Competition Commission of India (CCI) finds Karnataka Chemist and Druggists Association (KCDA) in violation of Section 3(3) of the Act |

CCI by its order dated March 02, 2017 has found that KCDA is violating Section 3(3) of the Act by denying supply of orders to stockists till No-Objection Certificate from KCDA is obtained.

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)

Suggested Reading:

(i) Competition Commission of India (CCI) re-imposes penalty on 11 cement companies for cartelisation

(ii) COMPAT sets aside CCI’s penalty on Alkem Laboratories for indulging in anti-competitive practices-

(iii) CCI again fines Pharma Company for Anti-Competitive Activities

(iv) Bid-Rigging in Public Procurement: Some evolving trends in Indian Competition Law

(v) Competition Appellate Tribunal (COMPAT) directs Competition Commission of India (CCI) to re-consider penalties imposed on LPG manufacturers

About the author

M M SHARMA

 Comdt. (Retd.) M. M. Sharma heads the Competition Law & Policy team in VA since 2009 and has over 30 years’ experience as an Advocate of Delhi High Court and holds a Post Graduate Diploma in Economics of Competition Law from Kings College, London. He has worked in the Competition Commission of India (CCI) as Additional Registrar during 2006-2008 and was responsible for drafting the Implementing Regulations under the Competition Act, 2002. He has experience of working as Head-Legal /In-house Counsel for a large Corporate Group in the Steel and Power sector before joining VA in 2009. He has represented clients as an independent arguing Counsel in landmark cases decided by CCI, the Competition Appellate Tribunal (COMPAT) , High Courts and the Supreme Court. As a prolific writer, he contributes articles and is regularly quoted on competition issues in National Newspapers and interviewed by TV Channels. He also teaches as a visiting faculty in various Universities and Institutions and is widely regarded as a subject expert in various Committees of Apex Business Chambers, such as FICCI, CII, ASSOCHAM and PHD CCI.  Mr. Sharma has been mentioned as a “Notable Practitioner” in the “Competition/Antitrust” category of Chambers & Partners (Asia Pacific) Ranking of Leading Lawyers for Business in India for the year 2012 and 2013. VA’s competition law and policy team has also been awarded the Law Firm of the Year Award for “Competition/Antitrust Law” for 2013 by the Indian Business Law Journal. Included as a ‘Recognised Practitioner’ in Individual Lawyers’ranking by Chamber’s Asia Pacific Guide 2020 for Antitrust/Competition Law.