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Tuesday March 6th, 2018

Biggest Competition Related Fines in Egypt’s History Imposed on Four Pharmaceutical Companies

On 28 February 2018, the Cairo Economic Court issued a fine totaling five billion five hundred and eighty million EGP against four medicine distribution companies for violations of the Competition Law. The competition regulator, the Egyptian Competition Authority, had initiated legal proceedings in 2015 against the four companies (Ramco Pharm– Ibn Sina – Multi Pharma – United Company for Pharmacists) following the companies’ agreement to unify pricing through reducing credit and discount periods granted to pharmacies. The Competition Law prohibits agreements or contracts between any parties in the same market that result in anti-competitive practices (e.g. price-fixing agreements, agreements determining market shares, or agreements restricting the production, distribution or availability of a product).  The Law imposes a fine on each offender, ranging from 2-12% of the total revenue resulting from such agreements. If revenue resulting from these transactions cannot be calculated, the imposed fine will range from 500 thousand to 500 million EGP for each offender. The Competition Authority had initiated proceedings after observing the negative consequences of the relevant distribution agreement on small and medium pharmacies, which saw their profit margins reduced and forced some of them out of the market completely, resulting in a shortage of some medicines especially in remote areas. In this respect, competition officials have highlighted the seriousness in which they approach drug market, given its sensitivity.

Whereas the full written and reasoned decision by the Economic Court has not yet been officially released, this is a highly notable case since it imposes the highest fine in the history of cases initiated by the Competition Authority. Moreover, this is also the first case in which the principle of “leniency” is applied. Article 26 of the Competition Law pardons the first offender from criminal proceedings, if they report the offence and provide documents leading to exposing the crime. The court is also allowed by virtue of the same Article to reduce the penalty by half for any accused party that assists in proving part of the crime.

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