Being prima-facie satisfied by the information filed, the CCI ordered investigation into the matter. It was revealed during the investigation that the pharma manufacturers such as M/s Elder Pharma as well as M/s Eli Lilly and Company were denying supplies to chemist for want of NOC from KCDA. The investigation further revealed that there has been an understanding between All India Organisation for Chemists and Druggists (AIOCD), Indian Drug Manufacturers’ Association (IDMA”) and Organisation of Pharmaceutical Producers of India (“OPPI”), which shows that: (a) the appointment of stockists by pharmaceutical companies is controlled by Associations under the overall control of AIOCD; (b) trade margins of stockists and retailers have been fixed; and (c) a system of product information service has been introduced for which a charge is collected by the Associations from the pharmaceutical companies who want to introduce new medicines in any territory. The DG found that KCDA is also an affiliated body of AIOCD like other State Associations and it also follows the restrictive and anti-competitive norms and guidelines formulated by AIOCD.
The CCI noted from a copy of the webpage of KCDA that it has adopted A policy for appointment of stockists whereby new pharmaceutical companies are normally not allowed to appoint two stockists in one revenue district. This appointment could also be done only after obtaining cooperation/consent letter from KCDA. CCI thus concluded that KCDA had mandated its NOC as a necessary pre-requisite for appointment of stockist by any pharma company in the territory of the State of Karnataka. In various orders, the CCI has held that such practice is violative of Section 3(1) read with 3(3)(b) of the Act. Similarly, the CCI held that determination of trade margins for wholesalers and retailers by KCDA is in contravention of the provisions of Section 3(1) read with Section 3(3)(a) of the Act.
As regards the penalty, the CCI noted that penalty has already been imposed on KCDA by the CCI for similar conduct. Hence, the CCI restrained itself from imposing the penalty in this case. (Source: CCI decision dated March 02, 2017; For full text see CCI website)