Info Service on WTO and Trade Issues (Nov18/07)
9 November 2018
Third World Network
South Africa challenges North on curbing anti-competitive behaviour
Published in SUNS #8790 dated 7 November 2018
Geneva, 6 Nov (D. Ravi Kanth) - South Africa has challenged the developed
countries at the World Trade Organization (WTO) to discuss how to
promote public health by curbing the anti-competitive behaviour of
the pharmaceutical companies stemming from the existing Intellectual
Property (IP) protection.
The South African challenge comes at a time when the developed countries
led by the United States are queering the pitch for framing rules
for Intellectual Property and Innovation by ignoring the central issue
of anti-competitive behaviour of the pharmaceutical industry that
is causing an explosion in the prices of prescriptive drugs, particularly
in the US where it is a major election issue today.
South Africa has said that "IP protection per se cannot be presumed
to confer market power or to indicate anti-competitive behaviour."
In its proposal (IP/C/W/640) circulated on 26 October, South Africa,
later joined by Brazil, has asked members to discuss at the meeting
of the WTO Council for Trade-Related Aspects of Intellectual Property
Rights (TRIPS) on Thursday ( 8 November) about the interface between
competition law and policy and IP because of the anti-competitive
behaviour of leading pharmaceutical behemoths.
Incidentally, Brazil has also co-sponsored the proposal on IP and
Innovation circulated by the US, the EU, Japan, and Chinese Taipei
During the June 2018 TRIPS Council meeting, South Africa said that
the co-sponsors on "IP and the Public Interest: Promoting Public
Health through Competition Law", including China, had demonstrated
that "there are various pro-competitive provisions in the TRIPS
Agreement, including Article 6, Article 8.1, Article 31(k) and Article
South Africa said, "these provisions leave WTO Members broad
policy space to apply competition law in respect of acts related to
the acquisition or exercise of IP rights."
For accommodating "the variety of potential competition approaches,"
South Africa and other co-sponsors had argued that "remedies"
are available to address anti-competitive behaviour, including "permitting
a broader range of remedial action than some other public health-related
flexibilities associated solely with patents."
Therefore, "competition policy has an important role to play
in ensuring access to medical technology and fostering innovation
in the pharmaceutical sector," South Africa has argued.
"WTO Members have absolute policy space under international law
to design their national competition laws in accordance with their
domestic interests and needs and the level of their development,"
South Africa has maintained.
It acknowledged that there are difficulties in using competition policy
in developing countries due to "lack of capacity to administer
or enforce such a system."
Nevertheless, many WTO members, including several developing countries,
are already using "competition law to address various anti-competitive
practices that affect access to medicines and medical technologies."
South Africa said practices adopted by patent holders that have been
identified as detrimental include, among others:
(i) abuses of IPRs due to a refusal to deal with or imposition of
overly restrictive conditions in medical technology licensing;
(ii) preventing generic competition through anti-competitive patent
(iii) mergers between pharmaceutical companies that lead to undesirable
concentration of research and development and IPRs;
(iv) cartel agreements between pharmaceutical companies, including
between manufacturers of generics;
(v) anti-competitive behaviour in the medical retail and other related
(vi) bid rigging in public procurement.
In this respect, South Africa said, "not all jurisdictions follow
the same approach, for instance, refusal to license may amount to
an abuse of dominance in some jurisdictions while others consider
this [to be] within the rights of IPR holders."
It maintained that the "objectives" and "principles"
enshrined in Articles 7 and 8 of the TRIPS Agreement form central
elements of the interpretation of the T RIPS Agreement, especially
with regard to the relevant provisions that recognize flexibilities
to legislate at the national level.
South Africa cited the cases of Canada - Patent Protection for Pharmaceutic
al Products and Australia - Tobacco Plain Packaging to argue that
paragraph 5 of the Doha Declaration constitutes a subsequent agreement
of WTO Members within the meaning of Article 31(3)(a) of the Vienna
Convention on the Law of Treaties, and have important consequences
for how flexibilities in the TRIPS Agreement are interpreted.
According to South Africa, the United Nations Conference on Trade
and Development (UNCTAD) has produced seminal work on several issues
concerning competition policy matters.
Even the World Intellectual Property Organisation (WIPO) has actively
discussed the issue of IP and competition, South Arica maintained.
Against this backdrop, South Africa and the co-sponsors have urged
WTO members to "share their national experiences and examples
of how competition law is used to achieve public health and related
The sponsors on the IP and the public interest have posed the following
que stions to be discussed at the TRIPS Council meeting on Thursday:
(1) What types of behaviours do WTO Members consider abuses of intellectual
property rights in the pharmaceutical and medical sectors? Has there
been any evolution in the approaches that WTO Members take to assess
such types of behaviours?
(2) What examples of best practice can Members identify on the subject
of the control and remedies for excessive pricing? Are there context-specific
methodologies employed by Members for determining if prices are excessive,
and the mechanisms to remedy and control pricing abuse?
(3) What examples of best practice can be identified through national
competition laws and practices? Are there certain common trends that
can be identified across various jurisdictions?
(4) To what extent can technical assistance and capacity building
contribute to the delivery of more effective policies by WTO Members
in the field of competition law to address the abuse of intellectual
South Africa's proposal has triggered fierce opposition from the US,
the European Union, and Switzerland among others who have maintained
that the TRIPS Council should not discuss the issue. Instead, the
industrialized countries want to discuss IP and Innovation, which
fails to serve any public goals at this juncture.
Ahead of the WTO's TRIPS Council meeting on Thursday, the two sides
are challenging each other in which way the IP protection must proceed
in the face of public health challenges, particularly the unaffordable
prices for prescription drugs in several industrialized countries.
The US, joined by the European Union, Japan, Switzerland, Korea, Chinese
Taipei, and Brazil among others, has zeroed in exclusively on how
IP can foster new business in which the private sector "is moving
more and more towards having knowledge and technology as its main
product and service."
The US and other sponsors have argued repeatedly that given the predominant
role played by knowledge in economic growth and other intangible assets,
WTO members must aim at policy measures that would enhance intellectual
property rights for supporting new businesses.
The sponsors have listed the following areas in which IP and innovation
can play an important role:
* IPRs can act as a cartel that sets start-ups on a growth path, and
thus may provide a stimulus and encourage them to enter national and
* IP can play a key role in overcoming financing constraints well
known to young entrepreneurs. Patents function as a mechanism for
credibly publicizing information for external investors. In fact,
this patent signaling mechanism motivated a body of economic research
examining use of patents by start-ups to signal quality such as R&D
success and innovative capabilities, which outsi de investors would
otherwise have difficulty in screening or differentiating.
* To create a secure national and international business environment,
with a special focus on making IPR available and providing adequate
remedies for when they are infringed.
The proponents want WTO members to share country-specific information
on IP and knowledge-based businesses, and address the question as
to what IPR-specific regulatory measures, policies and practices are
"conducive to, or even necessary for, creating new businesses,
e.g. how easy is it to create a new business for young entrepreneurs."
Significantly, the proponents are silent about IP and public health,
particularly the growing prices of prescription medicines in the US
and other countries.