CCI Closes 14-Year Antitrust Case Against AIOCD, Cipla, Sun Pharma And Other Drugmakers

The Competition Commission of India (CCI) on Monday closed a 14-year-old antitrust case against the All India Organisation of Chemists & Druggists (AIOCD), Cipla, Sun Pharma, Dr. Reddy's Laboratories and several other pharmaceutical companies, holding that allegations of anti-competitive practices were not established.

A coram of Chairperson Ravneet Kaur and Members Anil Agrawal, Sweta Kakkad and Deepak Anurag disagreed with the Director General's findings.

It observed, “The Commission further notes that the DG's findings largely rely upon evidence pertaining to the period prior to 2011 and do not adequately account for the compliance measures and undertakings accepted by the Commission in earlier proceedings involving substantially similar allegations.”

The proceedings stemmed from information filed in 2012 by Kailash Gupta, President of the All India Chemists and Distributors Federation (AICDF). The information was filed against AIOCD, pharmaceutical industry associations and several drug manufacturers, including Dr. Reddy's Laboratories, Ranbaxy Laboratories, Cipla, Pfizer, GlaxoSmithKline and Sun Pharma.

Gupta alleged that AIOCD and its affiliated associations mandated Letters of Cooperation or No Objection Certificates before appointing stockists. He also alleged that they collected Product Information Service (PIS) charges for launching new products and imposed restrictions relating to supplies and trade margins through memoranda of understanding.

After finding a prima facie case, the Commission directed the Director General to investigate. The investigation concluded that several chemist associations and pharmaceutical companies had continued to follow these arrangements, amounting to anti-competitive conduct.

The Commission rejected the parties' contention that the proceedings were barred because similar issues had been examined earlier. It held that the present matter involved a broader investigation, additional parties and fresh material. It also observed that the earlier proceedings did not prevent it from examining the allegations raised in this case.

The Commission, however, did not agree with the Director General's conclusion that the evidence established mandatory NOC/LOC requirements, compulsory PIS approvals or an organised boycott mechanism. It noted that much of the material relied upon by the investigation related to the period between 2009 and 2012. This was before AIOCD undertook in earlier proceedings to discontinue such practices.

“The Commission observes that reliance placed by the DG on historical correspondence and material predating such compliance measures would require examination in light of the subsequent undertakings and compliance actions undertaken by OP-1.”, the commission noted.

The competition watchdog also noted that several pharmaceutical companies had appointed stockists without obtaining NOCs or LOCs. It further observed that the investigation had not examined any stockist to establish that such approvals were compulsory. Nor had it shown that appointments were denied in their absence.

“…the DG had not examined any stockist to establish that obtaining NOC/LOC was in fact a compulsory requirement or that appointments were denied due to the absence of such approvals.”, it noted.

On PIS charges, the Commission held that the material on record did not establish that such charges were mandatory. It observed that the material on record indicated that PIS services were voluntary and intended to disseminate information relating to newly launched products.

The Commission also found that the allegation of an organised boycott was not supported by the evidence.

“The Commission also notes from the replies and statements of various pharmaceutical companies, that the allegations relating to boycott practices are not substantiated by consistent evidence on record. While a few entities referred to isolated instances of indirect verbal threats or specific disputes, such assertions were not supported by documentary evidence establishing any organised or systematic boycott mechanism.”, it observed.

As for the pharmaceutical companies, the Commission held that the isolated communications relied upon by the Director General were insufficient to establish that they had participated in an anti-competitive agreement.

Holding that no contravention had been established against any of the parties, it closed the proceedings.

For Opposite Parties: Senior Advocates Arun Kathpalia, Vaibhav Gaggar, Ritin Rai, Advocates Avantika Kakkar, Aman Singh Baroka, Ananya Mahant, Navnit Kumar, Shubhankar Gupta, Nakul Mohta, Sachin S, Hitesh Nagar, Ayush Kashyap, Saijal Arora, Devahuti Pathak, Ishani Bannerjee, Ram Kumar Poornachandran, Chandni Anand, Ileina Srivastav, Nidhi Mehta, Diksha Gupta, Harshawardhan, Kalrav Mehrotra, Aishwarya, G R Bhatia, Vatsala Pandey, Samar Bansal, Rhea Parkash, Jay Zaveri, Pranav Saigal, Arjun Nihal Singh, Manav Gupta, Samar Bansal, Zenia Cassinath, Abhay, Pallavi Damor, Radhika, Vaibhav Singh, Nisha Kaur Uberoi, Sarthak Pande, Ishan Arora, Sudhanshu Prakash Singh, Kamal Sharma, Krishna Vijay Singh, Pragya Sharma, Rasmani Raghuwanshi, Ankita Gupta, Vishal Chavan, Riku Sharma and Shubhankar Gupta