Based on an information (petition) filed by Santuka Associates Pvt Ltd, a clearing & forwarding agency based at Cuttack in Orissa, the Competition Commission of India (CCI) has passed an interim order to the Mumbai based manufacturing company US Vitamins Ltd not to terminate its C&F agency with the informant (petitioner) in Orissa.
The Commission has also restrained the All India Organisation of Chemists and Druggists (AIOCD) from issuing any direction or threat to USV Ltd for terminating its C&F agency with Santuka Associates. Both the parties have also been directed to appear before the commission on 01.06.2011.
The CCI has passed the interim order under section 33 of the Competition Act, 2002, and the order will remain effective till the next date of hearing, which is scheduled for 01.06.2011. While granting the order, the Commission has considered several Supreme Court judgements on various similar cases.
According to the Commission’s order, Santuka Associates is a Clearing & Forwarding agent in medicines of various pharmaceutical companies including USV Ltd, at Cuttack in Orissa. Its sister concern Santuka Agencies is the sole distributor of medicines of the USV for the entire state of Orissa. The petitioner agency is a member of the District Chemists and Druggists Association, namely Cuttack District Chemists and Druggists Association (CDCDA) which is affiliated to Utkal (Orissa) Chemists and Druggists Association (UCDA).
In the information filed to the Commission it has been stated that because of the dispute over elections to CDCDA, the president of AIOCD has refused to recognize the elected office-bearers of UCDA and has formed ‘AIOCD Utkal Committee’ appointing himself as the chairman and his supporters as convener and committee membeRs.Subsequently, Santuka Associates has been warned by the national trade body that if it does not cooperate with the president of the AIOCD, no product of USV will be allowed to sell in India, or the agreement with it will be terminated. The C&F agency was orally informed by the executive of the USV Ltd that the company was under tremendous pressure from the president of AIOCD to terminate its C&F agency.
Santuka Associates has alleged that AIOCD has entered into various MoUs and Agreements with Associations of pharmaceutical manufacturers like IDMA and OPPI. As per the terms with them, a drug manufacturing company can appoint stockists only after consultation with the concerned state or district chemists and druggists association. Further, if an additional stockist is to be appointed, it should get an NOC from the AIOCD or he should be a bonafide member of the associations affiliated with AIOCD. The petition has also alleged that AIOCD has been indulging in many anti-competitive activities such as controlling the trade policies of pharmaceutical companies, fixing trade margins and regulating the stockistship of every drug manufacturing company. Further, it is collecting Rs.2000 per product towards Product Information Service from companies which are introducing new products.
Another allegation is that in spite of a restraint order passed by Monopolies and Restrictive Trade Practices Commission (MRTPC) in RTPE No.9/2005 which was made absolute by the Competition Appellate Tribunal vide its order dated 18.01.2010 the AIOCD is continuing with it alleged activities unabated.
For a speedy passage of an interim order, Santuka Associates has filed a writ petition dated 10.05.2011 before the High Court of Delhi and the court directed the Commission to hear the application of the informant under section 33 of the Competition Act on 16.05.2011, on an urgent basis. In view of this the Commission considered the matter of interim relief on 16.05.2011.
During the course of the meeting of the Commission, the USV Ltd submitted a copy of a notice given to its C&F agent, Santuka Associates, dated 04.05.2011 regarding termination of C&F agency dated 27.07.2010. Even though AIOCD was also asked to appear before the Commission on the day of hearing, it chose not to appear before it. Only parties from USV and Santuka appeared before the Commission.
By examining all the documents, the Commission felt that USV has decided to terminate the C&F agreement dated 27.07.2010 with Santuka Associates because of the pressure from AIOCD. The letter given to Santuka by USV made it clear that the C&F agency would cease from the 30th day of the receipt of the letter dated 04.05.2011. The CCI observation revealed that Santuka was asked to cooperate with the president of AIOCD Utkal Committee, failing which its C&F agency would get terminated. The order of the Commission says that the alleged activities of AIOCD seem to be in violation of section 3(3) (a) and 3 (3) (b) read with section 3 (1) of the Act.
Regarding the interim order of CCI, A N Mohan, president of AICDF, another national trade body, and former president of AIOCD, has commented that the manufacturers are now liberated from the dictates of certain leaders of AIOCD based at Mumbai. He said a trade organisation is expected to protect the rights of traders and it should not become the destroyer of them. He warned the autocratic trade organizations that all these issues would be taken up in the Parliament by AICDF.