The Competition Commission of India (CCI) has imposed penalties on the Chemists and Druggists Association of Baroda (CDAB) and Federation of Gujarat State Chemists and Druggists Association (FGSCDA) after finding them to be in contravention of the provisions of the Competition Act, 2002.
An official press release said the Commission had imposed a monetary penalty of Rs. 1,08,588 and Rs. 11,11,549, calculated at the rate of 10% of their average income, on CDAB and FGSCDA, respectively, under the provisions of Section 27 of the Act.
Penalties of Rs. 34,048 and Rs. 62,144, calculated at the rate of 10% of their respective average incomes, have also been imposed upon Mr. V.T. Shah (President, CDAB) and Mr. Jashvant Patel (President, FGSCDA).
The release said that one of the stockists based in Vadodara (Baroda) had filed an information alleging that despite an earlier order of the Commission in the year 2012, CDAB, through its practices, had 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.
The Commission said that investigations carried out by its Director General (DG) revealed involvement of the State Level Association, FGSCDA, 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 Mr. Shah and Mr. Patel 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.
"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 release added.