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GlaxoSmithKline Accused of Market Abuse

Friday - 4/19/2013, 4:26pm  ET

LONDON -- The shares of GlaxoSmithKline  were flat at 1,655 pence in early this afternoon after the FTSE pharmaceutical giant quickly responded to the Office of Fair Trading's accusations of market "abuse."

GlaxoSmithKline, which develops and sells vaccines and medicines across the globe, was alleged to have paid off three rivals to delay their release of generic versions of GSK's Seroxat, a treatment for depression. The OFT claims that between 2001 and 2004, Glaxo's conduct amounted to "an abuse of a dominant position" in the drugs market.

GSK could face a fine of up to 30% of "relevant turnover" relating to the drug if taken to court and found guilty. Realistically, the fine would be marginal for a company the size of GlaxoSmithKline, although the news could pile political pressure on the FTSE giant after the NHS were denied cost-savings.

Responding to the allegations in press release, the company stated:

GSK supports fair competition and we very strongly believe that we acted within the law.

The OFT investigation covers matters that have already been investigated by the European Commission in 2005-2006. In March 2012 the Commission announced that it had formally concluded its enquiry with no further action. The issues were also reviewed in the European Commission's 2008-2009 Sector Inquiry. Neither investigation resulted in any sanctions against the company.

Perhaps of greater importance to Glaxo shareholders was the announcement on Wednesday of FDA approval for a new chronic obstructive pulmonary disease (COPD) treatment, which could generate sales of $1.3 billion by 2018. GSK reports first-quarter results this Wednesday, and the company currently trades around 14 times expected earnings, yielding a healthy 4.8%.

On these figures, our top analysts have highlighted GlaxoSmithKline as one of our "5 Shares You Can Retire On," an exclusive wealth report that reviews five particularly attractive possibilities in the FTSE 100.

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This article was originally published as GlaxoSmithKline Accused of Market Abuseon Fool.com

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