A Matter of Merits: the CAT overturns and remakes the CMA’s Phenytoin Decision, upholding infringements

In a recent groundbreaking judgment, the Competition Appeal Tribunal (CAT) revisited the long-debated issue of excessive pricing, raising critical questions about the balance between robust enforcement and the evidentiary burdens placed on competition authorities.1 This case arose from the Competition and Markets Authority’s (CMA) initial 2016 infringement decision against Pfizer and Flynn Pharma, which concluded that the companies had abused their dominant positions by charging excessive prices for phenytoin sodium capsules.2 Following appeals, the CAT reviewed and set aside the CMA’s decision, challenging its application of the United Brands test, which comprises two limbs: (1) whether the difference between the cost and price is excessive (Excessive Limb) and (2) whether the price is unfair, either (a) in itself or (b) when compared to competing products (Unfair Limb)3. On appeal, the Court of Appeal (CoA) clarified that while the CMA could rely on the ‘unfair in itself’ part of the Unfair Limb, it must also assess all relevant evidence, including comparators provided by the defendants.4 In response, the CMA issued a second decision in 2022, reaffirming its findings with revised methodologies. This led to fresh appeals, culminating in the CAT’s latest judgment, which exercised its jurisdiction and re-made the decision, providing significant clarifications while critically evaluating the CMA’s approach to excessive pricing.5 The CAT’s ability to decide appeals on the merits introduces a unique layer of scrutiny in UK competition law.6 Unlike judicial review, which limits its focus to legality and procedural fairness, the CAT’s merits-based review evaluates the substantive correctness of a decision, ensuring that the decision is not only procedurally sound but also substantively justified.