Micro restrictive practices: a local association of chemists condemned for price-fixing

The Italian Competition Authority (ICA) fined Federfarma Teramo, a local professional association, for price-fixing practices in the market for the so-called SOP pharmaceuticals (Auorità Garante della Concorrenza e del Mercato, caso I684, Federfarma Teramo).

Federfarma Teramo is an association, its members being the great majority of pharmacies of the province of Teramo, Central Italy.

Trade in SOP pharmaceuticals is subjected to a special regime since the enactment of the Bersani and has been fully liberalized with the 2008 Budget Act. The main elements of this regime include:

• No medical prescription is required;
• SOP pharmaceuticals are supplied through other distributive channels than pharmacies;
• Retailers are free to set selling prices.

The ICA opened investigation upon receipt of an anonymous letter which contained a circular written on a Federfarma Teramo headed paper. The circular contained a table of the maximum rebates members are invited to apply to 119 SOP pharmaceuticals. During the following investigation copies of the circular have been found in many member pharmacies. It has been also found a prospectus detailing the maximum rebates applicable to 250 SOP pharmaceuticals .

The circular amounts to a decision of an association taken by Federfarma Teramo, the object of which is to implement a price-fixing mechanism prohibited by article 2 of the Act n. 287/1990. To suggest the highest applicable rebate to a given product is consistently perceived as price-fixing practice.

Moreover, the ICA also found out that members of Federfarma Teramo have effectively applied the circular, the rebates granted to the enlisted products have been reduced during the considered period.

Thus, the ICA imposed on Federfarma Teramo a Euro 11,200 penalty, which roughly corresponds to 8% of the overall amount of the membership fees payed each year to the infringer.

Interestingly, the ICA task to detect and sanction the restrictive practice was much facilitated by a smoking gun in the shape of the circular written on the Federfarma Teramo headed paper, which detailed the maximum applicable rebates. Federfarma Teramo released the circular after the liberalization of the trade regime for SOP pharmaceuticals, with the understandable aim to maintain their market power they enjoyed during the previous regime.