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BGH – Advertising must not circumvent price controls on medicines

March 2019 - Corporate & Commercial. Legal Developments by GRP Rainer LLP.

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The Bundesgerichtshof (BGH), Germany’s Federal Supreme Court, has set out new restrictions on pharmacies enticing new customers, ruling that readily offering rewards for referring new customers is now allowed.

Pharmacies are subject to increasing competitive pressures. This is partly due to online mail-order pharmacies. As such, it has become all the more important for pharmacies to secure the loyalty of their existing customers and acquire new ones. This is true for both mail-order pharmacies as well as on-site pharmacies. However, there are restrictions relating to the acquisition of customers. We at the commercial law firm GRP Rainer Rechtsanwälte note that offering rewards for referring customers is not allowed if doing so circumvents price controls on medicines.

In Germany, there are price controls on medicines that online and local pharmacies are equally bound to comply with. These price controls cannot be circumvented by offering customers a reward for referring new customers where the reward can also be redeemed when purchasing medicinal products that are subject to price controls. According to a ruling of the Bundesgerichtshof from November 29, 2018, this constitutes a violation of the Heilmittelwerbegesetz (HWG) and the Gesetz gegen den unlauteren Wettbewerb (UWG), Germany’s Act on the Advertising of Medicinal Products and Act Against Restraints of Competition respectively (Az.: I ZR 237/16).

In the instant case, a mail-order pharmacy had advertised that it would reward its customers by paying them ten euros for referring a new customer. A professional body representing pharmacists decided to bring a legal action against this. Like the courts of lower instance before it, the BGH largely granted the action.

While pharmacies are, in principle, allowed to pay their customers rewards, price controls on medicines must not be circumvented in doing so. Yet that is exactly what happened in this case. The reward was paid when an order was placed by a new customer, even if said customer ordered medicinal products that are subject to price controls. The BGH concluded that the mail-order pharmacy was thus guilty of anti-competitive conduct.

The Court went on to state that this finding is not called into question by the fact that it is the referring customer and not the new customer who receives the reward. The BGH reasoned that the former obtains an advantage from purchasing the medicinal product that is subject to price controls, which creates the overall impression that purchasing the medicine from the mail-order pharmacy is cheaper.

Advertising is a fine balancing act for physicians, pharmacists and practitioners of other health professions that can give rise to violations of competition law. Lawyers with experience in the field of competition law can offer advice.

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