The First Civil Senate of the German Federal Court of Justice, which is responsible among other things for claims under the Unfair Competition Act, has ruled that it is illegal under competition law for pharmacies to give their customers low-value promotional gifts such as a bread roll voucher or a one-euro voucher when they purchase prescription medicines.

Proceedings I ZR 206/17

Facts:

The defendant operates a pharmacy in Darmstadt. In September 2014, she handed a customer a bread roll voucher for “2 Wasserweck or 1 Ofenkrusti” on the occasion of the purchase of a prescription drug. The voucher could be redeemed at a bakery located near the pharmacy. The plaintiff, the Zentrale zur Bekämpfung unlauteren Wettbewerbs (Central Office for Combating Unfair Competition), brought an action against the defendant for an injunction to link the sale of prescription-only, price-controlled medicines with the free distribution of a bread voucher.

Previous process history:

The district court upheld the action. The defendant’s appeal has been unsuccessful.

The Court of Appeal assumed that the addition of a roll coupon to the purchase of a prescription drug violated the price maintenance regulations for drugs (Section 78 (2) sentences 2 and 3 AMG). These regulations are market conduct regulations, so that such an infringement is at the same time anti-competitive (§ 3a UWG). In view of the fact that the donation of low-value small items for the purchase of pharmaceuticals was permissible under the Heilmittelwerbegesetz (German Drug Advertising Act), the case law had denied the noticeability of an infringement of pharmaceutical pricing law. However, this could no longer be adhered to after the legislator had expressly supplemented the corresponding provision of the Therapeutic Products Advertising Act with effect from August 13, 2013 by the provision that benefits or advertising gifts granted contrary to the price regulations of the Medicinal Products Act were inadmissible (Section 7 (1) sentence 1 no. 1 HWG). The fact that, according to the case law of the Court of Justice of the European Union, the price provisions of the German Medicines Act do not apply to pharmacies established in other Member States of the European Union (ECJ, judgment of October 19, 2016, C-148/15, GRUR 2016, 1312 – Deutsche Parkinson Vereinigung/Zentrale) does not preclude the application of those provisions to pharmacies established in Germany, either for reasons of Union law or for reasons of constitutional law.

In its appeal, which was allowed by the Court of Appeal, the defendant continued to pursue its motion to dismiss the action.

Proceedings I ZR 60/18

Facts:

The defendant operates a pharmacy in Berlin. He temporarily granted his customers a discount in the form of a one-euro voucher in 2014. Customers could redeem the voucher for another purchase at the defendant’s pharmacy. The plaintiff is the Central Office for Combating Unfair Competition. It filed a claim against the defendant for an injunction to provide a one-euro shopping voucher to customers who fill a prescription for a prescription-priced drug.

Previous process history:

The district court upheld the action. On appeal by the defendant, the Court of Appeal dismissed the action.

The Court of Appeal assumed that the granting of a one-euro voucher by the defendant when dispensing prescription drugs to consumers violated the price-fixing regulations for drugs (Section 78 (2) sentences 2 and 3 AMG). These price fixing provisions are compatible with the freedom to exercise a profession and the principle of proportionality. The fact that, according to the case law of the Court of Justice of the European Union, the price provisions of the German Medicines Act do not apply to pharmacies established in other Member States of the European Union (ECJ, judgment of October 19, 2016, C-148/15, GRUR 2016, 1312 – Deutsche Parkinson Vereinigung/Zentrale) does not preclude their application to the sale of medicinal products within Germany and does not result in unlawful discrimination against pharmacies established in Germany. However, the infringement of the price maintenance regulations by means of a gift of a small item of low value which is at issue here is not anti-competitive. It was not likely to cause significant harm to the interests of consumers, other market participants or competitors (Section 3a UWG). This assessment is not contradicted by the fact that, according to the current version of the German Drug Advertising Act (Heilmittelwerbegesetz), it is also not permissible to give away small items of low value in contravention of the price regulations under pharmaceutical law (Section 7 (1) sentence no. 1 HWG).

In its appeal, which was allowed by the Court of Appeal, the plaintiff continued to pursue its claim.

Decisions of the Federal Supreme Court:

The Federal Court of Justice dismissed the defendant’s appeal in the proceedings I ZR 206/17. The plaintiff’s appeal in the proceedings I ZR 60/18 was successful.

According to the decisions of the Senate, the addition of both a bread roll voucher and a one-euro voucher when purchasing a prescription drug is anti-competitive because both promotional gifts violate the applicable price fixing regulations (Sections 3, 3a UWG in conjunction with Section 7 (1) Sentence 1 No. 1 HWG, Section 78 (2) Sentence 2 and 3, (3) Sentence 1 AMG).

In the case of advertising for medicinal products within the meaning of Section 2 AMG, Section 7 para. 1 sentence 1 HWG, benefits and other advertising gifts (goods or services) may only be offered, announced or granted if one of the exceptions expressly regulated in numbers 1 to 5 of this provision applies.

This fundamental prohibition of value advertising is a market conduct regulation within the meaning of Section 3a UWG. A violation of this prohibition may give rise to claims for injunctive relief (Section 8 UWG). The provision of § 7 para. 1 sentence 1 HWG is intended to counteract the abstract danger that consumers, when deciding whether and, if so, which remedies to use, may be improperly influenced by the prospect of promotional gifts. As far as § 7 para. 1 sentence 1 no. 1 half-sentence 2 HWG generally prohibits advertising gifts granted contrary to the price regulations of the German Medicines Act, this is also intended to prevent ruinous price competition between pharmacies and to ensure a nationwide and uniform supply of medicines to the population.

The judgment of the Court of Justice of the European Union in the case “Deutsche Parkinson Vereinigung/?Zentrale” (Judgment of October 19, 2016 – C-148/15, GRUR 2016, 1312 = WRP 2017, 36) does not preclude the application of the price regulations of the German Medicines Act referred to in Section 7 (1) sentence 1 no. 1 HWG for pharmacies established in Germany. According to this decision, the regulations on fixed prices for pharmacies located in other states of the European Union constitute an infringement of the free movement of goods (Article 34 TFEU). However, the regulations on the free movement of goods are not applicable to domestic situations without a cross-border element, as in the cases in dispute.

The judgment of the Court of Justice of the European Union also does not lead to discrimination against nationals that is impermissible under national constitutional law. From Art. 3 para. 1 GG, it does not follow that a regulation for nationals must correspond to that for other citizens of the Union, as long as the unequal treatment is based on objective reasons. With regard to the pharmaceutical price fixing, a weighty objective reason already arises from the fact that the national legislator is restricted in its freedom of design with regard to the cross-border sale of pharmaceuticals by the free movement of goods regulated in the primary law of the European Union and the case law of the Court of Justice of the European Union that has been issued in this regard, but there is no corresponding restriction for the sale of pharmaceuticals within Germany. Moreover, different treatment of pharmacies established in Germany, on the one hand, and pharmacies established in other Member States of the European Union, on the other hand, is justified because, in view of the special features of the German market, fixed pharmaceutical prices have a lesser effect on pharmacies established in Germany than on pharmacies established in other Member States, which are particularly dependent on mail-order sales for direct access to the German market. The continued application of the pharmaceutical price maintenance regulations for pharmacies located in Germany also does not violate Art. 12 Para. 1 GG. The law, which is in conformity with the provisions of sec. 78 para. 1 and 2 AMG is proportionate in view of its purpose of ensuring a nationwide and uniform supply of medicinal products to the population, which is in the public interest. Taking into account the broad legislative discretion, the proportionality of the price regulations is only questioned if the purpose of the law can no longer be generally achieved as a result of the volume of sales of price-linked drugs by foreign mail-order pharmacies or if the statutory regulation is no longer reasonable for domestic pharmacies in view of the competitive pressure from other European countries. The courts of appeals have not found that this is currently the case.

The violation of the market conduct regulation of § 7 para. 1 sentence 1 HWG is, after all, suitable for noticeably impairing the interests of market participants within the meaning of Section 3a UWG. The fact that both a roll voucher and a one-euro voucher are promotional gifts of low value does not change this. In amending the Therapeutic Products Advertising Act effective August 13, 2013, the legislature assumed that any deviation from the pharmacy dispensing price for prescription drugs that is prohibited by law is likely to trigger undesirable price competition among pharmacies. The clear statutory provision according to which every grant of a benefit or other promotional gift within the meaning of Section 7 para. 1 sentence 1 no. 1 HWG, which violates the price regulations of the German Medicines Act, is inadmissible, may not be undermined by classifying such a violation as not appreciable and thus as not being anti-competitive. It is not possible to rely on the financial insignificance of the advertising gift, since the price fixing must be strictly observed according to the will of the legislator.