OFT fines Reckitt £10m for Gaviscon market abuse

Reckitt Benckiser was slapped with a £10.2m fine by the Office of Fair Trading yesterday for abusing its dominant market position in relation to the National Health Service.

The maker of pharmacueticals and domestic products was penalised after it admitted that it unlawfully stopped supplying Gaviscon Original Liquid, a heartburn treatment, after its patent had expired. The effect was to boost sales of the similarly named Gaviscon Advance Liquid, whose patent does not expire until 2016 – a move that is banned under competition law.

Where a branded medicine's patent has expired and a generic name has been assigned to it, doctors can use software to search for the brand and then provide patients with a so-called "open prescription", which allows pharmacies to choose whether to dispense the relevant brand, or a cheaper alternative.

Reckitt's action blocked GPs from prescribing a cheaper generic version and ensured more prescriptions for Gaviscon Advance Liquid.

The fine was reduced from £12m reflecting the company's early admission and, according to the OFT, its decision to co-operate as part of an early resolution agreement. "This OFT investigation relates to an infringement that took place a number of years ago under a highly complex area of competition law, on which there have only more recently been clarifying cases," Reckitt Benckiser said in a statement last night.

"Therefore, while the company believed at the time it was acting within the law, as is always our intent, we respect the view of the OFT in this matter and have agreed to settle."

Reckitt, which has a market capitalisation of £25bn, refused a request for an interview.

A spokesman for the OFT said it was not required to disclose how much the firm's action move had cost the health service. The UK market for heartburn medicine is worth between £15m and £20m.

"This fine sends a strong signal to deter others that are in a dominant market position," said Anne Pope, a senior director in the OFT's goods group. "The law is complicated in this area, but it does specifically prohibit abuse of a dominant market position – it is clearly not possible for the law to list all the possible examples.

"The market for this type of drug is worth between £15m and £20m, so this fine accounts for a large proportion of Reckitt's turnover in this area."

Industry analysts brushed the fine aside, arguing instead that Reckitt's proposed acquisition of SSL International, the maker of Durex condoms and Scholl foot care products, was a significantly more important event for the company.

"The fact the SSL deal looks as if it is going to complete soon is extremely positive," said Tom Gidley-Kitchin, an analyst at Charles Stanley.

Other sector experts said Reckitt might be on the lookout for further acquisitions. Chas Manso de Zuniga, of Evolution Securities, argued that a number of American companies could be on Reckitt's radar.