High Court of Ireland Decisions

1. This Judgment deals with an application on behalf of the Defendants to dismiss all claims of the Plaintiff. Counsel for the Defendants has reserved his right to call evidence in the event that the application is not successful and in these circumstances it is clear from the decisions of the Supreme Court in Heatherington -v- Ultra Tyre Service Limited and Others (1993: 2: IR: 535) and O'Toole -v- Heavey (1993: 2: IR: 545) that in order to succeed the Defendants must establish that the Plaintiff has failed to establish a prima facie case.

2. The Plaintiff (hereinafter "Chanelle") is a wholesale distribution company which was founded in 1980. The directors and principal shareholders are Michael Burke and his wife Mary Burke. Michael Burke is a qualified veterinary surgeon and practised as such for several years before setting up the Plaintiff company. He did so because he was unhappy with the distribution services offered by the multinational companies and set out from the beginning to provide a twenty-four hour delivery service of the full range of animal health products. The business of Chanelle prospered from the beginning and today enjoys a turnover of approximately £9 million out of a total animal health products market of some £55-£60 millions. Chanelle is part of a group of companies which includes Chanelle Pharmaceuticals Manufacturing Limited ("CPML") which was formed in 1985.

3. Amongst the suppliers serviced by Chanelle in the 1980's were Beechams Plc. and Smith Kline French Limited. These two companies merged in the early 1990's to become Smith Kline Beecham. In January 1995 the Pfizer Group of Companies, of which the Defendants are part, purchased the world wide animal health business of Smith Kline Beecham Plc. and as part of this take-over the first named Defendant took over the animal health business of Smith Kline Beecham in Ireland and commenced trading as Pfizer Animal Health. Chanelle continued to act as wholesaler and distributor of the Pfizer Animal Health range of products. In this way in 1996 Chanelle had acted as wholesaler or distributor for a decade and a half for the Beechams Plc and Smith Kline French range of products, now part of the range of Pfizer Animal Health.

4. The first named Defendant ("Pfizer") is the Irish subsidiary of a US Corporation, Pfizer International Inc. Pfizer carries on business from Pharmapark, Chapilizod, Dublin 20. Pfizer International Inc., is a multinational corporation with subsidiaries or branches in many countries throughout the world. It is a world leader in many veterinary and other pharmaceutical products.

5. Pfizer is the second largest supplier of animal health products in the Irish market the largest being Merck Sharp & Dohme which is a single product (Ivomec) company. The third largest supplier is Mallinckrodt. Pfizer has approximately twelve per cent of this market. Prior to the take-over of Smith Kline Beecham Pfizer products in Ireland were distributed on an exclusive basis by Caffrey & Mallon in Limerick ("C&M"). Shortly after the take-over in January 1995 Chanelle was contacted by Pfizer who were considering appointing them as stockholding agents for the new company. After detailed negotiations this contract was given in November 1996 to Cathal May Roberts a wholesale distributor who also distributed the human range of Pfizer products.

6. The second named Defendant has been joined in these proceedings as the employer of one Mr. Johan Rabie and has offices at Louvain-la-Neuve, Belgium. As will be detailed hereafter Mr. Rabie was involved to some degree in the events which lie at the heart of the dispute between the parties.

7. After the take-over of the Smith Kline Beecham range Pfizer continued the exclusive distributorship through C&M for Pfizer products and Smith Kline Beecham's distribution system comprising sales to wholesalers and direct sales to customers also continued for several months. At the end of the year apart from appointing a national stockholder Pfizer decided to appoint a limited number of wholesale distributors. In this connection a meeting took place on the 29th November, 1995 between Chanelle and Pfizer. As a result of this and other meetings five wholesale distributors were appointed and the Pfizer products were available only through these five. The other four were Boileau and Boyd, Co-operative Animal Health, Agri Health and C&M . These five wholesale distributors were the largest wholesalers in the distribution market.

8. At the meeting on the 29th November, 1995 the parties reached agreement on the terms of the distributorship. The wholesaler's discount was 12.5%, a fee of £10,000 was payable for the monthly supply of information on Pfizer sales extracted from Chanelle's computer, credit was sixty days and the territory of the agreement was the Republic of Ireland. The discount of 10% represented a reduction from a previous 15% for Smith Kline Beecham products but this was offset by the increase in business resulting from the decision of Pfizer to distribute its goods exclusively through the five appointed wholesalers.

9. 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 10%. This rebate was paid monthly to end purchasers and was calculated on a rolling twelve month basis.

10. Mention should be made of a meeting between the parties which took place on the 12th February. There were complaints on either side. For their part Tom Mullaney (Managing Director) and Philip Howlan (Sales Manager) of Pfizer were, according to Michael Burke, very dissatisfied with Chanelle because they were giving away 6% discount out of the 12½%. Chanelle for its part complained that other wholesale distributors were being given 15% discount on Dectomax which was the number one success product from Pfizer. Chanelle's response to the discount complaint was that they were followers, that others had done it before and they agreed that in one case a personal friend in Galway of Michael Burke had been given this discount. Pfizer's response to Chanelle's complaint was that they denied that other wholesale distributors were being given 15% and insisted that Chanelle's discount remain at 12½%.

11. A second matter of some significance is the fact that Valbazan which is a very successful white wormer supplied by Pfizer had come off patent some time before this. Chanelle's sister company CPML was engaged in developing a generic competitor to Valbazan namely Albex which was launched at a trade show in Athenry on the 25th May, 1996. In a telephone conversation on the 22nd May Michael Burke notified Tom Mullaney of Pfizer that this launch was about to take place. In the course of that telephone call he asked Tom Mullaney whether he had any complaints about Chanelle and whether Pfizer was happy with them. He was told "You are doing an excellent job: no complaints". It was following this that Michael Burke told Tom Mullaney that Chanelle were bringing out a generic Valbazan and he got the impression that Tom Mullaney was a bit taken aback. He had made the telephone call in the first place because during the previous year Tom Mullaney had asked him on three or four occasions whether Chanelle were bringing out a generic Valbazan. He felt he owed it as a matter of courtesy to inform Tom Mullaney before the actual launch.

12. Following this Tom Mullaney tried to arrange a meeting between himself and Michael Burke between the date of the telephone call and either the 7th or 10th of June. He wouldn't give an agenda for the meeting. Because of conflicting commitments neither date proved possible.

13. On the 18th June, 1996 Michael Burke was in London. That morning Tom Mullaney delivered to Chanelle at its premises in Loughrea a letter dated 17th June indicating that it had been decided to implement new distribution arrangements for their animal health products from the 24th June, 1996. From that date the main wholesale distributors set out in the letter excluded the Plaintiff. The letter referred to the two failed meetings as business review meetings

14. This decision to "de-list" Chanelle came without warning and immediately Michael Burke attempted to make contact with Tom Mullaney. He wanted to know why his company had been "de-listed". He failed initially to make contact and subsequently did so but did not succeed in getting a clear reason. Subsequently it has been suggested that Chanelle was not wholly committed to the Pfizer animal health product range, that it had made wrongful use of private or confidential information belonging to Pfizer or, alternatively, that it was in a position to make use of such information and there was a suggestion that it had not been prompt in paying monies it owed to Pfizer.

15. It is clear from the conduct of the defence, however, that the main stand of the Defendants is that the agreement between the parties is governed by common law and common law alone. They claim to have given adequate notice and indeed Chanelle makes no case based on notice. The relevance of the Defendants' reasons, stated or otherwise, for "de-listing" Chanelle is the bearing they may have on the complex issues arising under Irish Competition Law and Articles 85 and 86 of the Treaty of Rome.

16. Having failed to procure a satisfactory reason for their "de-listing", Chanelle instituted these proceedings and brought an application for an Interlocutory Injunction in July of last year. This was resolved by the Defendants' undertaking to continue to supply Chanelle on the same basis as theretofore until the determination of this action.

17. Chanelle says that the Pfizer range of animal health products is an essential part of its business. It is essential that Chanelle has access to this range which comprises approximately eighty different animal health products many of which are unique to the Defendants and many of which are market leaders in their own right. The Defendants are part of a world wide animal health producer and Chanelle claims that its wholesale business will not be viable without access to the products of the Defendants' range on the same terms as the other four appointed wholesalers.

18. Many of the Defendants' products are in a special if not unique position in the market according to chanelle. For example Valbazan is the number one white drench product in Ireland for the treatment of endoparasites in cattle and sheep. It is the only white drench product effective against all types of stomach round worms and lung worms as well as adult fluke and fluke eggs. This arises because of its unique combination of chemicals. Furthermore Valbazan is the number one world-wide Pfizer product. About 75% of chanelle's business is with vets. These tend to prefer to purchase all their supplies from one wholesaler. Chanelle also says that there is a preference in the marketplace for brand leaders. All of his means, according to chanelle, that its wholesale distributor business will be damaged and possibly lost if it cannot have access to the Pfizer range of animal health products on the same terms as the other four appointed wholesalers.

19. The pleadings articulate a number of different claims and grounds of relief. These can be conveniently summarised as follows:-

20. In either event Chanelle says that the object of the agreements was anti-competitive. Furthermore, Chanelle says that the effect of such de-listing is to restrict or distort competition in a way which offends against Section 4(1) of the Act of 1991. Chanelle says not only that competition in the trade of distributing Pfizer animal health products in Ireland has been restricted or distorted but that so also has the market for the end user.

21. Before outlining the basis of the Defendants' application I will first set out in a little more detail Chanelle's contentions in relation to each of the above claims.

22. Initially (at the stage of the Interlocutory Application) Mr. Burke made the case that de-listing chanelle would mean that it would not be able to carry the Pfizer range of products, that the customers would automatically switch to other suppliers who are chanelle's competitors and since the Pfizer cash save rebate scheme would not be available to these purchasers chanelle would be put at an enormous disadvantage with the possible loss of £2.2 million turnover in a twelve month period implying lost profits in the region of £400,000 to £500,000 per annum. In the course of these proceedings, but not before, it was made clear by Counsel on behalf of the Defendants that the rebate would be available to Chanelle in the event that it purchased Pfizer products from one of the four appointed wholesale distributors just the same as it would be available in the case of any other purchaser. This contrasts with the plea at paragraph 22 of the amended Defence which places emphasis on the availability of these products by way of import from other EC countries. Furthermore the point was made that because Chanelle's purchases would be large it would qualify for the top rate of rebate at 10%. Michael Burke and Mr. Moore McDowell, an economist, who gave evidence on his behalf, both commented that these four wholesale distributors are in direct competition with chanelle and would be unwilling to supply goods on terms which would enable it to compete effectively in the wholesale distributor market. In the course of cross-examination Counsel on behalf of the Defendants put to Mr. Burke the following questions:-

23. Q. I must suggest to you, Mr. Burke, that between the rebate which you would automatically qualify for and discount which you would negotiate with the distributor anyway, you would have no difficulty in selling Pfizer products.

24. A. It would be impossible and I am being realistic about it. I mean, I get 12½% as a wholesaler, right, all the other people get 12½%. If I had to buy form another wholesale distributor they may give me no discount. Before I go out on to the market, in order to compete with them on the market, I have to give 7% so I am at a loss of 7% immediately and number two, the people I sell to cannot get a rebate.

25. Q. So are you saying that you must, whatever else happens, be allowed to trade on exactly the same terms as the other distributors.

26. A Absolutely. I see no difference between Chanelle and the other four wholesale distributors that are either in the manufacture or the distribution of their own generics.

27. In commenting on the implications of "de-listing" for Chanelle as a wholesaler Mr. McDowell noted that it was commercially necessary for Chanelle to be able to offer a very wide range of products to potential customers. The reason for this was a widespread preference on the part of end users for "one stop shopping" even when they take supplies from more than one wholesaler. This witness noted that Pfizer had a share of around 15% in the total sales of animal health products in Ireland and said that de-listing Chanelle implied depriving it of the ability to offer the products of one of the top three producers in markets covering nearly half of the total animal health product sales in Ireland. This would clearly have the effect of seriously undermining its competitiveness as an independent wholesaler.

28. The evidence and report prepared by Mr. McDowell was initially on the assumption that Chanelle would not be eligible for volume rebates after de-listing. This has been stated to be incorrect by Counsel on behalf of the Defendant and Mr. McDowell accepted that many of his conclusions would have to be modified in light of this information. He did not, however, withdraw any of them.

29. Mr. Tom Tierney, group financial controller of Chanelle, specified six consequences of "de-listing" which would apply even if the rebate is made available to it as it is to any other purchaser of Pfizer products. These include that Chanelle would not get a wholesaler's margin ("the wholesaler margin is how you survive") they would not get "referred orders" (that is orders referred to a wholesaler from Pfizer representatives in the field) and there were a number of promotional devices which would not be available to Chanelle.

30. In commenting on the fact that Pfizer's rebate system is given to end users rather than to distributors Mr. McDowell identified an element of loyalty bonus which he said reduces substitutability between Pfizer's products and those of other producers. In the context of wholesaling, the rebate system:

31. He referred to the fact that Pfizer had expressed concern (in February 1996) that Chanelle was offering large discounts out of its wholesalers margin. Whilst I have to take account of the fact that these conclusions were arrived at on the assumption that the rebate would not be available to Chanelle at all after it was de-listed, I must also bear in mind in dealing with this application that Mr. McDowell whilst accepting that this modified the force of his conclusions did not withdraw them.

32. A separate aspect of Chanelle's claim under this heading is that there is an element of "disciplining the market" in Pfizer's' decision to "de-list" Chanelle. This arises in the following way. Valbazan is an extremely successful product of the Defendants both world wide and in the Irish market. Chanelle's competing product Albex was launched and competes directly with Valbazan. The consequence of de-listing not only weakens Chanelle as a competitor but also sends a clear signal to other distributors that introduction of generic competitors for Pfizer's' brand leaders is likely to be a costly exercise. This creates a barrier to entry to the market for the supply of generics. In this context I note that Michael Burke in a telephone conversation with Johan Rabie on 19th June, 1996 suggested a formula where "we would not bring out any further competing generics".

33. In a further submission Chanelle alleges that Pfizer's distribution system is what is termed a "selective distributive system". In principle a supplier is free to determine how his goods are to be distributed. (See for example "Butterworths Competition Law", Chapter 4, para. 568). He may appoint a sole agent, he may distribute himself, he may select any number of wholesale distributors. If, however, he selects distributors and places them under an obligation to sell his goods only to end users or other distributors who have been appointed by the supplier this amounts to an intervention in the market place which requires justification. In order to justify such an intervention the goods themselves must be suitable for selective distribution. Examples of categories of goods which have been held suitable for selective distribution are goods that are technically complex, goods the brand image of which is particularly important, and goods with an extremely short shelf life necessitating particularly careful distribution. If a selective distribution system is not to run counter to competition law the products must be appropriate for such treatment, the criteria for selection of wholesale distributors must be qualitative and the system must be operated in a non discriminatory way which means that any wholesale distributor who qualifies under the qualitative criteria is entitled to be appointed a distributor.

34. Chanelle argues that the Pfizer distribution system is in fact a selective distribution system because whilst the appointed distributors are not restricted from selling only to end users or other distributors who have been appointed by Pfizer, the effect of the rebate system with its "loyalty tie" characteristics produces the same result. Appointed distributors will not sell otherwise than to end users and fellow appointed distributors because the only way the end user will qualify for the Pfizer rebate is to purchase from an appointed distributor. It is further argued that even if Pfizer's distribution arrangements do not amount to a selective distribution system in the strict sense, it is none the less a restricted distribution system which is contrary to Section 4 and Article 85 because it is operated in a discriminatory manner with anti-competitive effect, namely, Chanelle has been de-listed notwithstanding that it qualifies under all the appropriate qualitative criteria. The significance of a distribution system being a selective distribution system properly so called is that there is authority to say that it could constitute an agreement or concerted action for the purposes of competition law despite appearing at first sight to be no more than a unilateral action.

35. Quite apart from the foregoing, Chanelle alleges that in a number of identified markets the Defendants are in a dominant position and that withdrawal of supply constitutes abuse which should be condemned.

36. These markets have been identified in the letter from Chanelle's solicitors dated the 25th April, 1997. Four of these are product markets identified in the Animal and Plant Health Association report (the "APHA report") which has been introduced in evidence. The APHA Report is a quarterly compendium of data in relation to the animal health market and divides the range of products into categories and sub-categories where specific product is identified and sales figures given. Not all suppliers to the animal health market are members of APHA but the evidence shows that approximately 90% of the volumes in each market are included. In four specific markets identified in the letter of the 25th April, 1997 each of the Pfizer products specified has in excess of 40% of that particular market. It seems that these markets may have been identified by reference to the statement at paragraph 9-023 in Bellamy and Child "Common Market Law of Competition" 4th edition where it is stated:-

37. A fifth market has been identified in the Defendants' successful antibiotic product "Synulox".

38. Finally Chanelle's solicitor's letter appears to make the claim that the "full range of the Defendants' veterinary products puts them in a position where they are in a dominant position in the market" and goes on to identify eighty different animal health products which it purchases from the Defendants.

39. Thirdly, it is claimed that the de-listing of Chanelle will have an effect on the markets in other member States of the European Community. Chanelle points to the fact that the first named Defendant imports products from the United Kingdom, Belgium and France as well as the United States and also to the fact that its sister company exports the bulk of its manufactured products from this country. Chanelle's Counsel cites Bellamy and Child (op.cit.) at paragraph 2-129, where the test laid down by the Court of Justice for assessing whether trade between Member States will be affected is as follows:-

40. This has been described by Counsel as a "low threshold".

41. Counsel for the Defendants says that there is no evidence of an agreement. On the contrary the decision of the first named Defendant to "de-list" Chanelle was clearly a unilateral decision.

42. In so far as Chanelle seeks to establish an agreement with the Belgian company as employer of Johan Rabie it faces a dilemma: The law establishes that in general different members of the same group of companies cannot between themselves reach an agreement or engage in a concerted practice for the purposes of Article 85 or Section 4. (See Bellamy and Child: op.cit. para. 2-052). On the other hand if one looks at the individual companies it is clear from the correspondence that the decision (to de-list) was clearly left to the sole discretion of the Irish company. Either way there was no agreement.

43. In addition Counsel for the Defendants says that there is no evidence that the object of any alleged agreement was to distort or to restrict the market or that such was its effect.

44. He points to the fact that Chanelle has been unable to cite a single clear precedent in point and wonders why. Clearly the principle is that a supplier is entitled to select who will distribute his goods and how they will do it. That is all the Defendant has done in the present case. If, on the contrary, Chanelle is entitled to compel the Defendants to continue dealing with it as a wholesale distributor or, failing this, to have the Defendants' distribution system condemned as void, this will open the flood gates so that any wholesale distributor can demand that the Defendant supply it with goods for distribution. This sets at nought the principle that the supplier is entitled to decide who will distribute his goods and how, and in the end result will be "anti competitive" by compelling a supplier to deal with a whole multitude of potential distributors thereby increasing costs and overheads to the detriment of the ultimate purchaser.

45. Specifically, the distribution system is not a selective distribution system because the appointed distributors are perfectly free to sell the Defendants' goods to anyone they like. Accordingly there is no question of the first Defendant being obliged not to discriminate against Chanelle. The rebate system is not the equivalent of a bar on members of a true selective distribution system because whilst it may reduce the percentage profitability of Chanelle once Chanelle has been "de-listed", this does not distort the market. There is no evidence that any vet or farmer would be disadvantaged by having four as distinct from five wholesalers.

46. In regard to the claim that there is an alleged abuse of a dominant position, Counsel says that it is first necessary to define the market, then to establish dominance by reference to well established criteria and finally to establish abuse. In the present case Chanelle has identified what it says are four markets by reference to the APHA study, a fifth by reference exclusively to the Defendants' product Synulox and sixthly Chanelle appears to have identified the general animal health products market in the Republic of Ireland.

47. With regard to the definition of the markets by reference to the APHA study Counsel criticises this on the basis that the purpose of the APHA study was not to identify any market at all. In one or two cases it is quite clear that products which are in different markets are listed together in the APHA Report. Furthermore the APHA study does not cover all the products in any market because not all the suppliers are members of APHA. With regard to establishing dominance Counsel relies on the four steps set out in Bellamy and Child (op.cit.) at paragraph 9-007 as follows:-

48. Counsel for the Defendants argues that the Court has been provided only with a "snapshot" of the position of the Defendants in the relevant markets in the shape of the APHA survey for the fourth quarter of 1996. Furthermore there is no evidence whatsoever of the position (actual or potential) of rivals in the market let alone to show that there is no real likelihood of such rivals eroding the alleged dominant position.

49. In relation to the alleged "abuse" of this position, if it exists, Counsel says that there has not been a refusal to supply: the Defendants' goods are available to Chanelle through the appointed distributors and indeed Chanelle will qualify in common with all purchasers for the rebate.

50. Counsel for Chanelle refers to Bellamy and Child (op. cit.) at paragraph 2-016 to the effect that an agreement may be written or oral and may be inferred from all the circumstances. It can consist in the continuing business relationship between the parties. He refers to the commission decision of the 18th December, 1987 in the case of Konica where at paragraph 40 of the legal assessment it is stated

51. Earlier in dealing with the status of the suppliers' promulgated terms it was stated (paragraph 36):

52. Counsel for Chanelle would apply these principles to the alleged agreement or concerted practice operating between the first Defendant and the remaining appointed distributors.

53. With regard to the alleged agreement between the first and the second named Defendants Counsel relies on the acknowledgement by Mr. Johan Rabie that he was involved in the fringes of the decision and to the acknowledgement in a letter from the Defendants' solicitors of 4th February, 1997 that the distribution policy in relation to products is left to the local operating company to decide upon rather than being decided at European level.

54. Reliance is also placed on the contention that the Defendants' distribution arrangement amounts to a selective distribution system properly so called and that accordingly, the decision to de-list Chanelle which offends against the rules in relation to such systems, can be treated as anti-competitive under Section 4 of the Act of 1991 and Article 85 despite appearing to be unilateral.

55. With regard to the argument that there is no evidence that the decision to de-list either restricts or distorts the market Counsel contends that the evidence of

56. Mr. McDowell establishes that both the wholesale and the retail markets are affected in a way which restricts them or distorts them. He says that it is sufficient to establish that the wholesale market is affected even if there were no evidence (though he claims there is) that the retail market is also affected. He says that there is no authority to support the general contention of the Defendants that the touchstone of competition law is whether the ultimate purchaser is either advantaged or disadvantaged. On the contrary in Consten -v- Grundig (CMLR: 1966: 418) the Court of Justice held that Article 85(1) extended to agreements which restricted competition between distributors of the same brand of products which is a point emphasised in Bellamy and Child (op.cit.) at paragraph 2-069. In relation to the "floodgates" argument, Counsel for Chanelle refers to the qualitative criteria set out at paragraph 2(6) of its solicitor's letter of 7th April, 1997 and argues that these criteria would exclude the vast majority of wholesalers.

57. On the point that there is no evidence that the de-listing of Chanelle would restrict or distort the market, Chanelle relies on a Commission decision of the 17th April, 1980 in the case of Krups (OJEC: 13/5/1980). An International Dealers Association agreement was referred by Krups itself to the Commission for negative clearance. In granting that clearance the Commission made clear that it had regard to the fact that all dealers who can perform the functions specified in the dealership agreement were admitted by Krups to its dealers association and that the

58. In particular the sales promotion services provided by Krups which were of any consequence for competitiveness at the distribution stage (which included international consumer advertising, international after sales service, a policy on prices and terms reflecting market conditions and quality and modern design) were all available to outside dealers. In contrast, says Counsel, even if the Defendants' products are available to Chanelle, they are clearly available at less advantageous terms which must have an effect on the competitiveness of Chanelle.

59. Arising out of these claims, submissions and counter submissions a number of issues fall to be determined. I will now set out these issues bearing in mind that at this point if Chanelle has made out a prima facie case in relation to any one of them then the authorities indicate that the Defendant is not entitled to a dismiss of that part of its case.

60. These issues are:-

61. I am prepared to accept that a prima facie case has been made out to establish a concerted practice operating between the first Defendant and the nominated distributors. In reaching this conclusion I have paid particular regard to the statement in Bellamy and Child at paragraph 2-016 that such an agreement "can consist in the continuing business relationship between the parties" and to the authorities cited by Counsel for Chanelle. There is a continuing business relationship between the first named Defendant and the existing nominated suppliers and I consider that Chanelle has made out a case for the Defendants to answer so far as this point goes.

62. In relation to the claim that there is an agreement between the Defendants the evidence for this, such as it is, comes from the Defendants themselves. Mr. Johan Rabie, an employee of the second named Defendant, indicated to Mr. Michael Burke that he was involved in the fringes of the decision to de-list Chanelle. Mr. Burke says that Johan Rabie told him that Pfizer decided to drop Chanelle as a wholesaler because they had a competing product with Valbazan and that they were also afraid of other generics that Chanelle was working on. Michael Burke took a contemporaneous note of his phone call with Mr. Rabie which indicated that Pfizer's concern was that Chanelle manufactured a generic Albendazole which effected their business, that Mr. Rabie was involved in the fringes of the decision and they were also concerned that Chanelle were working on more generics. The other part of Chanelle's case on this point is to be found in the Defendants' solicitor's letter of the 4th February, 1997 to which I have already alluded. Again I am prepared to hold that Chanelle has made out a prima facie case to show an agreement or concerted practice between the Defendants.

63. I have been referred to case 56/65 Soiété Technique Mienére (1966 ECR: 235) as authority to show that the Court when approaching the question whether an alleged agreement or concerted practice is in breach of Article 85(1) (that is that it is an "anti-competitive" agreement) it is necessary first to consider "the object" of the agreement and if the object does not of its nature restrict competition it is necessary next to consider "the effect" of the agreement.

64. The evidence that a Plaintiff will normally be able to adduce in relation to the "object" of an agreement - in the sense of the intended purpose - must necessarily be indirect. In the present case Chanelle points to the fact that its sister company had just launched a generic competitor of a successful product of the Defendants, the fact that this appears to be supported in the observations of Johan Rabie and it is also noted that the Defendants were slow in giving a reason for de-listing Chanelle. (Something, of course, which on the Defendants' case they were perfectly entitled to withhold). I am prepared to hold that there is sufficient evidence to raise a prima facie case that the object (in the sense of the intended purpose) of the de-listing of Chanelle was to deter its distributors from developing competitor generics, or to use the expression of Mr. McDowell "to discipline the market".

65. Whilst the authorities seem to suggest that once it has been established that the object of an agreement is "anti-competitive" it is not necessary to consider what the effect of the agreement might be, in case I am incorrect in the immediately preceding conclusion, I should say that I also consider that a prima facie case has been made out to show that the effect of the de-listing of Chanelle is anti-competitive. In this regard I have paid particular attention to the evidence of Mr. McDowell to which I have already briefly referred. I have also had regard to paragraph 2-102 of Bellamy Child, (op.cit.) under the heading of "Effect on Potential Competition" and to the point made by Counsel for Chanelle that wholesalers compete on services just as much as they might do on price. Having reached these conclusions I do not think it is necessary for me to decide at this stage whether Pfizer's distribution system is a selective distribution system properly so called and I prefer to leave this to be determined later if necessary.

66. Whilst I have been impressed by the arguments of Counsel for the Defendant showing that the markets alleged have not been identified by appropriate evidence (and I have taken note of the point that the purpose of the APHA survey is not to identify markets and that the figures do not include all suppliers) and while in addition I have taken note of the observation of Mr. McDowell that ".. for economic analysis to add substantially to what is available from veterinary and pharmaceutical sources in determining what products are "in the market together" an estimate of "cross price elasticities of demand" would be helpful and that in the absence of data relating to same it has not been possible to come to any more precise conclusions on the substitutability and market boundaries based on estimates of cross price elasticity of demand" I am nonetheless prepared to hold on balance that Chanelle has made out a sufficient prima facie case as to the identity of the markets set out in the letter of the 25th April, 1997 to require an answer from the Defendants on this point.

67. In relation to the first four markets set out in the letter of the 25th April, 1997 I do not think that Chanelle has established a prima facie case to show that the Defendants' product is dominant in those markets. Whilst the percentage share of the Defendants' product may exceed the threshold indicated in Bellamy and Child in the reference already alluded to I accept that before a Court can embark upon the exercise of enquiring whether a particular product is dominant in any market it is necessary to have evidence not only of the percentage share of the product in question but also of its rivals and to have satisfactory evidence of the market share of the relevant product over a period of time to enable the Court to conclude that there is no prospect of the dominant position being eroded. Chanelle has not adduced such evidence in relation to these four markets and accordingly I accede to the Defendants' request to dismiss Chanelle's claim in so far as it relates to an alleged abuse of dominant position in relation to those four markets.

68. A different situation applies in relation to the claim made in connection with the Defendants' product Synulox. Chanelle asserts that there is a market for Synulox and Synulox alone. In the first place I accept that a market can be narrowly defined. In Case 22/78 Hugin -v- Commission (1979: ECR: 1869) it was accepted that a market existed in the supply of spare parts for Hugin cash registers. On the other hand Professor Whish in his book "Competition Law" at page 5 writes "... monopoly power does not exist in relation to a product, but to a relevant product market , and the definition of this relevant product market must meet two criteria: It must be sufficiently narrowly drawn to exclude non-substitutes and it must be sufficiently broadly drawn to include all substitutes".

69. The evidence relied upon by Chanelle to establish a specific market in the Defendants' product Synulox has been conveniently identified in a memorandum referring to the transcript of evidence prepared by Counsel at my request. This evidence establishes the following: Michael Burke says that Synulox is a product that a vet must have with him in order to carry out his work: he refers to its uniqueness and to its broad range of activity. He described it as "the Rolls Royce of antibiotics". In certain cases it is the only antibiotic that will work for a particular type of disease. A number of vets referred to Synulox as a drug of choice or equivalent. One of these Mr O'Keeffe was not prepared to say, however, that there were cases which may not be treatable without Synulox. On the other hand another, Brendan Gardiner, stressed on a number of occasions that there was no substitute for Synulox . He stressed that there was no other product on the market that contained both Amoxycicillin and Clavulinic Acid. The results of State laboratory testing on occasion would indicate that the only drug to treat a particularly difficult condition was Synulox. Another witness, veterinary surgeon Pat Murphy, gave evidence that there were a number of cases where Synulox has proved to be the only antibiotic that is effective and that it is particularly effective with calves. There are cases where the animal will die if it is not given Synulox and he thought that a vet would be negligent if he did not carry it when faced with such a case. It is particularly effective in the case of gangrenous mastitis. Under cross-examination Mr. Murphy insisted that there was no substitute for Synulox in the market.

70. I have some doubt in deciding that a prima facie case has been made to establish a separate market for Synulox in this country. However in deciding that such a case has been made out I have been particularly conscious of the distinction between a prima facie case on the one hand and on the other a case that will probably succeed which is a distinction which clearly emerges from the authorities referred to at the outset of this judgment and it is indeed a distinction that I have kept at the forefront of my mind in reaching all my conclusions.

71. The Defendants argue that in this case, however, there has not been a refusal to supply Chanelle but only a refusal to supply it as a nominated distributor. The Defendants' product can be procured by Chanelle from any of the nominated distributors and with the benefit of the rebate. There is authority, however, (Napier Brown-British Sugar; 1990: 4: CMLR:) at Commission level that an offer of supplies on terms which the supplier knows are unacceptable to the customer will be treated as a constructive refusal.

72. With hesitation I am prepared to hold that Chanelle has produced sufficient evidence to warrant a reply from the Defendants to the proposition that a market exists in this country for the Defendants' product Synulox, which is separate to the general antibiotic market or any other market, thereby placing the Defendants in a dominant position in that market and that the decision of the Defendants to de-list Chanelle as an appointed wholesale distributor amounted in law to an abuse of that position.

73. Mr. McDowell with reference to a broad market definition for animal health products indicated that it would be hard to sustain an argument that even a large firm such as Pfizer has sufficient market power to warrant treating it as dominant in the sense of EU jurisprudence. Pfizer's percentage share in the overall animal health products market is approximately 12% or perhaps slightly above that. Mr. McDowell did, indeed, go on to consider the market power of the Defendants in the various submarkets.

74. In my view Chanelle has not established a prima facie case to show that Pfizer has dominance in a single overall animal health product market in the Republic of Ireland and accordingly no case can be made in relation to abuse of dominance in such a market. Accordingly I accede to the Defendants' application to dismiss Chanelle's claim in so far as it relates to any alleged abuse of dominance in the overall animal health products market in this country.

75. Pfizer imports products from other Member States of the EU as well as from the U.S. Chanelle's sister company CPML exports the bulk of its products to other Member States.

76. The "low threshold" referred to by Counsel for Chanelle refers to the possibility of foreseeing an influence, direct or indirect, actual or potential, on the pattern of trends between Member States, such as might prejudice the aim of a single market in all the Member States.

77. In relation to the case alleging anti-competitive agreements or concerted actions under Article 85 I am prepared to hold that a prima facie case has been made out that the de-listing of Chanelle as an appointed wholesale distributor could have such an inter Member State effect as is indicated in the Miller case, to which I will refer immediately hereafter and that therefore a prima facie case has been established to show an infringement of Article 85 of the Treaty.

78. In considering whether a prima facie case has been made out to establish an inter Member State effect arising out of the refusal of the Defendants to supply Synulox to Chanelle as an appointed wholesale distributor, I have had particular regard to the judgment of the European Court of Justice's decision in Miller International Schallplatten GmbH -v- Commission of the European Communities (Case 19/77) where it was held that the treaty does not require proof that an allegedly anti-competitive agreement has in fact appreciably affected trade between Member States "but merely requires that it be established that such agreements are capable of having that effect." I note, in particular, that the Court so held notwithstanding reliance by Miller on its weak position in the market and a "derisory" proportion of the total relevant market.

79. Despite the "low threshold" established by this authority I consider that the case alleging abuse of a dominant position in relation to Synulox must be close to coming within the "de minimis" category. I am prepared, notwithstanding, to hold that a prima facie case has been made out in this regard also.