Apotex v. Paladin Labs Inc. et al: The First, but Certainly Not Last, Private Abuse of Dominance Case
On September 29, 2023, Apotex Inc. (“Apotex”) applied for leave to the Competition Tribunal (“Tribunal”) under section 103.1 to bring an application under the abuse of dominance provisions of the Competition Act (the “Act”). Last year’s amendments to the Act (which we detailed previously) allow private parties to seek leave to bring abuse of dominance applications at the Tribunal. Prior to the amendments, only the Commissioner of Competition (“Commissioner”) could bring enforcement action for alleged abuses of dominance.
While this was the first private case seeking relief under Act’s abuse of dominance provisions, its discontinuance just over two weeks after filing (on November 13, 2023) suggests that it was a successful one. In any event, it certainly won’t be the last such application. This case provides important lessons as to how these provisions of the Competition Act may be deployed in the pharmaceutical space, and beyond.
Apotex, a maker of branded and generic drugs, sought to bring a generic ponatinib-based drug to market. As detailed in Apotex’s Notice of Application, one condition of obtaining expeditious regulatory approval required Apotex to establish that its drug was biologically equivalent to a drug for which Health Canada approval had already been obtained (with a “bioequivalence” study). To conduct this study, the would-be applicant required a sample of the previously-approved product, to compare with the proposed generic.
Apotex alleged that ICLUSIG was the only ponatinib-based drug that had already received the relevant Health Canada approval. ICLUSIG is owned by and marketed by Takeda Pharmaceuticals U.S.A. Inc., and distributed by Paladin Labs Inc. and Endo Pharmaceuticals Inc. (collectively with their affiliates named in the application, the “Respondents”). Apotex claimed that, due to careful controls on ICLUSIG, it was unable to obtain a sample other than through the Respondents. From June 2023 through September 2023, Apotex allegedly made a series of requests to the Respondents for a sample of ICLUSIG. These requests were unsuccessful.
Alleged Abuse of Dominance
Apotex applied for leave to the Tribunal to bring an application seeking a remedial order under the abuse of dominance provisions of the Competition Act. Abuse of dominance is a reviewable form of unilateral conduct under section 79 of the Act. Three elements must be satisfied for conduct to constitute an abuse of dominance:
- The person or persons must have a dominant position (i.e., substantially or completely control a class of business in Canada or any area of Canada);
- The person or persons must engage in a practice of anti-competitive acts; and
- Those facts must result in a likely substantial prevention or lessening of competition.
Where a respondent is found to have violated the abuse of dominance provisions, the Tribunal has a number of remedies at its disposal. In addition to injunctive relief or structural remedies, the Tribunal can also order significant administrative monetary penalties (up to the greater of (i) $10 million for the first violation and up to $15 million for any subsequent violations; or (ii) three times the value of the benefit derived from the anti-competitive practice, or, if that amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues).
In its submissions, Apotex alleged that the Respondents’ refusal to provide Apotex with ICLUSIG samples, given the Respondents’ allegedly dominant position in the market for ponatinib-based drugs, was intended to prevent Apotex from launching a competing generic drug, and therefore constituted an abuse of dominance.
In its proposed Amended Notice of Application for Abuse of Dominance, Apotex not only sought an order requiring the Respondents to provide the requested ICLUSIG (among other injunctive relief), but also sought substantial administrative monetary penalties (three times the profits earned from the sale of ICLUSIG during the period where Apotex’s requests were allegedly rebuffed). To be clear, administrative monetary penalties are only payable to the state – they are not damages. A successful private applicant in abuse of dominance would not benefit from any monetary penalties recovered, but the possibility of a monetary penalty acts as additional leverage in the litigation.
But First: Leave Requirement
Before Apotex could bring its proposed abuse of dominance application, however, the company first needed to seek leave. To grant leave to a private party to bring an abuse of dominance under section 103.1 of the Competition Act, the Tribunal must be satisfied of two things:
- The applicant’s business must be affected directly and substantially; and
- The alleged conduct could be subject to an order under the abuse of dominance provisions.
The case, however, never got this far, as Apotex obtained the samples soon after filing and discontinued the application. But if it had pursued the matter, Apotex would have had to contend with case law questioning whether leave should be granted in circumstances like this. Specifically, prior jurisprudence under section 103.1 of the Act has understood “substantially” with reference to the affected party’s entire business. In response, Apotex spent considerable space in its factum arguing that the Tribunal should consider “substantial” to apply to a portion of the applicant’s business. If “substantially” were to refer only to a portion of the applicant’s business, Apotex, a company with billions of dollars in annual revenue, would likely have had a stronger case for leave.
While short-lived, the case provides two key takeaways:
- Expect more activity in this space. This was the first private abuse of dominance case, and it was a success for the applicant. This may embolden other, similar suits against companies alleged to occupy a “dominant” position in a given market. While administrative monetary penalties are not awarded to potential applicants, they may represent an additional source of leverage to be deployed in seeking settlement.
- More narrowly, innovators should prepare for further abuse of dominance applications (or at least the threat thereof) in this space. With historical enforcement action from the Competition Bureau relating to the provision of samples to makers of generic drugs, and the outcome of this private application, other generic makers may be inspired to pursue (or threaten) copycat applications.
For further information, contact McCarthy Tétrault’s Competition/Antitrust & Foreign Investment Group.
 A “practice of anti-competitive acts” includes any act intended to have a predatory, exclusionary, or disciplinary negative effect on a competitor or any act intended to have an adverse effect on competition, among other acts enumerated in section 78 of the Act (though this list is non-exhaustive).
 “[T]he business to be considered on a leave application pursuant to section 75 of the Act is the entire business of the applicant, not simply the product line affected by the refusal to supply… The substantiality of the effect must therefore be measured against the business as a whole.” Audatex Canada, ULC v CarProof Corporation, 2015 CACT 28 at para 45, cited in Apotex v. Paladin Labs Inc., et al, Applicant’s Memorandum of Fact and Law, para 47.
 Apotex v. Paladin Labs Inc., et al, Applicant’s Memorandum of Fact and Law, para 43-52.