Commission’s order in the complaint filed against All India Organization of Chemists & Druggists (AIOCD)

The order can be accessed here. The facts and the certain issues in the said matter to be noted are discussed below:

 Facts

 The complaint was filed by M/s. Peeveear Agencies alleging that the All India Organization of Chemists & Druggists (AIOCD) and Janssen- Cilag Pharmaceuticals  are limiting and restricting the supply of pharmaceutical drugs in India in contravention of the provisions of the Act. The Informant alleged that AIOCD is abusing its dominant position by imposing unfair and discriminatory conditions which had the effect of limiting / denying market access to genuine distributors unless they submit to its dictates. The Informant also submitted that various MOUs and agreements by AIOCD and its affiliated organizations either with the association of drug manufacturers or with individual drug manufacturers restricting the appointment of distributors,  is illegal and contrary to the provisions of the Act. This was obviously a Section 3 case and not a Section 4 case as alleged by the Informant. The Commission found AIOCD guilty of contravening Section 3 of the Competition Act for fixing trade margins, compulsory payment of PIS charges, issuing NOC and boycotting companies.

 Issues to Note

 (a)        The Commission on whether AIOCD was an enterprise for the purpose of the  Competition Act stated that since the members of an association are engaging in an economic act, the association would be deemed to be an enterprise for the purposes of the Act. The question that needs to be asked is whether an  association carrying out an activity of a non-economic nature would be an enterprise for the purposes of the Act or not. The answer can be found in various  EU judgments. It has been held that it is not necessary in order to apply Article 101(1) to an association of undertakings that the said body should be  engaged in an activity of an economic nature. As long as the activities of the association or the members affiliated to it are calculated to produce effects contrary to the laws of competition, Article 101(1) would be applicable.

  (b)       One of the members in the separate opinion stated that decisions taken by an  association of undertakings should amount to a cartel and that the members should also be punished for the violations of the association. On this issue, my opinion is that the members of an association should be penalized only if can be proved that the members were colluding through the platform of the association. It is only when membership coincides with participation in an agreement that individual members should be penalized.  If there is only a decision by an association and it has not been proved that the members were colluding or had an agreement between them then only the association should be penalized. Similarly, in a cartel case only if the association is actively supporting the cartel activities, should the association be penalized along with the cartel members.

 (c)       The Commission’s growing desire of going after individuals for competition law violations. The Commission has stated that it shall proceed against the office bearers of AIOCD. I think that the Commission should levy individual sanctions only for grave anti-competitive infringements like hardcore cartels and restrain themselves in other cases. It will be interesting to see the penalties that the Commission decides to levy on individuals.

 (d)        The Commission in the majority order held that an agreement between three associations which are not engaged in identical goods & services cannot be held to be violating Section 3(3) of the Competition Act. Accordingly, two  associations namely IDMA & OPPI were let off. I fail to see as to why the arrangement between the three associations does not violate Section 3(1) of the Act which is a general provision covering all anti competitive agreements causing or likely to cause an appreciable adverse effect on competition within India. Also, an agreement entered into by an association of undertakings may amount to a decision of the said association of undertakings. Therefore, Individually the three associations do violate Section 3(3) as well.

 (e)        Considering that the Commission found AKCDA (affiliate of AIOCD) guilty of contravening competition laws, all the state and district associations affiliated to AIOCD should also have been found guilty and proceeded against.

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