The GSK France case in search of a consistent story - Association of 葛兰素史克法国案例故事一致的搜索协会.ppt

The GSK France case: in search of a consistent story Michele Polo (Bocconi University and LECG) 2007 ACE Conference, Toulouse The case Very complete summary in Choné’s presentation I do not enter into relevant market issues (interesting comments in Avenel’s presentation) I focus on the predatory pricing issue: Identify the anticompetitive story proposed by the CC; Build an alternative competitive explanation Which factual elements allow to discriminate between the two? Did the decision run a proper evaluation of these factual elements? The anticompetitive story of the CC Actors: Glaxo France (predator); Flavelab (prey); Merck, Panpharma, Lilly, …(other firms) Markets: pharmaceutical markets at the turning point when patent protection is expiring; supply to hospitals (bidding markets). Market A: Acyclovir; Market B: cephalosporins (2 molecules: cefuroxime and cefamandole, but only the former is considered!) Qualitative argument: the patent holder establishes a reputation of aggressive behaviour in one (small) market and deters entry also in other markets where patent protection is going to expire. Predation strategies establish a link across otherwise different and separate markets Reference to two models of predatory pricing: Reputation: below cost pricing in market B (cefuroxime) where Glaxo is not dominant with the aim of constructing a reputation of aggressive player and deter entry in market A (acyclovir) where Glaxo is dominant; Financial Predation: aggressive pricing to induce negative performance and inability of the entrant to rely on external finance to cover losses The anticompetitive story of the CC (2) 1999-2000: Glaxo prices Zinnat? (market B: cefuroxime) below purchasing price in hospital procurements where it faces Flavelab as a competitor selective price cuts; Glaxo establishes a general reputation of aggressive incumbent towards entrants (also in other markets, including market A) Flavelab exits in 2000 and goes bankrupt in 2001 Glaxo