The Competition Commission of India (CCI) has found the Chemists and Druggists Association of Baroda (CDAB) to be in contravention of the provisions of the Competition Act, 2002.
A complaint was filed with the Monopolies and Restrictive Trade Practices Commission (MRTPC) in 2009, alleging that the CDAB has indulged in restrictive trade practices.
Allegedly, the CDAB, through its practices, was limiting and controlling the supply of drugs and medicines in the market by mandating 'No Objection Certificate' (NOC) prior to appointment of stockists and payment of 'Product Information Service' (PIS) charges prior to the introduction of new products in the market by pharmaceutical companies.
Besides, there were allegations that CDAB was fixing the trade margins for the wholesalers and retailers. Subsequently, the case was transferred to the CCI by the MRTPC under the provisions of section 66(6) of the Competition Act. After forming a prima-facie opinion, the CCI directed the office of Director General (DG) to conduct an investigation into the matter.
Investigations carried out by the DG established contravention on part of the CDAB. After a detailed enquiry, the CCI passed an order on September 5, 2012, wherein it was found that the CDAB was imposing the requirement of mandatory NOC and was also fixing margins for the wholesalers and retailers by enforcing the norms laid down by the All India Origin Chemists and Distributors (AIOCD).
Accordingly, the CCI imposed a monetary penalty, in addition to cease and desist directions, under section 27 of the Competition Act.
Pursuant to an appeal filed by the CDAB, the erstwhile Competition Appellate Tribunal (COMPAT), vide its order dated November 18, 2016, set aside the CCI's September 2012 order on a procedural issue and remanded the matter back to the CCI for fresh adjudication.
Accordingly, the matter was considered afresh. After allowing CDAB with an opportunity to cross-examine various witnesses, the CCI allowed parties to file their written submissions and conducted a detailed hearing in the matter.
Based on the material available on record, the CCI found that the CDAB was indulging in the anti-competitive practice of insisting NOC prior to the appointment of new stockists by pharmaceutical companies and was also fixing/prescribing the trade margins during the relevant time period, in contravention of the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Competition Act.
Accordingly, the CDAB was directed to cease and desist from indulging in the aforesaid anti-competitive practice. Further, the CCI imposed a monetary penalty of Rs. 32,724 calculated at the rate of 10 per cent of the average income of CDAB for the period, under the provisions of section 27 of the Competition Act.
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