Penalty of Rs 10.62 lakhs imposed upon Chemist and Druggists Association of Goa for adopting anti-competitive practices

Competition Commission of India (CCI): A penalty of Rs 10.62 lakhs has been imposed upon Chemist and Druggists Association of Goa for adopting anti-competitive practices of directly or indirectly controlling the supply of drugs in a concerted manner in violation of Section 3(3)(a) and 3(3)(b) of the Competition Act, 2002. In an earlier case also CDAG was found guilty of adopting anti-competitive practices by the Commission and an order under section 27 of the Act dated June 11, 2012 was passed by the Commission vide which a penalty of Rs 2 lakhs was imposed. While alleging continued contravention of the provisions of the Competition Act, 2002, a complaint was filed by Xcel Healthcare before the Commission contending that CDAG was restraining pharmaceutical companies such as Glenmark Pharmaceuticals Ltd and Wockhardt Ltd. from doing business with non-authorised stockists and thereby not complying with the order of the Commission. The Commission took suo-moto cognizance and ordered the Director General to investigate the matter. After a detail perusal of the investigation report, CCI found that in complete disregard to CCI order dated June 11, 2012, CDAG was continuing to exercise control on the supply chain through which drugs and medicines are made available in the market through the practice of requirement of LOC/NOC prior to appointment of stockists by pharmaceutical companies without having any legal or statutory authority in this respect. CCI also observed that by forcing pharmaceutical companies to follow its mandate and threatening the other stockists in Goa to stop taking supplies or suspend receiving supplies from them till such time they stopped supplies to the unauthorised stockists such as Xcel Healthcare, CDAG was responsible for limitation and restriction of supply of medicines in the market. Observing that the case involved continued contravention and utmost disrespect to the Commission’s earlier order, CCI held that, “The said anti-competitive conducts require to be penalized to cause deterrence in future among the erring entities engaged in such activities. Accordingly, it is required that the degree of punishment is scaled to the severity of the violation” and imposed heavy penalty upon CDAG. CCI also directed CDAG to seize and desist from indulging in the practices. (In re: Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa (CDAG), Glenmark Company and, Wockhardt Ltd., 2014 CCI 29, decided on October 27, 2014)