The Competition Commission of India (CCI) has directed the All India Organisation of Chemists and Druggists (AIOCD) to cease and desist from indulging in and following practices which have been found anti-competitive in violation of Section 3 of the Competition Act. Besides, the Commission has also imposed a penalty of Rs.47,40,613 on the trade body which claims to have more than seven lakh members spread across the country.
The Commission in its order dated 19.02.13 has also directed the AIOCD to file an undertaking that the practices carried on by it and its members regarding grant of NOC for appointment of stockists, fixation of trade margins, collection of PIS (product information service) charges and boycott of products of pharmaceutical companies have been discontinued within 60 days from the date of receipt of this order.
The case against AIOCD was filed with the CCI by Santuka Associates, a C&F agent based at Cuttack, on May 2, 2011, in which the Santuka Associates had alleged that the AIOCD was abusing its dominant position by imposing unfair and discriminatory conditions which has the effect of limiting/denying market access to genuine stockists, distributors and C&FAs unless they submit to its dictates and mandates.
The Santuka Associates further alleged that the constant threats given by AIOCD to the pharma companies can, in no way, be said to increase the efficiency in supply, distribution or storage of pharmaceutical products in India or to be in the benefit of the various stockists or distributors or C&FAs. It was further alleged that the AIOCD was imposing conditions which have the effect of creating barriers to new entrants and also foreclosing competition by hindering entry into the market.
In its complaint, the Santuka Associates further alleged that the AIOCD has been giving oral threats to various drug manufacturers to comply with their illegal demands and objectives and in the process have indulged in practices resulting into denial of market access. The conditions imposed by AIOCD that no agreement by a drug manufacturing company with a stockist or a distributor or a C&FA would be entered into unless they have a “no objection certificate” from an affiliated organisation of AIOCD, is clearly an abuse of dominant position by AIOCD. And the various MOU’s and agreements by AIOCD and its affiliated organisations either with the association of drug manufacturers or with individual drug manufacturers restricting the appointment of stockists by prescribing unfair conditions is illegal and contrary to the provisions of the Act, it said.
After hearing the concerned parties, including pharma associations like IDMA and OPPI, for almost two years, the Commission ordered that the AIOCD should issue a letter to the OPPI, IDMA and to USV Limited i.e. OP-2 to OP-4 that there was no requirement of obtaining an NOC for appointment of stockists and the pharmaceutical companies, stockists, whole sellers were at liberty to give discounts to the customers.
The order further says that the AIOCD shall also inform all Chemists & Druggists and all its members and associations by sending a circular/ letter that they were free to give discounts to the customers and also issue circular that PIS charges were not mandatory and PIS services could be availed by manufacturers/ pharmaceuticals firms on voluntary basis.
Earlier, the investigation by the Director General of the Commission has found that the horizontal agreement amongst the members of AIOCD and the practices carried on by their members on the issue of grant of NOC for appointment of stockists including the second stockists, fixation of trade margins, collection of PIS charges and/or boycott of products of pharmaceutical companies fall within the mischief enshrined in Section 3(3) (a) and 3(3) (b) of the Competition Act.