Antitrust Law Daily Wrap Up, TOP STORY—C.D. Cal.: Allergan dodges judgment on pleadings in market allocation suit, (Jun 1, 2016)

By Jeffrey May, J.D.

Disputed issues of material fact precluded judgment on the pleadings in an antitrust action brought by a dentist against pharmaceutical manufacturer Allergan, Inc., the federal district court in Santa Ana, California, has decided. The complaining dentist, who claimed to have paid supra-competitive prices for Botox purchases, contended that partial judgment as to liability was warranted based on per se illegal horizontal market allocation in the form of an exclusive license agreement between Botox maker Allergan and potential foreign rival Medytox, Inc. (Tawfilis v. Allergan, Inc., May 31, 2016, Staton, J.).

Allergan did not deny the existence of the license agreement with Medytox. Medytox is a Korean company that was purportedly positioned to challenge Allergan’s control of the U.S. market for neurotoxins for cosmetic use, such as Botox. The plaintiff contended that Allergan entered into the license agreement in response to Medytox's impending entry into the U.S. market.

According to the plaintiff, instead of having Medytox’s product compete against Allergan’s Botox in the United States, Allergan agreed to act as Medytox’s exclusive licensee in the entire world with the exception of Korea and Japan. The plaintiff contended that this agreement was sufficient evidence to support liability against Allergan on the market allocation claim.

In order to prevail on the motion, the plaintiff had to show a per se unlawful horizontal market allocation agreement. This required that Allergan and Medytox be “competitors at the same level of the market structure.” However, there was a dispute over whether Allergan and Medytox were potential competitors within the U.S. market, in the court's view.

Many of the allegations concerned Medytox’s intent to enter the U.S. market. At the pleading stage, neither Allergan nor the court had any basis to assess the veracity of these allegations, it was noted. Thus, the motion for judgment on the pleadings was premature, according to the court.

This is Case No. SACV 15-307-JLS (JCGx).

Attorneys: Ralph B. Kalfayan (Krause Kalfayan Benink And Slavens LLP) for Adel Tawfilis. Alfred C. Pfeiffer, Jr. (Latham & Watkins LLP) and Bryan A. Merryman (White & Case LLP) for Allergan, Inc.

Companies: Allergan, Inc.; Medytox, Inc.

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