Competition law preserves market balance by ensuring fair pricing and broad product choice for consumers while allowing companies to operate under equal conditions. Its main purpose is to provide consumers with quality products at fair prices and to create a healthy market environment where companies compete on equal terms. Within this framework, practices such as fixing prices or production conditions through collusions, blocking market entry and allocating customers are considered major competition law infringements.
In 2024, the European Commission issued a competition infringement decision against Alchem International, a Switzerland-based producer of pharmaceutical raw materials, and its subsidiary Alchem International (H.K.) Limited. The Commission found that Alchem had engaged in cartel activities, including price fixing and customer allocation, in the sales of N-Butylbromide Scopolamine/Hyoscine (SNBB), an important raw material used in pharmaceutical production.
The investigation determined that Alchem had participated in this cartel activity within the European Economic Area (EEA) from 1 November 2005 to 12 February 2018. Alchem did not cooperate with the Commission during the investigation and therefore was not eligible for a reduction in penalties. This highlights the crucial importance of cooperating with authorities during EU competition law investigations.
The European Commission imposed a fine of €489,000 on Alchem for this infringement. The amount was determined by considering factors such as the duration of the violation, its geographical scope, the value of raw material sales, and the nature of the infringement.
The Alchem decision was adopted under Article 101 of the Treaty on the Functioning of the European Union (TFEU), which prohibits agreements that restrict competition. Under Article 101, activities such as price fixing, market allocation, or production restrictions are prohibited, except for certain exemptions. This decision is also crucial as it constitutes the first cartel fine in the pharmaceutical sector concerning an active raw material.
Effects of Cartels on Markets and Consumers
Cartel practices not only raise prices but can also hinder innovation. For consumers, the artificial increase in medicine prices makes access to certain critical drugs more difficult. As a result, cartel activities in the European pharmaceutical sector impose financial burdens, cause disruptions in supply chains, and undermine market transparency.
The European Commission’s Inspection and Investigation Methods
The Commission detects cartels through methods such as reviewing suspicious correspondence, analyzing confidential documents, and monitoring markets. In the Alchem investigation, the company’s lack of cooperation increased the penalty and highlighted the severity of the infringement. This serves as a concrete example of the zero-tolerance approach to competition law violations.
Cartel Risks and Preventive Measures in the Pharmaceutical Industry
Raw materials cartels can cause severe disruptions in the production chain. Risks include a reduction in the number of producers, price fluctuations, and a breakdown in supply continuity. The EU’s comprehensive intervention against such infringements aims not only to control prices but also to safeguard transparency across production and distribution stages.
Global Perspective
The Alchem decision is significant not only for Europe but also for international competition law. Similar pharmaceutical raw material cartels have been sanctioned in countries such as the United States, Japan, and China. These decisions serve as precedents for safeguarding fair competition in the global pharmaceutical supply chain.
Conclusion
The Alchem decision demonstrates that competition law not only protects fair pricing but also ensures that markets operate under transparent, accessible, and equitable conditions. It delivers a strong message aimed at preventing future cartels, enhancing transparency in the sector, and protecting consumers.
Nur Yeşildağ, Associate
