CCI penalizes CDAG in violation of the provisions of the Competition Act, 2002

The Competition Commission of India (CCI) has found Chemist & Druggist Association, Goa (CDAG) in violation of the provisions of the Competition Act, 2002 which deals with anticompetitive agreements. The Commission has imposed penalty of Rs. 2 Lakhs @10% on the average of the receipts for financial year 2008-09, & 2009-10 on CDAG. CCI has termed the imposition of guidelines by CDAG that lay down the margins for wholesalers and retailers as anti competitive and against the interests of the consumers. As part of these guidelines, the CDAG had prescribed a cap on the amount of the discount a wholesaler can give to the retailer and prohibited the retailer from giving any discounts to the consumers. CCI has directed CDAG to remove the clauses in the Circulars, MoU and Guidelines and file an undertaking to this effect within 60 days from the date of receipt of the order.

The case was initiated on a complaint filed by Varca Druggist & Chemist through its proprietor and proprietors of 2 other pharmaceutical drugs and medicines firms before Director General, Monopolies and Restrictive Trade Practices Commission (MRTPC). The case was later transferred to the CCI and investigation was conducted by Director General, CCI.

The Commission has held that in such a situation, when efforts are being made to ensure supply of drugs to the common man at a cheaper rate, the restrictive guidelines of Chemists and Druggist Association work as stumbling block .Such guidelines of CDAG do not appear to be in line with the government plans to provide medicines to common man at an affordable rate. In view of the aforesaid, the Commission was of the view that CDAG not only limits and controls supply of drugs in the market through a system of seeking mandatory PIS approvals and limit and control the number of players by insisting on obtaining its NOC for appointment of stockist but also through its guidelines fixes trade margins for the wholesalers and retailers which, in turn, results into determination of sale price of drugs in the market. Therefore, the Commission has held that CDAG had violated the provisions of Section 3(3)(a) and 3(3)(b) of the Act.

The CDAG and its members had been directed to cease and desist from indulging in and following the anticompetitive practices. The order further directs CDAG to file an undertaking that Guidelines and MoU with respect to non-appointment of a stockist or a wholesaler from amongst the non-members of the CDAG, requirement of No Objection Certificate from the CDAG for appointment of stockiest or wholesaler and limit on the number of stockiest of pharmaceutical companies as well as the clauses mandating compulsory PIS approval from CDAG for introduction of drugs in the territory of Goa and requiring routing of bids for supply of drugs to the Government and the Hospitals through authorized stockiest only have been done away within the 60 days from the date of receipt of the order.

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