Contents
Judgment of the Court (Fourth Chamber)23 October 2025note(Appeal — Competition — Article 101 TFEU — Agreements, decisions and concerted practices — Market for modafinil — Patent settlement agreement between two pharmaceutical companies for the purpose of delaying a generic version of modafinil being brought to the market — Decision finding an infringement of Article 101 TFEU — Criteria for assessment — Restriction by object)In Case C‑2/24 P,APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 4 January 2024,Teva Pharmaceutical Industries Ltd, established in Petah Tikva (Israel),Cephalon Inc., established in West Chester (United States), represented by S. Ortoli and D. Tayar, avocats,the other party to the proceedings being:European Commission, represented initially by G. Conte, T. Franchoo and C. Sjödin, and subsequently by G. Conte and T. Franchoo, acting as Agents,THE COURT (Fourth Chamber),composed of I. Jarukaitis, President of the Chamber, M. Condinanzi and N. Jääskinen (Rapporteur), Judges,Advocate General: A. Rantos,Registrar: A. Calot Escobar,having regard to the written procedure,after hearing the Opinion of the Advocate General at the sitting on 27 March 2025,gives the following
Judgment
1By their appeal, the appellants seek to have set aside the judgment of the General Court of the European Union of 18 October 2023, Teva Pharmaceutical Industries and Cephalon v Commission (T‑74/21, ‘the judgment under appeal’, EU:T:2023:651), by which the General Court dismissed their action which sought the annulment of Commission Decision C(2020) 8153 final of 26 November 2020 relating to a proceeding under Article 101 [TFEU] and Article 53 of the EEA Agreement (Case AT.39686 – CEPHALON) (‘the decision at issue’), and, in the alternative, to have the fine imposed on them by that decision cancelled or its amount reduced.
Background to the dispute
2For the purposes of the present proceedings, the background to the dispute, as set out in paragraphs 2 to 23 of the judgment under appeal, may be summarised as set out below.
3Cephalon Inc. is a United States-based biopharmaceutical company supplying both originator and generic pharmaceutical products worldwide. Cephalon’s principal activities encompass research and development and bringing to the market medicinal products with a particular focus on disorders of the central nervous system.
4Teva Pharmaceutical Industries Ltd (‘Teva’) is a multinational pharmaceutical company which is active in the development, production and marketing of generic medicinal products as well as innovative and speciality pharmaceuticals, active pharmaceutical ingredients and over-the-counter products.
5In October 2011, after the European Commission approved the notified concentration by Decision C(2011) 7435 final (Case COMP/M. 6258 – Teva/Cephalon) of 13 October 2011 pursuant to Article 6(1)(b) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (OJ 2004 L 24, p. 1) (‘the merger decision’), Cephalon was acquired by Teva.
The relevant product and the applicable patents
6The present case concerns medicinal products containing the active pharmaceutical ingredient (‘API’) ‘modafinil’. Modafinil, discovered in 1976 by Laboratoire Lafon, a French pharmaceutical company, is a long-acting wakefulness-promoting agent used for the treatment of certain sleep disorders.
7In 1993, Cephalon obtained exclusive rights to modafinil and, in 1997, Cephalon started selling modafinil under the brand name Provigil in the United Kingdom. In 2005, it was selling modafinil in several countries in the European Economic Area (EEA).
8In the EEA, Cephalon’s various national compound patents for modafinil API expired at the latest in 2003, while data protection in relation to that active API expired at the latest in 2005.
9Although the compound patents for modafinil had expired, Cephalon still owned particle size secondary patents and other modafinil-related patents with an expiry date in 2015 in the EEA.
10Provigil was the most important product in Cephalon’s portfolio in terms of sales. In the light of the imminent entry on the market of generic products and in order to protect its business in the area in question, Cephalon also worked on a second-generation product (named ‘Nuvigil’), based on modafinil API, which it planned to place on the market to replace Provigil from 2006 onwards, first in the United States and subsequently in the EEA. In addition, Cephalon had planned to launch another modafinil-based medicinal product, named ‘Sparlon’. Ultimately, Cephalon launched neither Nuvigil nor Sparlon in the EEA.
11When, at the end of 2002, four generic companies (including Teva) applied for regulatory authorisation to market their generic modafinil products in the United States, Cephalon initiated patent infringement proceedings against them in the United States.
12Teva launched its generic modafinil product in the United Kingdom in June 2005.
13On 6 July 2005, following an exchange of letters, Cephalon initiated patent court proceedings against Teva before the High Court of Justice (England & Wales) (United Kingdom) and applied for an interim injunction to prevent Teva from selling its generic modafinil product in the United Kingdom. Teva then filed a counterclaim for revocation.
14Prior to the hearing on the request for an interim injunction scheduled for 11 July 2005, Teva agreed to stop selling generic modafinil products in the United Kingdom. In exchange, Cephalon agreed to provide a bond of 2.1 million pounds sterling (GBP) (approximately EUR 3.07 million) in the event that Teva succeeded in the court proceedings and was entitled to claim damages for foregone profit.
15The negotiations for a settlement agreement started at the end of November 2005.
The Settlement Agreement
16On 8 December 2005, Cephalon and Teva concluded a settlement agreement (‘the settlement agreement’). That agreement was also concluded for their affiliates and became effective on 4 December 2005.
17The agreement provided, inter alia, that, under Article 2, Teva committed not to enter the market independently and not to compete with Cephalon in the modafinil market (‘the non-compete clause’) and not to challenge Cephalon’s modafinil patent rights (‘the non-challenge clause’) (together ‘the restrictive clauses’).
18Articles 2.2 to 2.6 of the settlement agreement provided for a package of transactions relating to:– a licence from Teva to Cephalon in respect of Teva’s intellectual property rights;– a licence from Cephalon to Teva to use the data (known as ‘CEP-1347’) co-developed by Cephalon in connection with studies on the treatment of Parkinson’s disease;– the supply by Teva to Cephalon of the modafinil API;– payments from Cephalon to Teva for avoided litigation costs; and– the distribution by Teva of Cephalon’s products in the United Kingdom.
19Similarly, Article 3 of the settlement agreement provided for generic rights to be granted to Teva. Under that article, Cephalon granted to Teva a non-exclusive licence to launch its generic modafinil product, including in the EEA, from 2012 (or earlier, in the event that any other entity were to enter the market with a generic modafinil product).
20In accordance with Article 4 of the settlement agreement, Teva and Cephalon undertook to end immediately their modafinil litigation in the United States and the United Kingdom.
21The settlement agreement also included the amounts or royalties involved in the various transactions referred to in paragraphs 17 and 18 of the present judgment.
The decision at issue
22On 26 November 2020, the Commission adopted the decision at issue.
23In that decision, the Commission found that the applicants had infringed Article 101 TFEU and Article 53 of the EEA Agreement by participating in the settlement agreement in the pharmaceutical sector in exchange for a reverse payment (Article 1 of the decision at issue).
24The Commission imposed fines on Cephalon and Teva in respect of that infringement amounting to EUR 30480000 and EUR 30000000 respectively (Article 2 of the decision at issue).
The procedure before the General Court and the judgment under appeal
25By application lodged at the Registry of the General Court on 5 February 2021, Teva and Cephalon requested the annulment of the decision at issue and, in the alternative, the cancellation or reduction of the amount of the fines imposed.
26In support of their action, the appellants put forward four pleas in law.
27In the judgment under appeal, the General Court examined, in the first place, the first plea alleging an error of law and of fact in that the Commission had classified the settlement agreement as a restriction of competition by object (paragraphs 27 to 205 of the judgment under appeal).
28First, it dismissed the complaints regarding failure to apply the appropriate legal test (paragraphs 30 to 57 of the judgment under appeal).
29In that regard, the General Court held, in particular, that, in the light of the case-law arising from the judgment of 30 January 2020, Generics (UK) and Others (C‑307/18, ‘the judgment in Generics (UK)’, EU:C:2020:52), the classification of an agreement as a restriction by object requires an overall assessment including the interests and incentives of the parties concerned, in order to ascertain whether the commercial transactions contained in a settlement agreement could have any explanation other than the commercial interest of both the patent holder and the party allegedly infringing the patent not to engage in competition on the merits (paragraphs 37 to 43 of the judgment under appeal). Consequently, the Commission was required to ascertain whether the commercial transactions covered by the settlement agreement would also have been concluded, on equally favourable terms, absent the restrictive clauses. According to the General Court, if the Commission is able to find that the transactions in question would not have been concluded or would not have been concluded on such favourable terms absent those clauses, it can be concluded that those transactions cannot have any explanation other than the commercial interest of the holder of the patent at issue and of the party allegedly infringing the patent not to engage in competition on the merits (paragraph 45 of the judgment under appeal).
30The General Court then stated that the legal test applied by the Commission did not amount to a counterfactual analysis falling within the assessment of agreements as restrictions by effect (paragraph 47 of the judgment under appeal).
31Indeed, according to the General Court, it follows from the case-law of the Court of Justice that the assessment to be made in order to establish whether or not an agreement is to be characterised as a ‘restriction by object’ is not intended to identify and to quantify the anticompetitive effects of a practice, but solely to determine its objective seriousness, which can justify precisely there being no need to assess its effects (paragraph 49 of the judgment under appeal).
32Furthermore, the General Court stated that the fact that that assessment must be carried out, where necessary following a detailed analysis of the agreement concerned and in particular of the incentive effect of the transfers of value for which it provides, but also of its objectives and the economic and legal context of which it forms part does not also imply an assessment of the anticompetitive effects of that agreement on the market. It involves solely carrying out a detailed overall assessment of the complex agreements themselves in order not only to rule out their being characterised as a ‘restriction by object’ where there is doubt as to whether they are sufficiently harmful to competition, but also to preclude agreements from failing to be characterised as a ‘restriction by object’ by reason of their complexity alone and even though the detailed assessment of those agreements demonstrates that they reveal, objectively, a sufficient degree of harm to competition (paragraph 50 of the judgment under appeal).
33Second, the General Court dismissed the complaints regarding there being a plausible explanation for the transactions concluded alongside the agreement other than that they served solely as consideration for the restrictive clauses (paragraphs 58 to 166 of the judgment under appeal).
34Third, the General Court dismissed the complaints regarding the test established by the judgment in Generics (UK) concerning whether there were pro-competitive effects which were demonstrated, relevant and specifically related to the agreement concerned and sufficiently significant (paragraphs 167 to 191 of the judgment under appeal).
35The General Court found, regarding the arguments based on the merger decision, that the reference framework of that decision was different from that on which the analysis of the settlement agreement in the light of Article 101(1) TFEU was based. Whereas in the decision at issue the Commission assessed the restriction of competition caused by the settlement agreement and compared the impact thereof with a counterfactual scenario in which the settlement agreement was not concluded, the merger decision takes the settlement agreement for granted and assesses the likely impact of the parties’ merger on competition in the foreseeable future under EU merger control rules, starting in 2011 (paragraph 182 of the judgment under appeal).
36In addition, the General Court stated that the fact that the Commission, in the merger decision, found that after and despite the conclusion of the settlement agreement Teva was still the most likely competitive constraint on Cephalon does not mean that it considered that Teva’s generic rights had a pro-competitive effect (paragraph 183 of the judgment under appeal).
37Fourth, the General Court dismissed the complaints that the Commission allegedly erred in its assessment of the economic and legal context of the settlement agreement (paragraphs 192 to 205 of the judgment under appeal).
38In the second place, the General Court rejected the second plea, alleging an error in so far as the Commission classified the settlement agreement as a restriction by effect in that it relied solely on the potential effects of the settlement agreement (paragraphs 206 to 255 of the judgment under appeal).
39In that regard, the General Court noted in particular that, in accordance with settled case-law, it is possible to rely on the potential competition represented by a potential entrant, eliminated by the agreement in question, and on the structure of the market in question, and that Article 101 TFEU is designed to protect not only existing competition, but also potential competition (paragraphs 227 to 229 of the judgment under appeal).
40In the third place, the General Court rejected the third and fourth pleas, put forward by the appellants in the alternative, relating, respectively, to an incorrect application of Article 101(3) TFEU and to the fines imposed on the parties (paragraphs 256 to 307 of the judgment under appeal).
41In the fourth place, the General Court rejected the appellants’ request that it cancel or reduce the amount of the fines imposed (paragraphs 308 to 311 of the judgment under appeal).
42In the light of those considerations, the General Court dismissed the appellants’ action in its entirety.
Forms of order sought by the parties to the appeal
43By their appeal, the appellants claim that the Court should:– uphold the appeal and declare the action admissible;– set aside the judgment under appeal;– refer the case back to the General Court for a new judgment to be taken, unless the Court of Justice considers that it is sufficient well informed to annul the decision at issue; and– order the Commission to pay the costs.
44The Commission contends that the Court should:– dismiss the appeal; and– order the appellants to pay the costs.
The appeal
45The appellants raise two grounds in support of their appeal.
The first ground of appeal: errors of law in the application of the legal test resulting from the judgment in Generics (UK) in order to establish that there was a restriction of competition by object
46By their first ground of appeal, the appellants maintain that the General Court erroneously applied the legal test resulting from the judgment in Generics (UK) in order to establish that there was a restriction of competition by object in the context of a settlement agreement.
47The first part of that ground of appeal concerns the General Court’s interpretation of the first part of that test, which is found in paragraph 87 of that judgment, whereby a finding of a restriction of competition by object must be made where it is apparent from the analysis of the settlement agreement concerned that the transfers of value provided for by that agreement cannot have any explanation other than the commercial interest of both the holder of the patent and the party allegedly infringing the patent not to engage in competition on the merits. The second part of the first ground of appeal concerns the second part of that test, found in paragraph 111 of that judgment, according to which settlement agreements which are accompanied by proven pro-competitive effects capable of giving rise to a reasonable doubt that it causes a sufficient degree of harm to competition cannot constitute restrictions by object.
The first part: incorrect application of the first part of the legal test established by the judgment in Generics (UK)
–Arguments of the parties
48In the first part of the first ground of appeal, the appellants dispute paragraphs 45 to 47 of the judgment under appeal.
49First, in their view, the legal test set out in paragraphs 46 and 47 of that judgment is contrary to the case-law arising from the judgment in Generics (UK) and equates to a counterfactual analysis which is part of the assessment of agreements as a restriction by effect.
50In that context, the appellants complain that the General Court failed to explain why the legal test set out by the Commission in the decision at issue does not amount, in reality, to a counterfactual analysis which is part of an assessment of the agreements as a restriction by effect. In addition, the test confirmed by the General Court requires, in reality, an assessment, for each commercial transaction, of whether such a transaction would actually have been concluded, or whether it would have been concluded on the same terms, absent the settlement agreement taken as a whole, which is contrary to the case-law arising from the judgment in Generics (UK).
51Second, in the appellants’ view, in paragraph 45 of the judgment under appeal the General Court formulated a legal standard which is stricter than the test laid out in the judgment in Generics (UK).
52The appellants state that, in accordance with the guidance provided in the judgment in Generics (UK), a settlement agreement constitutes an agreement which has as its object the prevention, restriction or distortion of competition if it is clear from all the information available that the transfers of value can have no other explanation than the commercial interest of the parties to that agreement not to engage in competition on the merits. In addition, it is apparent from that judgment that, for such transfers of value to fall outside the definition of an agreement which restricts competition by object, it is sufficient for the alternative explanation for those transfers to be plausible.
53By holding that the Commission was required to ascertain whether the commercial transactions covered by the settlement agreement would also have been concluded, on equally favourable terms, absent the restrictive clauses, the General Court not only distorted the test established by the case-law of the Court of Justice, but also, unlike the Court of Justice, reversed the burden of proof.
54Third, in the view of the appellants, the General Court approved a test which was impossible for the parties to meet, contrary to the case-law arising from the judgment in Generics (UK).
55The appellants complain, in that regard, that the General Court incorrectly applied the test found in paragraph 43 of the judgment under appeal, in order to ascertain whether the commercial transactions contained in a settlement agreement could have any explanation other than the commercial interest of both the patent holder and the party allegedly infringing the patent not to engage in competition on the merits.
56They recall that when the settlement agreement was concluded, they were engaged in worldwide litigations concerning Cephalon’s patents protecting modafinil, and that, ‘absent the settlement agreement’ they would have continued to litigate. In that situation, Cephalon would have had no incentive to conclude any commercial transaction with Teva related to the subject matter of the litigation and only reduced incentives to conclude any sort of agreement at all, as the Commission itself acknowledged in paragraph 794 of the decision at issue.
57A test such as that applied by the General Court would necessarily exclude the conclusion of commercial transactions concomitantly with a settlement agreement, which would be contrary to the case-law arising from the judgment in Generics (UK).
58According to the applicants, the relevant question to be asked in that context was whether, assuming Teva and Cephalon had settled their litigation, there was a plausible explanation for each of the commercial transactions.
59The Commission contends that the first part of the first ground of appeal must be rejected as being unfounded.
–Findings of the Court
60By the first part of the first ground of appeal, the appellants are disputing paragraphs 45 to 47 of the judgment under appeal and, in particular, the legal test used by the General Court to classify non-compete and non-challenge commitments made in the context of the settlement agreement as restrictions of competition by object.
61As a preliminary point, it must be recalled that, in accordance with the case-law of the Court of Justice, settlement agreements whereby a manufacturer of generic medicines that is seeking to enter a market recognises, at least temporarily, the validity of a patent held by a manufacturer of originator medicines and gives an undertaking, as a result, no longer to challenge that patent and not to enter that market are liable to have effects that restrict competition, since challenges to the validity and scope of a patent are part of normal competition in the sectors where there exist exclusive rights in relation to technology (the judgment in Generics (UK), paragraph 81, and judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 293).
62Indeed, a manufacturer of generic medicines, after assessing its chances of success in the court proceedings between it and the manufacturer of the originator medicine concerned, may decide to abandon entry to the market in question and to conclude with that manufacturer an agreement in settlement of those proceedings (judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 163 and the case-law cited).
63Such an agreement cannot be considered, in all cases, to be a restriction by object within the meaning of Article 101(1) TFEU. The fact that such an agreement involves transfers of value by the manufacturer of originator medicines in favour of a manufacturer of generic medicines does not constitute a sufficient ground for characterising it as a restriction of competition by object, since those transfers of value may prove to be justified. That may be the case where the manufacturer of generic medicines receives from the manufacturer of originator medicines sums which correspond in fact to compensation for the costs of or disruption caused by the litigation between them, or which correspond to remuneration for the actual supply of goods or services to the manufacturer of originator medicines (judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 163 and the case-law cited).
64Consequently, where a settlement agreement relating to a dispute concerning the validity of a patent between a manufacturer of generic medicines and a manufacturer of originator medicines, which is the holder of that patent, involves transfers of value by the manufacturer of originator medicines in favour of the manufacturer of generic medicines, it is necessary to ascertain, first, whether the net gain from those transfers may be fully justified, as envisaged in paragraphs 62 and 63 of the present judgment, by the need to compensate for the costs of or disruption caused by that dispute, such as the expenses and fees of the latter manufacturer’s advisers, or by the need to provide remuneration for the actual and proven supply of goods or services from the manufacturer of generic medicines to the manufacturer of the originator medicine. Indeed, the settlement of such a dispute implies that the manufacturer of generic medicines recognises the validity of the patent in question, since it waives its right to challenge it. It follows that it is only where a ‘reverse’ payment, by the manufacturer of originator medicines to the manufacturer of generic medicines, is by way of the reimbursement of such costs or of remuneration for the supply of such goods or services that it can be regarded as consistent with such recognition and, therefore, as capable of being justified in terms of competition (judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 164 and the case-law cited).
65Second, if that net gain from the transfers is not fully justified by such a need, it must be ascertained whether, in the absence of such justification, those transfers can have no explanation other than the commercial interest of those manufacturers of medicines not to engage in competition on the merits. For the purposes of that analysis, it is necessary to determine whether that gain, including any justified costs, is sufficiently large actually to act as an incentive for the manufacturer of generic medicines to refrain from entering the market concerned; however, there is no requirement that the net gain should necessarily be greater than the profits which that manufacturer would have made if it had been successful in the patent proceedings (judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 165 and the case-law cited).
66As the Advocate General pointed out in point 45 of his Opinion, it is necessary to hold that characterisation as a restriction of competition by object cannot solely be found when restrictions of competition resulting from non-compete and non-challenge clauses provided for in settlement agreements are based not on the recognition of the validity of the patents owned by the manufacturer of originator medicines, but on a transfer of value from that manufacturer to the manufacturer of generic medicines in question constituting an inducement, for that manufacturer, not to engage in competition on the merits.
67Accordingly, settlement agreements, such as the settlement agreement in the present case, must be classified as restrictions of competition by object where it is plain from examining them that the transfers of value made by the manufacturer of the originator medicine to the manufacturer of the generic medicine can ultimately have as their sole explanation the commercial interest of those operators not to engage in competition on the merits (see, to that effect, the judgment in Generics (UK), paragraph 87, and judgment of 25 March 2021, Lundbeck v Commission, C‑591/16 P, EU:C:2021:243, paragraph 114).
68In order to determine whether an agreement may be characterised as a restriction of competition by object, it is necessary not to analyse each of its clauses separately, but to assess whether that agreement, taken as a whole, reveals a degree of economic harm to the proper functioning of competition in the market concerned (judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 294).
69It is in the light of those considerations that it is necessary to assess, first, whether the General Court was correct in considering in paragraph 46 of the judgment under appeal, when examining whether the settlement agreement had to be classified as a ‘restriction of competition by object’, that, in order to determine whether each of the commercial transactions found in that agreement had as its sole plausible explanation the objective of incentivising Teva to accept the restrictive clauses, and thereby, to refrain from competing with Cephalon on the merits, or whether those transactions would in any event have been concluded under normal market conditions, it was necessary to analyse whether the commercial transactions contained in that agreement would actually have been concluded or whether they would have been concluded on the same terms absent the restrictive clauses.
70In that regard, where the net gain from transfers of value cannot be fully justified by the need to compensate for the costs or disruption caused by the dispute relating to the validity of a patent between a manufacturer of generic medicines and a manufacturer of originator medicines, the legal test used in the case-law in order to classify a settlement agreement as a restriction of competition by object requires it to be ascertained whether the sole consideration for the value transfer received by the manufacturer of generic medicines from the manufacturer of the originator medicine is sufficiently large actually to act as an incentive for that manufacturer of generic medicines to refrain from entering the market concerned (see, to that effect, judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraphs 164 and 165 and the case-law cited).
71In those circumstances, the appellants err in complaining that the General Court focused its examination on the non-compete and non-challenge commitments found in the settlement agreement, since those commitments consist, in essence, in a decision to refrain from entering the market.
72Admittedly, as the Advocate General observed in point 71 of his Opinion, a reading in isolation of paragraphs 45 and 46 of the judgment under appeal could suggest that the General Court carried out an abstract analysis of the restrictive clauses, by examining the hypothetical scenario based on a comparison of ‘what had actually happened with what would have happened absent the restrictive clauses’.
73However, as is apparent from paragraphs 43 to 46 and 61 to 162 of the judgment under appeal, it was following a detailed analysis and an overall assessment of the settlement agreement that the General Court concluded that the transfer of value made by Cephalon to Teva by means of commercial transactions constituted consideration for the inclusion of restrictive clauses in the settlement agreement and, therefore, for Teva’s commitment to refrain from entering the generic medicinal products market independently.
74Specifically, the General Court first of all stated, in paragraphs 43 to 46 of the judgment under appeal, that it intended to establish, based on a hypothetical scenario, whether the commercial transactions between the appellants departed from normal market conditions by focusing, in particular, on the objectives and the economic and legal context of those transactions at the time the settlement agreement was concluded, in order to determine the incentive effect of the transfers of value provided for by that agreement.
75There is nothing to prevent the counterfactual elements from being taken into account in order to make a finding of a restriction of competition by object (see, to that effect, judgment of 2 April 2020, Budapest Bank and Others, C‑228/18, EU:C:2020:265, paragraphs 82 and 83).
76While the analysis set out by the General Court in paragraph 46 of the judgment under appeal, consisting of examining the commercial transactions contained in the settlement agreement absent restrictive clauses, entails, as the General Court noted in paragraphs 47 to 50 of the judgment under appeal, taking a hypothetical situation into account, that analysis cannot be conflated with the ‘counterfactual’ method.
77Whereas that method consists in a comparison of the competitive situation resulting from the agreement concerned and the situation which would exist in its absence, in order to assess whether an agreement between undertakings has anticompetitive effects (see, to that effect, judgment of 27 June 2024, Commission v KRKA, C‑151/19 P, EU:C:2024:546, paragraph 316 and the case-law cited), the General Court’s analysis when assessing whether there was a restriction of competition by object, as is apparent from paragraphs 43 to 50 and 61 of the judgment under appeal, sought to determine whether those clauses constituted an incentive for Teva to refrain from competing with Cephalon on the merits in order to determine the objective seriousness of the practice concerned, and did not seek to assess whether the settlement agreement had anticompetitive effects. The latter assessment was undertaken in paragraphs 221 to 223 and 230 to 254 of the judgment under appeal.
78Consequently, the test confirmed by the General Court does not require an assessment, contrary to the appellants’ assertions, for each commercial transaction, of whether it would actually have been concluded, or whether it would have been concluded on the same terms, absent the settlement agreement taken as a whole. Rather, that test seeks to establish whether, as required by the case-law referred to in paragraph 67 of the present judgment, the transfers of value can ultimately have as their sole explanation the commercial interest of the operators concerned not to engage in competition on the merits.
79Furthermore, in the light of the explanations contained in paragraphs 47 to 50 of the judgment under appeal, of which paragraphs 48 to 50 are not disputed by the appellants, as regards the difference between the analysis carried out when determining whether there was a restriction of competition by object and the counterfactual method which must be applied only when assessing the anticompetitive effects of an agreement, the General Court did indeed, contrary to the appellants’ assertions, explain why that analysis does not amount to that so-called counterfactual method.
80Second, it is necessary to examine whether the General Court, in paragraph 46 of the judgment under appeal, departed from the case-law arising from the judgment in Generics (UK) when it found that, in order to determine whether the only plausible explanation for each of the commercial transactions was to induce Teva to accept the restrictive clauses and thus to refrain from competing with Cephalon on the merits or whether those transactions would have been concluded in any event under normal market conditions, the Commission had to compare what had actually happened with what would have happened absent the restrictive clauses.
81By that complaint, the appellants are, in essence, seeking to demonstrate that the test set out by the General Court corresponds to the test resulting from the judgment in Generics (UK) for the examination of whether there is a restriction of competition by effect and cannot, therefore, be used to establish that there is a restriction of competition by object without resulting in an error of law.
82As stated in paragraph 43 of the judgment under appeal, the General Court intended to proceed to an overall assessment of the interests and incentives of the parties concerned, in order to ascertain whether the commercial transactions contained in the settlement agreement could have any explanation other than the commercial interest of the appellants not to engage in competition on the merits.
83Nevertheless, such an analysis must be based, as the General Court correctly observed in paragraphs 50 and 56 of the judgment under appeal, and which the appellants do not dispute, on an analysis of the commercial transactions and the settlement agreement together where those agreements form part of a single contractual framework.
84As the Court of Justice has stated, in order to determine whether an agreement may be characterised as a restriction of competition by object, it is essential, in particular because of the close links between the non-challenge, non-marketing and exclusive supply clauses of a settlement agreement, not to analyse each of the restrictive clauses separately, but to assess whether that agreement, taken as a whole, reveals a degree of economic harm to the proper functioning of competition in the market concerned which justifies such a characterisation (see, to that effect, judgment of 27 June 2024, Servier and Others v Commission, C‑201/19 P, EU:C:2024:552, paragraph 294).
85As the Advocate General observed in point 57 of his Opinion, that is all the more so where, as in the present case, the objective of that analysis consists of identifying whether the transfers of value had an incentive effect and of determining whether the insertion of the restrictive clauses in the settlement agreement represented the consideration for the transfers of value made by Cephalon through the commercial transactions covered by the settlement agreement.
86If it is found that, absent the restrictive clauses contained in the settlement agreement, the parties would not have concluded the commercial transactions provided for by that agreement, it may be inferred that those transactions cannot have any explanation other than the restriction of competition agreed in that agreement.
87In addition, contrary to the appellants’ assertions, it is in no way apparent from the judgment under appeal (i) that the General Court failed to conduct that analysis, since paragraphs 61 and 162 of the judgment under appeal demonstrate the opposite or (ii) that a demonstration of what would have happened in the absence of the settlement agreement as a whole was required.
88Accordingly, the present complaint, based on a misreading of the judgment under appeal, cannot be upheld.
89Similarly, it is necessary to reject the appellants’ complaint alleging distortion of the test established by the case-law of the Court of Justice, referred to in paragraph 53 of the present judgment, and reversal of the burden of proof required by that case-law.
90Indeed, the General Court made no error in holding in paragraph 45 of the judgment under appeal that the Commission was required to ascertain whether the commercial transactions covered by the settlement agreement would have also been concluded, on equally favourable terms, absent the restrictive clauses.
91As is apparent from paragraph 53 of the judgment under appeal, which is not disputed by the appellants, the General Court, referring to paragraphs 83 and 87 of the judgment in Generics (UK), recalled that it is for the Commission to demonstrate that, in the relevant context, the restrictive clauses concluded in the context of the settlement agreement gave rise to an agreement which restricts competition by object and therefore to demonstrate that it is plain from the examination of that agreement that the transfers of value provided for therein cannot have any explanation other than the commercial interest of both the holder of the patent at issue and the party allegedly infringing the patent not to engage in competition on the merits.
92Before the General Court, the appellants maintained that each of the commercial transactions in the settlement agreement had a plausible explanation other than to act only as consideration for the restrictive clauses. The General Court therefore ascertained, as is apparent from paragraph 61 of the judgment under appeal, whether, for each of the commercial transactions provided for in that agreement, the Commission had made an error of assessment in concluding that the purpose of those transactions was to serve as a transfer of value from Cephalon to Teva in consideration for Teva’s commitment not to enter the market for generic medicines independently and not to compete with Cephalon in relation to modafinil.
93After analysing the decision at issue and each commercial transaction provided for in the settlement agreement, the General Court came to the conclusion, in paragraph 162 of the judgment under appeal, which conclusion the appellants do not dispute, that the Commission had applied the appropriate legal test by establishing that each of the commercial transactions provided for in the settlement agreement had no other purpose than to increase the level of the overall transfer of value to Teva under that agreement with a view to inducing it to agree to the restrictive clauses.
94It follows that, contrary to the assertions of the appellants, the General Court did not make an error of law in holding that the Commission had duly proven, in accordance with the case-law resulting from paragraph 87 of the judgment in Generics (UK), that the transfers of value conducted in the context of the commercial transactions provided for in the settlement agreement could have no explanation other than the commercial interest of Teva and Cephalon not to engage in competition on the merits.
95Third, it is necessary to assess whether, as the appellants maintain, the General Court actually applied a test which was impossible for the parties to meet, contrary to the case-law resulting from the judgment in Generics (UK) and whether the General Court correctly applied the test which it itself set out in paragraph 43 of the judgment under appeal, in order to ascertain whether the commercial transactions contained in a settlement agreement could have any explanation other than the commercial interest of both the patent holder and the party allegedly infringing the patent not to engage in competition on the merits.
96In that regard, first of all, in so far as that complaint is based on the argument, which has already been examined in paragraphs 83 to 87 of the present judgment, that the General Court intended to examine the commercial transactions ‘absent the settlement agreement’, it must be rejected.
97Next, it is also necessary to reject the appellants’ arguments that the General Court’s overall assessment related, contrary to its statements in paragraph 43 of the judgment under appeal, to whether the appellants would have concluded a given commercial transaction independently of the settlement agreement.
98There is nothing in the judgment under appeal to indicate that the General Court did not carry out, as set out in paragraph 43 of the judgment under appeal, the determination of whether the commercial transactions contained in the settlement agreement could have any explanation other than the commercial interest of the appellants not to engage in competition on the merits. Accordingly, as is apparent, in particular, from paragraphs 61 and 162 of the judgment under appeal, the General Court carried out precisely that analysis.
99Last, contrary to the appellants’ assertions, it is not apparent from the judgment under appeal that the General Court ruled out the possibility of concluding commercial transactions concomitantly with a settlement agreement. Paragraphs 56, 61 and 162 of the judgment under appeal show, on the contrary, that the General Court recognised such a possibility by examining all the commercial transactions concluded between the parties in the context of the settlement of their disputes.
100Consequently, and as the Advocate General observed in essence in point 71 of his Opinion, the relevant question, in the present case, to establish a restriction of competition by object is whether the commercial transactions concluded in the context of a settlement agreement can be explained in a plausible manner, in the sense that their aim must not be to restrict or distort competition on the market by inducing a potential competitor not to enter the market in exchange for transfer of value not justified by the need to compensate for the costs or disruption caused by the litigation between the parties to that agreement.
101Therefore, the General Court cannot be criticised for having carried out such an analysis, which is apparent from paragraphs 61 and 162 of the judgment under appeal.
102It follows that the first part of the first ground of appeal must be rejected as being unfounded.
The second part: misapplication of the second part of the legal test established by the judgment in Generics (UK)
–Arguments of the parties
103In the second part of the first ground of appeal, the appellants submit that paragraphs 182 and 183 of the judgment under appeal are vitiated by an error of law, on the ground that the reasoning contained therein is insufficient and contradictory.
104In that regard, the appellants recall that, in accordance with the guidance provided in paragraph 111 of the judgment in Generics (UK), settlement agreements which are accompanied by proven pro-competitive effects capable of giving rise to a reasonable doubt that they cause a sufficient degree of harm to competition cannot constitute restrictions by object. In accordance with that case-law, those effects must be demonstrated, relevant and specifically related to the agreement concerned and sufficiently significant, so that they justify a reasonable doubt as to whether the settlement agreement concerned caused a sufficient degree of harm to competition, and, therefore, as to its anticompetitive object.
105In the merger decision, the Commission stated that, since the settlement agreement had removed the intellectual property barriers which made entry by other manufacturers of generic medicines extremely uncertain within a short time frame, the settlement agreement enabled Teva to become Cephalon’s most significant competitor on the modafinil market.
106The competitive constraint exercised by Teva on Cephalon was found to be so strong that the Commission had required Teva to divest its rights to produce and sell its modafinil product in order to remove the overlap between the parties to the merger.
107In the light of those factors, the appellants criticise the General Court, first, for having failed to explain, in response to the arguments which they had put forward at first instance in order to demonstrate that the pro-competitive effects arising from the settlement agreement were clear from the merger decision, why any restrictions of competition contained in the settlement agreement would outweigh the self-evident pro-competitive effects resulting from that agreement. In addition, the General Court failed to state why the difference between the analytical framework used in the decision at issue and that in the merger decision meant that there were no pro-competitive effects stemming from the settlement agreement.
108Second, the appellants are of the view that the reasoning in the judgment under appeal fails to explain how the General Court came to the contradictory conclusion in paragraph 183 of the judgment under appeal, namely that the fact that the Commission, in the decision authorising the merger, found that after and despite the conclusion of the settlement agreement Teva was still the most likely competitive constraint on Cephalon does not mean that it considered that Teva’s generic rights had a pro-competitive effect.
109In particular, that reasoning fails to explain why the merger decision did not give rise to reasonable doubt as to whether the settlement agreement caused a sufficient degree of harm to competition.
110The Commission is of the view that the arguments put forward by the appellants in their reply concerning the General Court’s reasoning in paragraphs 182 and 183 of the judgment under appeal allegedly being contradictory must, as new arguments, be rejected as being inadmissible. In any event, the Commission contends that the second part of the first ground of appeal is unfounded.
–Findings of the Court
111By the second part of the first ground of appeal, the appellants maintain that paragraphs 182 and 183 of the judgment under appeal are vitiated by an error of law based on an insufficient and contradictory statement of reasons.
112As a preliminary point, the Commission submits that the arguments put forward by the appellants concerning the contradictory nature of the General Court’s reasoning, put forward in their reply, must be declared inadmissible as they are new arguments.
113In that regard, it should be noted that the appellants merely stated in the heading of the second part of the first ground of appeal and in one paragraph of their appeal that the General Court’s reasoning was contradictory, without providing any explanation or argument in support of that contention. It was only at the stage of the reply that the argument concerning the alleged contradiction was enunciated n in relation solely to paragraph 183 of the judgment under appeal.
114Therefore, in so far as the argument alleging a contradictory statement of reasons was not substantiated in any way in the appeal and was put forward for the first time in the reply with regard to paragraph 183 of the judgment under appeal, without, additionally, being based on matters which came to light in the course of the procedure or amplifying a plea put forward in the appeal, it must be regarded as inadmissible, in accordance with Article 127(1) of the Rules of Procedure of the Court of Justice, applicable to appeal proceedings by virtue of Article 190(1) of those rules.
115In addition, it is important to point out that the appellants are not calling into question the entirety of the statement of reasons set out by the General Court when dismissing the third part of their first plea raised at first instance. More specifically, they are disputing only the statement of reasons set out by the General Court in paragraphs 182 and 183 of the judgment under appeal when dismissing the arguments they had put forward for the purposes of demonstrating that the pro-competitive effects arising from the settlement agreement clearly arose from the merger decision.
116However, even if the statement of reasons contained in paragraphs 182 and 183 of the judgment under appeal were vitiated by an error of law in that it was inadequate, such an error cannot result in that judgment being set aside.
117In the context of the second part of the first ground of appeal, the appellants disputed only one element of the reasoning relied on by the General Court in order to reject the third part of the first plea raised at first instance.
118In that regard, it is apparent, first, from paragraphs 178 to 180 of the judgment under appeal that the General Court examined and rejected the arguments that the settlement agreement was primarily pro-competitive, holding that Teva’s entry into the modafinil markets ought to be classified as a ‘delayed, controlled and limited entry into those markets, rather than an early entry’, as the appellants had maintained. Second, it held, in paragraphs 186 to 190 of that judgment, that the finding that there was a restriction of competition by object could not be set aside on the ground that the restrictive clauses were allegedly ancillary.
119It follows that the second part of the first ground of appeal must be rejected as being, in part, inadmissible and, in part, ineffective.
120In those circumstances, the first ground of appeal must be rejected in its entirety.
The second ground of appeal: errors of law in assessing whether there was a restriction by effect within the meaning of Article 101 TFEU
121In support of their second ground of appeal, the appellants submit, in essence, that the General Court made a number of errors of law when examining anticompetitive effects of the settlement agreement.
122In that regard, it is apparent from the case-law that the anticompetitive object and anticompetitive effect of an agreement are not cumulative but alternative conditions for applying the prohibition laid down in Article 101(1) TFEU. It is therefore not necessary to examine the effects of an agreement once its anticompetitive object has been established (see, to that effect, judgment of 6 October 2009, GlaxoSmithKline Services and Others v Commission and Others, C‑501/06 P, C‑513/06 P, C‑515/06 P and C‑519/06 P, EU:C:2009:610, paragraph 55 and the case-law cited).
123Since the examination of the first ground of appeal, relating to the assessments made by the General Court in the context of determining whether there was a restriction of competition by object, has revealed no error of law, it is not necessary to examine the second ground of appeal, which concerns the anticompetitive effects of the settlement agreement.
124In those circumstances, it is necessary to reject the present appeal.
Costs
125Under Article 184(2) of the Rules of Procedure, where the appeal is unfounded, the Court is to make a decision as to the costs.
126Article 138(1) of those rules, applicable to appeal proceedings pursuant to Article 184(1) thereof, provides that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.
127Since the appellants have been unsuccessful and the Commission has applied for costs to be awarded against them, the appellants must be ordered to pay the costs.
Operative part
On those grounds, the Court (Fourth Chamber) hereby:
1.Dismisses the appeal;
2.Orders Teva Pharmaceutical Industries Ltd and Cephalon Inc. to pay the costs.
Delivered in open court in Luxembourg on 23 October 2025.
Source: EUR-Lex, © European Union, 1998-2026. Reuse authorised under Decision 2011/833/EU.