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India – CCI Passes Order Against AIOCD, ADDA And BDDA For Violation Of Various Provisions Of Section 3 Of The Act.

24 January, 2014

 


On December 9, 2013, the Competition Commission of India (‘CCI’) passed its order against the All India Organization of Chemists and Druggists Association (‘AIOCD’), the Assam Drug Dealers Associations (‘ADDA’) and Barpeta Drug Dealers Association (‘BDDA’), (collectively referred to as ‘the Associations’) holding them in violation of the provisions of Section 3(3) (a) and Section 3(3) (b) of the Competition Act, 2002 (‘Act’). AOICD, ADDA and BDDA are affiliated associations of druggists and chemists at the national level, State level and district level, respectively. The information was filed against the Associations by M/s Sandhya Drug Agency (‘Informant’). The Informant is a wholesaler and supplier of various pharmaceutical companies, including Alkem in the Barpeta district of Assam.


The Informant alleged that due to some political differences between the Informant and BDDA, BDDA and ADDA, in collusion with AIOCD, directed Alkem to stop the supply of its products to the Informant.


CCI, on the basis of the above information, directed the Director General (‘DG’) to conduct a detailed investigation and then proceeded to pass its order on the following issues:


i. Issue Of No Objection Certificate (‘NOC’) For Appointment Of Stockists, Fixation Of Trade Margins And Collection Of Production Information Service Charges (‘PIS’)


CCI agreed with DG that the requirement of an NOC led to reduction in supply of pharmaceutical products in the market. CCI, as a result, held that the conduct of AIOCD and its affiliates i.e. ADDA and BDDA, in relation to grant of NOC, attracts the provisions of Section 3(3) (b) read with Section 3(1) of the Act. On the issue of PIS charges, CCI observed that the actions of AIOCD and its affiliate ‘state’ association, ADDA, in imposing the requirement of a mandatory PIS approval for launch of any new drug, consequently results in delays in the drugs reaching the consumers. Such delay, coupled with withholding of PIS approvals, on any ground, was in violation of the provisions of Section 3 (3) (b) read with Section 3(1) of the Act. On the issue of PIS charges, CCI observed that BDDA has no role in their determination and that the bulletin was published and the approval granted by the State units of AIOCD, i.e. ADDA. Therefore ADDA alone could be held liable for this anti-competitive conduct.


Further, on the issue of boycott, CCI took the view that the act of boycott by AIOCD, ADDA and BDDA was in contravention of the provisions of Section 3(3) (b) read with Section 3(1) of the Act, since the acts resulted in limiting the supply of drugs and the number of players in the market.


ii. Whether The Organization Of Pharmaceutical Producers Of India (‘OPPI’) And The Indian Drug Manufacturers Association (‘IDMA’) Were Also Liable Along With AIOCD


On the issue of fixed trade margin resulting from the Memorandum of Understandings (‘MOUs’) entered into between AIOCD, OPPI and IDMA, CCI noted that, as a result of the above mentioned industry practice, the trade margins were neither being determined on a competitive basis, nor were they allowed to fall below the agreed percentages. However, CCI took the view that OPPI, IDMA and their members appeared to be victims of the exploitative tactics of AIOCD, and their conduct of entering into MOUs with AIOCD should not be treated at par with the anticompetitive conduct of AIOCD itself.


iii. Whether The Members/Office Bearers Of The Executive Committees Of AIOCD, ADDA, BDDA, OPPI And IDMA Are Also Liable For Violation Of Section 3 of the Act


CCI observed that, in accordance with its earlier order in Varca Chemists and Druggists v. CDAG1, the anti-competitive decision or practice of the association can be attributed to the members who were responsible for running the affairs of the association, and had participated in giving effect to the anti-competitive decision for the practice of the association. However, it deferred its decision on this count, given the non-receipt of information regarding the office bearers of AIOCD, ADDA and BDDA. Further, CCI held that the office bearers of OPI and IDMA cannot be held liable for any contravention of the provisions of Section 3 of the Act.


In light of the above, CCI imposed a penalty of INR5,61,097 on ADDA, and ordered AIOCD, BDDA and ADDA to ‘cease and desist’ from indulging in the aforesaid anti-competitive practices. CCI refrained from imposing any penalty on AIOCD due to an earlier penalty of INR47,40,613 imposed on AIOCD in the earlier case of Santhuka Association Pvt. Ltd. v. AIOCD & Ors.2

 

End Notes:

1 MRTP Case No. C-127/2009/DGIR (4/28)
2 Case No. 20 / 2011

 

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
[email protected]

 

Abhijit Joshi, AZB & Partners 
[email protected]
Shuva Mandal, AZB & Partners 
[email protected]

 

Samir Gandhi, AZB & Partners
[email protected]


Percy Billimoria, AZB & Partners 
[email protected]

 

Aditya Bhat, AZB & Partners 
[email protected]

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