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CCI imposes penalty on Chemists and Druggists Association of Baroda

The Competition Commission of India has imposed a penalty on the Chemists and Druggists Association of Baroda after it found it to be in contravention of the provisions of the Competition Act, 2002. The move was undertaken after a complaint alleged that the CDAB has indulged in restrictive trade practices.

Jan 17, 2019 15:21 IST
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The Competition Commission of India (CCI) has imposed a penalty on the Chemists and Druggists Association of Baroda (CDAB) after it found it to be in contravention of the provisions of the Competition Act, 2002.

The move was undertaken after a complaint was filed with the Monopolies and Restrictive Trade Practices Commission (MRTPC) in 2009 alleging that the CDAB has indulged in restrictive trade practices.

Key Highlights

The complaint alleged that the CDAB, through its practices, was limiting and controlling the supply of drugs and medicines in the market by mandating ‘No Objection Certificate’ prior to the appointment of stockists and payment of ‘Product Information Service’ charges prior to the introduction of new products in the market by pharmaceutical companies.

There were also allegations that CDAB was fixing the trade margins for the wholesalers and retailers.

The case was transferred to the Commission by MRTPC under the provisions of Section 66(6) of the Act.

The Commission after forming a prima-facie opinion directed the office of Director-General to conduct an investigation into the matter. The investigation carried out by the DG established contravention on part of the CDAB.

After detailed enquiry, the Commission passed an order where it was found that the CDAB was imposing the requirement of mandatory NOC and was also fixing margins for the wholesalers and retailers by enforcing the norms laid down by AIOCD.

The same was found to be in contravention of the provisions of Section 3(3)(a) and 3(3)(b) with Section 3(1) of the Act.

Accordingly, the Commission imposed a monetary penalty, in addition, to cease and desist directions, under Section 27 of the Act.

Other Details

Following an appeal filed by CDAB, the Commission’s order was set aside and the matter was considered afresh.

After allowing CDAB with an opportunity to cross-examine various witnesses, the Commission allowed parties to file their written submissions and conducted a detailed hearing in the matter.

Based on the material available on record, the Commission found that the CDAB was indulging in the anti-competitive practice of insisting NOC prior to the appointment of new stockists by pharmaceutical companies and was also fixing and prescribing the trade margins during the relevant time period, in contravention of the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act.

Accordingly, CDAB was directed to cease and desist from indulging in the aforesaid anti-competitive practice.

Further, the Commission imposed a monetary penalty of Rs 32,724 calculated at the rate of 10 per cent of the average relevant income of CDAB for the relevant period, under the provisions of Section 27 of the Act.

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