint and would grant interim measures. In response, the OFT notified him that they were continuing to obtain information and to conduct interviews, and made clear that they needed to be satisfied that the thresholds in section 25 were met.
  36. There was continuing contact over the following weeks, with the OFT requesting and receiving further information. On 14th February, Mr Maitland-Walker spoke to Mr Bearne for an update. His file note records that:
  37. "OFT still had concerns about supply chain, concern about lack of immediate harm, message of immediate harm not coming through, maybe if another supplier takes similar action."

    And:

    "Could not give me a date for decision on interim measures but unlikely for 5th March."
  38. On 19th February 2007, Mr Maitland-Walker informed the OFT by letter that the claimant had decided to apply for an interim injunction preventing Pfizer from implementing the new distribution agreement on 5th March, and he asked the OFT to keep this information confidential until Pfizer and UniChem had been served.
  39. In the same letter, Mr Maitland-Walker stated:
  40. "We appreciate the complexity of the issues the OFT faces, and recognise that the OFT may wish to seek, for example, expert economic analysis in respect of the structural changes to the market that will be caused by Pfizer's new distribution arrangements."
  41. Mr Bearne spoke three times to Mr Maitland-Walker on 19th February, following receipt of his letter. Mr Maitland-Walker confirmed that his clients were not withdrawing their application for interim measures. Mr Bearne said that the OFT was now planning to issue a decision on interim measures sooner rather than later, and, in any event, before 5th March. It would, he said, probably take a couple of days.
  42. Mr Maitland-Walker's note of the second conversation continues:
  43. "You said that the decision was likely to be negative on interim measures on the basis that there was insufficient evidence of serious harm to the supply chain, but you said that the OFT had not made a decision on the section 25 thresholds but would do so later."
  44. In the note of the last conversation on 19th February, Mr Maitland-Walker recorded Mr Bearne as saying that:
  45. "The OFT was intending to write a letter to us within the next few days and that it was proposing to reject the application for interim measures on the grounds that there was insufficient evidence of any serious harm to the supply chain. You said that this did not mean that the OFT had decided not to pursue the case. A decision upon whether the section 25 thresholds had been satisfied was yet to be made. That would probably not be made until after 5th March 2007."
  46. In view of the terms of section 35, which requires an investigation under section 25 as a pre-condition to the grant of interim measures, it was clear from paragraph 3 of this note that the OFT would probably not be able to make a formal decision on interim measures before 5th March.
  47. Notwithstanding that position but, it would seem, in the mistaken belief that the OFT could take an effective decision to refuse the application for interim measures which could form the subject of an appeal to the Competition Appeal Tribunal, Mr Maitland-Walker wrote to the OFT on 20th February to say that his clients had decided that they would not proceed with an application to the High Court. It was clear from the letter that they had prepared evidence for an application for an injunction and they proposed to submit it to the OFT.
  48. On 23rd February, Mr Bearne spoke to Mr Maitland-Walker, whose file note of the conversation records as follows in paragraphs 2 and 3:
  49. "2. You said that in fact you were about to ring me to let me know that a decision on IM [interim measures] was now unlikely to be taken before 5th March 2007. You said that the OFT had been distracted from its main task of deciding whether the section 25 thresholds had been met to trigger a formal investigation. You said that you could not decide on IM until a decision had been made on the section 25 point. The OFT had finite resources. It would not make the section 25 decision until after 5th March and the IM issue would have to be considered after that. You said that we would receive a letter confirming this by the middle of next week. The present situation was that our application for IM was not formally rejected.
    "3. I asked whether this problem had arisen because of the new material we had sent during this week. You said no. You said that the OFT would welcome further material if we wished to provide it."
  50. On 26th February, shortly after 6 o'clock in the evening, Mr Maitland-Walker wrote to Pfizer that the claimants intended to issue proceedings in the High Court, and to seek an interim injunction to prevent implementation of the new distribution scheme pending trial of the action. In fact the relief now sought is restricted to orders requiring Pfizer to continue to supply the claimants.
  51. In a letter dated 27th February 2007 to Mr Maitland-Walker, the OFT set out its current position. It is an important letter and accordingly the entire text of the letter should be treated as an annexure to this judgment. It should in passing be noted that in so far as the second sentence of the third paragraph of the letter is intended to summarise the effect of section 35(2), there appears to be some words missing.
  52. The critical features of the OFT's letter were first that the analysis of the competition implications of the scheme were not straightforward and that the OFT had not yet formed a firm view on whether it could or should open an investigation under section 25. In other words, it had not yet decided whether there were reasonable grounds for suspecting that there was an infringement of Articles 81 or 82, or their counterparts in the Competition Act; or whether, if that pre-condition were satisfied, it should exercise its discretion, under section 25(1), to conduct an investigation.
  53. Secondly, even if it were open to it to impose interim measures, it would not do so because there was insufficient evidence of irreparable harm.
  54. It is this sequence of events which the claimants rely on to explain the delay in applying to the court for injunctive relief until what I think can fairly be described as the last minute. They explained that if the OFT had said earlier that it would not be likely to grant interim measures, or if the OFT had not said, as it did, on 19th February 2007 that a decision on interim measures would probably be available in a couple of days, they would have applied earlier to the court.
  55. While I accept that the claimants were waiting for a decision from the OFT which would either be favourable to them or which they could appeal to the Competition Appeal Tribunal, I do not consider that the course taken was appropriate. The real question which in my view needs answering is whether, if the claimants delayed their application to the High Court until the last minute, justice could properly be done on a complex application. Self-evidently, in my view, the answer is no. The defendants are left with no time to respond fully to the claimants' very substantial evidence, and the court is left with no time to digest fully the factual and legal issues which arise.
  56. There are of course times when complex matters must come to the court for a very urgent decision. But this is not one of those cases. This is not the occasion to investigate how the parallel jurisdictions of the OFT and the High Court should operate. But if a party wishes to apply to the High Court, it should do so in good time to enable the application to be fully dealt with before the date when the injunction is to take effect.
  57. In these circumstances, it seems to me that the claimants must accept that the rushed circumstances of this application are of their own making and that, in consequence, the court's inevitable doubts as to whether an injunction should be granted will tell against them.
  58. The order sought by the claimants is that Pfizer should continue to supply them with its prescription drugs. Counsel for Pfizer accepted that this was a mandatory order, but he submitted that in this case it did not call for any difference in approach from an application for a prohibitory injunction. In Zockoll Group Limited v Mercury Communications Limited [1998] FSR 354, a decision of the Court of Appeal, Phillips LJ, having cited from the judgment of Hoffmann J in Films Rover Limited v Cannon Film Sales [1987], 1 WLR 670, said at page 366:
  59. "I would concur with this passage as providing detailed guidance to the approach of the court when considering an application to grant a mandatory interlocutory injunction. A more concise summary, which I would commend as being all the citation that should in future be necessary, is the following passage in the judgment of Chadwick J in Nottingham Building Society v Eurodynamic Systems [1993] FSR 468 at 474."
  60. This is the citation from Chadwick J's judgments:
  61. "In my view the principles to be applied are these. First, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be wrong in the sense described by Hoffmann J...
    "Secondly, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.
    "Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish this right at a trial. That is because the greater the degree of assurance the plaintiff will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.
    "But, finally, even where the court is unable to feel any high degree of assurance that the plaintiff will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. Those circumstances will exist where the risk of injustice if this injunction is refused sufficiently outweigh the risk of injustice if it is granted."
  62. Mr Roth pointed out correctly that these cases did not concern applications arising in competition cases, and that, in particular, where Article 82 or section 18 of the Competition Act was engaged, it was likely that a mandatory order would be sought. For that reason, the approach should be the same as with applications for prohibitory injunctions.
  63. Mr Roth relied on the judgment of Rimer J in Sockel GMBH v The Body Shop International plc, [2000] EULR 276. The claim alleged an infringement of Article 82 when the defendant refused to supply the claimant, which had been a sub-franchisee of the defendant's Austrian head franchisee. The claimant applied for an interim mandatory order requiring the defendant to supply it. Rimer J dismissed the application on the grounds that there was no serious issue to be tried, but he went on to deal obiter with whether he would otherwise have granted the order. He said at page 290:
  64. "Finally, there is anyway a difficult question as to whether it would be right to make an order of the nature which Sockel seeks. This question does not, of course, arise, but had I concluded that Sockel's case does give rise to a serious question to be tried, then I would have had to go on to consider whether or not an injunction should be granted. Mr Burnton submits that this is not a case for an injunction because he says that damages would adequately compensate Sockel for any loss it may suffer if, in fact, BSI has infringed its rights. He says that this is so even if the consequence of the infringement is that Sockel would be forced out of business and to cease trading. I do not for my part accept that. It appears to me that, if Sockel is indeed entitled to continued supplies and the likely consequence of its being deprived of them would be that its business is wholly lost, then a award of damages at trial would be poor compensation. In a case such as that, I consider that there is much to be said for the view that only the grant of a permanent injunction would provide proper protection for the claimant and that it would follow that there would also be a strong argument for granting an interim injunction at this stage. In this respect I refer to Kay LJ's observations in J Lyons & Sons v Wilkins, cited by Lord Wilberforce in his dissenting speech in Garden Cottage Foods Limited v Milk Marketing Board."
  65. After dealing with difficulties in drafting and enforcing such an order, Rimer J said at page 291:
  66. "I do not consider that there is or can be any general principle to the effect that an injunction cannot be granted in cases such as these. If there were, it would seem to me to represent a deficiency in the law. Had I been satisfied that Sockel has an arguable case for relief under Article 82 which deserves to go to trial I think it probable that in all the circumstances of this case I would in principle have been prepared to grant an interim injunction, since I consider that, overall, the grant of such an injunction would be less likely to result in an injustice than would its refusal. I add, however, that I would also have given directions with a view to the trial being expedited and coming on at the earliest possible date."
  67. I do not consider that Rimer J was proposing for Article 82 cases any different approach from that adopted and approved by the Court of Appeal in Zockoll Group v Mercury Communications. His reference that overall the grant of the injunction would be less likely to cause injustice than its refusal echoes the passage from Chadwick J's judgment, although he does not refer, and perhaps was not referred, to those decisions.
  68. Moreover, in Getmapping plc v Ordnance Survey, [2002] UKCLR 410, which was a claim for infringement of Article 82, Mr Justice Laddie cited and applied the passage which I have quoted from Zockoll Group v Mercury Communications. The parties in that case were agreed that it represented the correct approach.
  69. For my part I am satisfied that the decision of the Court of Appeal in Zockoll Group v Mercury Communications requires me to adopt the approach stated by Chadwick J. I can see no logical reason why the fact that mandatory orders may be more common in cases under Article 28 than in other cases calls for a different and exceptional approach.
  70. I am prepared to assume for the purposes of this application that the claimants have a seriously arguable case, sufficient to satisfy the test in American Cyanamid v Ethicon. In his very clear submissions, Mr Roth outlined his case by reference to some of the authorities. In their submissions, Pfizer and UniChem made clear that they reject the argument that there is a serious issue to be tried. But with a proper concern for the short time available, they did not focus their main submissions on that point.
  71. The defendants did, however, submit that I should take account of the approach of the OFT. They pointed out that it is the specialist competition authority with primary domestic responsibility for the enforcement of the Competition Act and Articles 81 and 82. The OFT opened its preliminary investigation in November 2006 and it received submissions from complainants, Pfizer and UniChem. It requested and received further evidence. It was asked in November 2006 to impose interim measures and it knew that Pfizer's new system would become effective at the beginning of March 2007.
  72. With the benefit of detailed submissions, the time to digest them and request further evidence, and its specialist knowledge and expertise in competition matters generally, and specifically relating to the pharmaceuticals market, its position as expressed in its letter of 27th February 2007 was that:
  73. "The analysis of the competition implications of Pfizer's actions are not straightforward, and we do not yet have a firm view on whether this is something we can or should pursue under the Act."
  74. In other words, as I have said earlier, they were still not satisfied that there were reasonable grounds for suspecting that the new system and the refusal to supply wholesalers might involve an infringement of the relevant provisions of the Act and the EC Treaty. As Mr Quigley for Pfizer submitted, if this were a clear case of infringement, the OFT would undoubtedly have recognised it as such.
  75. It seems to me that the court is bound to take note of the approach of the OFT. The court is not bound by it. If the court can be satisfied that a strong case of infringement has been made out, it should be guided by that. But I have been unable to form that view, certainly in the very short time available. While, as I say, I am prepared to assume a seriously arguable case, I am not prepared to put it higher than that.
  76. I turn to consider the balancing risks of injustice if the injunction is made or refused. For these purposes I am considering the balance over the period until there can be an effective hearing of the application if the claimants proceed further. I am conscious, however, that a refusal of an injunction now may itself be a factor against the grant of an injunction at a later stage, by which time the new system will have been fully operational in the intervening period.
  77. The claimants accept that their loss of profits on sales of Pfizer products can be compensated by an award of damages. Their principal concern is that as a result of their inability to offer the full range of prescription drugs, smaller independent pharmacists and dispensing doctors will switch to UniChem. UniChem will be the only source of delivery for all products. Once a customer is lost, it is difficult to get him back.
  78. Two features in particular are relied on by the claimants. First, it is more inconvenient for retailers to deal with two suppliers, although many will place some business with a second supplier to ensure an established back-up supply. Dispensing doctors tend in the main to use only one supply. At present, according to the evidence of Dr Baker, the chief executive of the Dispensing Doctors Association, UniChem's presence in that market is small.
  79. Secondly, UniChem will offer a better delivery service if the customer takes all its supplies rather than just Pfizer products from UniChem. They will have the benefit of fixed delivery times and later cut-off times for orders for the next delivery. Some of the witnesses state that UniChem will offer only one delivery per day for Pfizer-only products -- see the witness statements of John Cochrane, Anthony Maltby and David Wood -- but at least one other witness, Jeremy Power, states that UniChem has offered a twice daily delivery and according to Mr Watson's summary of the terms of the Pfizer/UniChem contract, UniChem is required to make two deliveries a day where the customer already receives two deliveries from its current supplier of Pfizer products.
  80. In its letter of 27th February 2007, the OFT stated that even if it were eventually to decide that enforcement action under the Act was appropriate, it would not exercise its discretion to take interim measures because there is insufficient evidence of irreparable harm.
  81. The OFT goes on to address the three arguments advanced by the complainant as to irreparable harm. The claimants have not relied on the first and third of those arguments on this application. The second ground was switching, as to which the OFT in its letter stated:
  82. "You suggest that as a result of UniChem being Pfizer's sole LSP, purchasers may switch to UniChem for all of their Ethical pharmaceutical requirements and that such switching would have a devastating impact on the turnover and margins of other full-line wholesalers and could render supply to certain locations unviable. Were the Pfizer/UniChem agreement of itself capable of inducing a significant switch in pharmacies' purchases of non-Pfizer Ethical pharmaceuticals, the OFT accepts that it may be capable of causing significant and irreparable harm in this sector. However, discussions with major Ethical pharmaceutical retailers have indicated that such switching is certainly not an anticipated consequence of the agreement in the short-term. We have not received any evidence that the customers of BAPW members intend to switch purchase of non-Pfizer products to UniChem following implementation of the DTP scheme."
  83. Mr Roth submitted that this was not an adequate answer because the threat of switching arises not in relation to major retailers but in relation to small pharmacies and dispensing doctors. It is very unclear what evidence was before the OFT as regards the risks of switching by small pharmacies and dispensing doctors. The point was raised in an email from the first claimant's solicitors on 5th February 2007, and some of the witness statements now before the court were provided to the OFT on 20th, 21st and 22nd February.
  84. In addition, Mr Roth told me in reply that when Mr Maitland-Walker says, in paragraph 20 of his first witness statement, that between 1st and 7th February 2007 he had several exchanges of email with Mr Bearne of the OFT providing him with confidential information in response to the OFT's request, this was information on switching.
  85. The position is therefore that either the evidence put to the OFT was not, in their view, evidence that customers intended to switch; or that evidence was just not put to them on this. If the latter is correct, the fault lies with the claimants. Given that this is put forward as a major concern, I find it almost incomprehensible that full evidence was not put at an early stage to the OFT. The complainants are not required to wait for requests for information from the OFT. The position is, therefore, that the court is being asked to assess, at the last minute, evidence of damage which could and should have been put to the OFT in time for it to give proper consideration to it.
  86. Clearly a rational argument is made that a risk exists but it is difficult to assess. In section 6 of his witness statement, Mr Watson of Pfizer gives evidence as to the added value services which wholesalers offer to attract and retain customers. These include loan guarantees and computer systems. I am not satisfied, on the evidence before the court, that there is a significant risk in the short-term, with which I am concerned, that there will be any significant level of switching by small pharmacies and doctors' surgeries.
  87. As regards damage to Pfizer and UniChem if an injunction were granted, the new system has been planned for a long time, and has in substance been in operation since 23rd February 2007. Mr Watson gives evidence in paragraph 10.1 of his witness statement as to the confusion and disruption in the market if an injunction were granted at this very late stage. The matters raised in subparagraphs 10.1.1 to 10.1.3 are relevant although the claimants are not now seeking to prevent implementation of the agreement with UniChem, but only to require a continuation of supplies to them.
  88. Mr Watson states at paragraph 10.3:
  89. "I would also add that an interim injunction at this late stage would be extremely damaging to the reputation of Pfizer, the largest pharmaceutical manufacturer and research and development investor in the world, which has taken a lead in setting up a distribution scheme that it believes will better serve the interests of patient safety and product security. There would almost certainly be further unknown consequences which cannot be quantified at this time."
  90. Similar points are made on behalf of UniChem. In my judgment, the disruption and reputational damage likely to arise from an injunction at this stage are real and not readily capable of compensation. Applying the approach set out in the judgment of Chadwick J in Nottingham Building Society v Eurodynamic Systems plc, I have concluded that a refusal of an injunction is likely to involve the least risk of injustice. I certainly do not feel a high degree of assurance that the claimants will be able to establish their right to an injunction at trial.
  91. I have sought to address as best as time has allowed the issues of the strength of the claimants' case and the damage which could flow from a grant or refusal of an injunction. These considerations lead to a refusal of an injunction at this stage, but the delay in bringing the application is also a powerful factor against the grant of an injunction.
  92. It is extraordinary for the court to be faced with an application of this complexity in relation to proposals which have been well-known both publicly and to the claimants for several months. It is a strong thing for the court to interfere by interim injunction in the conduct of business, particularly on the scale proposed in this case. By depriving the defendants and the court of the proper opportunity of dealing with this application, the delay greatly increases the risk of injustice if an injunction is granted. The fact that the claimants chose to pursue their complaints with the OFT and to persist in doing so until the very last moment does not in my judgment provide a good ground for not bringing the matter before the court at a much earlier stage.
  93. In all these circumstances, and for the reasons set out above, I refuse to grant the injunction sought by the claimants.


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