The Competition Commission of India (‘Commission’) has found the Chemists and Druggists Association of Baroda (‘CDAB’) and Federation of Gujarat State Chemists and Druggists Association (‘Gujarat Federation’) to be in contravention of the provisions of the Competition Act, 2002 (‘Act’). One of the stockists based in Vadodara filed an information alleging that despite an earlier order of the Commission in the year 2012, CDAB, through its practices, has continued to limit and control the supply of drugs and medicines in the market by mandating ‘No Objection Certificate’ (‘NOC’/‘LOC’) prior to appointment of stockists and payment of ‘Product Information Service’ (‘PIS’) charges prior to introduction of new products in the market by pharmaceutical companies.

Investigation carried-out by the Director General (‘DG’) revealed involvement of the State Level Association, i.e. the Gujarat Federation, besides CDAB, in the alleged conduct. After detailed enquiry, the Commission has found that CDAB and the Gujarat Federation were indulging in the anti-competitive practice of insisting NOC prior to the appointment of new stockists by pharmaceutical companies. Further, the Gujarat Federation was found to be carrying on the practice of making introduction of new products in the market subject to payment of PIS charge and its approval. These practices were held to be limiting and controlling supplies of drugs/medicines in the market, in contravention of Section 3 (3) (b) read with Section 3 (1) of the Act. Further, the Commission has held office bearers of CDAB and Gujarat Federation, namely Shri V.T. Shah (President, CDAB), Shri Jashvant Patel (President, Gujarat Federation), to be responsible under Section 48 of the Act, for their involvement in the anti-competitive practices.

Accordingly, CDAB, Gujarat Federation and their office bearers, have been directed to cease and desist from indulging in the aforesaid anti-competitive practice. Further, the Commission imposed a monetary penalty of ₹ 1,08,588/- and ₹ 11,11,549/-, calculated at the rate of 10% of the average income of CDAB and the Gujarat Federation, respectively, under the provisions of Section 27 of the Act. Penalties of ₹ 34,048/- and ₹ 62,144/-, calculated at the rate of 10% of their respective average incomes, are also imposed upon Shri V.T. Shah (President, CDAB) and Shri Jashvant Patel (President, Gujarat Federation).

This case is yet another example of how competitive markets and fair-play in the distribution of drugs/medicines are being compromised by the persisting anti-competitive behaviour of the chemist and druggist associations at the Regional as well as State level. It is indeed a serious matter that despite various orders by the Commission in similar cases and specific directions through a press notice, chemist and druggist associations have not mended their ways and have continued to indulge in such anti-competitive conduct. Considering the larger public interest involved in the distribution of drugs/medicines, the Commission deprecates such a conduct and its perpetration in any form by those responsible, be it the Associations, Stockists/Distributor/Wholesaler/Retailer and the Pharmaceutical Companies. Given the widespread and continuing indulgence in the Anti-competitive practices, the Competition Commission of India will be keeping a close watch on the conduct by all such entities in various parts of the country and would not hesitate to take action, wherever deemed necessary.

The detailed order can be seen at the Commission’s website www.cci.gov.in.     

 

Anti-competitive supply restrictions: associations barred from mandating NOCs and PIS charges, penalties imposed under competition law. The Commission found chemists and druggists associations required No Objection Certificates for appointing new stockists and conditioned product introductions on payment of Product Information Service charges, practices that limit and control supply of drugs and medicines and thus contravene competition law. The Director General's probe implicated both the local association and the state federation; associations and specified office bearers were directed to cease such practices and were held individually liable. Monetary penalties were imposed on the associations and on named office bearers, calculated as a percentage of average income under the statute, and the Commission warned of continued enforcement to protect market access and public interest in medicine distribution.