Varca Druggist & Chemist & Ors vs Chemists And Druggists Association, ... on 11 June, 2012

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Competition Commission of India

Varca Druggist & Chemist & Ors vs Chemists And Druggists Association, ... on 11 June, 2012

fan-'3 §QM¥3ET§T§QN GQ§'€§?£ﬁ§SS§Q§\§ (BF EMMA {Ease Na,c+i:2?:2e§3:m°wc :tm:«s; $1» 0 '53:' 3-WE Fikgd by Varca Drugs & Chemists 8» Others §nfc3r'rnan'a' Against Chemist&. Dmggisi Asseciaticn. G03 {§'3§AG)T Qppcssiice Party QRQER i had tha benefit of gaing thmugh the arder passed by my Zearnad caiieagues and having ciiffarent agsinian an eesftain issues, decicieci {:3 pass a separate Ordei',

2. The infmsnani in {his case had brought to the notice cf the Ccjmmissiezm various; acts and deeds of the sapgyosﬁe party and asked the Ccammésssion is ':aE~:.e agzpropriaie actimn under the prcwisions Q? the Cernpetitian Act. The in\;es>t§gai'mn was c:3ne§Lscied by the BE?» whet E1323 cailectedé dncumentary matés*§a§ and orai evidence abau': the aﬁegatians made by me informant. The evidence czcmsists 0? Memorandum sf Asseciatian, various. guizieﬁnas isaueci by the £\$scx:iat§an, letters, minutes of meetings anéi statement 0'? affine bearers of GP narrating the ctmduct <32' aﬁsuciatienn atmui hnéﬁéng sf meetings and issuamse of §E:ﬁ€':i°S eta. Thus the evidence avaimbie can record is beyand the paie of cizzsuht.

3. The apposite party is an asseciaézicm 0°? wh+:2ia$a1ers$ stockisis and retaiiers in Goa' A perusai of ﬁst 0? e+>:ecLstive manibers m' the Asscsciatien wouici Shaw that the Assmziatian was having separate whe':gs.=.¢§'£'§":?§7I>§9, irman and Retaiiers ffihairman. H. was _ L jg.

1....»-a being gcwemed by an exe::ui:iva body having President, Secretary, Vice: P:'&§§a'en'i=3., the twrzs Chairmen as stated abave and executiw-2 members.

4. The Opposﬁs; Party was having 3 Me'smar'a:1dum <24' ﬁxszsmsiaétian and had enacted byuiaws and «gL:ideiines for R3 members. The guideéinsss issued by the OP to.»?ba.fa§iowed by the membera and drug manufacturmg companies incﬁuding Ayurvedic tmmgsanies,

2) 3} *3) 8} Tintenaiia, aarataénadjfgiinxviéng giireciians :-

A§3;:>©intmen%1tee':Tsinatécm of stockists shaﬁi Q3353?' be done with the permission of the Asseciatidrz.

A new wmpany can apmzint oniy two stockists, was in North {Boa and the secand in South 8233. ' The steering Gemmitteze shaii issue ciearance certiﬁcate far appoinimant £3'? stmkist if tha smckiesi aaﬁafies 'me canditians as per guideéinea Na person can be appointad stocéazéest by a ccampany wiihcxut ﬂatter of z::ieas'anc:e!NQ<3. _ Na stackim shaii piarse atzrcier to a wmgaany befczre receiving a i-sitter of ciaarance. Any whaiesaéer xziaiating the guédaiizngs shaii ieava the smckistship and ahaié be debarrad from taking further ﬁnes for one year and Wm have is; pay a minimum fine af Rs.5,00{} tn the ogapesits: party.

Yhe number of stackists in be appainted by the pharmaceuiieizai Qonmanies is aka gsverneszd by the guideiinea.

Campanies are not akawed to appeint amther smckist far we year after ii appainia a stackiai, even if the mmpany feaeis; the need for anaiher stackist. ii have in pa; 3 minimum ﬁne sf Rs.'1.{3,GOE':

A czampany vioiating the g.;L.g§§£&i%7~%@$cuxf3 M' ' .¢ <3.

e '\ and it shaié abide by Q) A cczmpany wanting in apgmint a new stun!-«fast shaii appiy far NSC is the Asseciatissn. ;3\;3;3E§catMian shaié be made separately for the 'two disiricta of {Baa and new sioc:§:istw0u1dA be given NQC if the exisiing stmckéssi has airssaciy reached 2: minimumgaaie.

-It '10}Na cmmpany can make direcrx suppiy of medicines in dczciars, nursséng homes, hospitaés £3!' chemésts, NE suppiies must be muted thmugh an autharized atackist oniy. A msmgsany cannot ciirecztiy éieai with private haspétais, nursing Emmea buiisz purchasers '§'£}Bizi*s for Gavernment iendarss are in be rmztazti thmugh GBAG; faiiirsg which the sompanEes.'stec%:ists may be baycstied by SEJAG and thraatened af dire censequences is given.

'i2}$ci1en1as of the pharmacezzticm companﬁes {giving ben%eﬁts) are net to ba passed an by the retaiiers to the ccansumers and the detractors ara is be penalized by the ﬁiscip§inary_committee 0f the CBAG.

'i3)§f a company has mapped operations in (503 far more than iwa years: and want is restart the operations, it wiié be ccmsicisared a new cempany and W323 have is apmy far frash W3 {Pradust ¥n'f<:>z'n'2ation service) and for ezpgmimment 0? smckists.

M}WhoEesaierss sahaéi give rﬁaxitnzzm cash déscnunt ta retaﬁars oniy 0? 2%.

15)V'»iho¥esa3er$ shouici not cperaie any 'indirect beneﬁdaary scheme in get iargesr mders fmrn retaiﬁars.

"3B)A whokzzsaﬁer feumi vio§at'mg ihe guideiinsas 8; ruies wiﬁ be Eiabie '(<3 sirkzi actmn by C{3.:?\G on the: recemmendatic;:3...~ai~.£3j§cipiinary Cammittee agpuinied far the <5 s.,\ purpcrse. Qn being; fmm *' warning iettar far first vioiatinn and a fine of Rs.:5,{3%.','z{3 for $e«.c:»:md viczlatéon csupied with deharring him far 3 periaci of one year "far beeﬁng appaintad a stockist '§?)Raia§§ers were §i_§§§ied not to enter mic: unhealihy campeﬁtien of giving discount to the atusismerés and 'cc: not to caparate any baneficéiary sczhame ta attract the customers. A reiaiier' 'faund violating the ruies wouid be ievied a ﬁne <2"? Rs.2,5{30 besides warning ietter for firai xiimawtian and a fine (3? Rs;,5,TC3{}G fa? sécond vioiaiion T with direcmns ta 33$ whaiesaiiers ta bcycoit such retaiiar for a period :3? 3 mV:»nih=s.

5. The sheave guixzﬁeiines farmed paw: :3? the enfczrceabie miss 0*? the OP. Apart {ram these guideiines, the minutes of meetinga cs? AGM heéd by GP shaizw that 'the OP' had been serious abmst impmmentaiion of such guicieiines and haé been ensuring that the wheiesalers, ccsmpanies, stackésts and retaiiers foiiow these guic1"e§§nes. Right fmm ZQGS enwards AGM minutes cf {DP show that in the Aﬁms, there was discussian about different whoiesaéars and stockéstsw and companies me had met foikswed the guidelines and {hare was mantien of acﬁen iai~:en by the Assaciaiicn against i%'sem. Nﬂiis were been denied and perzaities were irn;::ans%e{:£ in pursuance on' above guideiinezs, in the meeﬁing heid cm 20"' Juiy, 230?' at ihe affine of CB!-KG, one membssar pmciuceti a mu from "\i§mta§e Hospitﬂ' shaming 'i{.'s% diacmmt on reguiar meéicines purchasatzi and {-3 note waa iaészen cs? this vieiatian and 'st was dacideé that this viaiatian be put up before whaiesaiers rneeting, ﬁt was aiso noted that «some whoiessaiers were mai-iing pmducts avaiiabie and suppkging drugs to reiaiiers withcsui payment 01' PS charges. This matter was aiso discusseci and it was decided {Mai mg whoiasamrs wiﬁ have tat: pay Ra'? ,QE3{)f~ .n-"' .-.'5'\.,\ \ it.» the Association iswstead cf M jfmé §ﬂ'S charges being iavied éﬁegaﬁgz by CJDAG. Tina armuai report for the year 2QD?'--O8 rnenrirms that the vezhrriesarers srmuid become members of the Asscrciariorz arrﬁ whiie making; first suppéy 'to the reraiiers, they srrourd first check the membership of new crrerrrrsrs, The reraiiers shmzid arse mace arciers nrrry an ihcrse whoresaiera who wera members of the Asszsaiation. in the rmgeting m' mvhoresaiers :3'? 1:1" Arrgust, 2808, the Chairman repmrted that a ierter was being written in 'ﬁarijrajr Drstrrbutars' regarding practicer cf giving extra drsrcaum to rhea rzrrailers agarnsr the guidaéinea. Simiiaréy, it was aisrs decided is write ieﬁer tr.» 'hriicre Labs' seeking expiarration regarding viaéatécm sf CQAG guideiinevs by their super strrckirrtrs. The Eefter dated 10"' September, 2{3{)Es wrwren by CDAG ta Micro Labs 'rs. on reward' in this; éatter, Micro Labs has beer-an raid to direct its super strsckists nest in supply maciécirres to those stockists whiz were near rzfficiai stockists (re. not registered rrrrith €1iI3.5\£3r

6. The resaiuréarrs passeﬁ by the Asscciariorrr of 3"' February; 2089 are an regard. Reseiurion No. 3 proxricias that it wag mandatery for aﬁi companies that the stockist wrriéh has rune ciévisirrrr of a mmrzzany shaii get air ather divisions :2? the said mrnrrany. The rasr>%r.r':§cm Nr}. 4 gzsrsviries that if the existing stacékisr of the campany satisfies the rgrséciaiirwes regarding iémii er' saies sf a stockist, than orriy the rzxemrtive Semmitiee: cf CBAG aha?! give NSC. to the compemy to appmirrt amiher stockist aimuitaneeusiy. Sirnéiaréy, five resolrrtiens were gassed in 'me meeting :3'? 3S' March, 2039. The first resoiurion prcwided that the Association shaii make it rrrandatarfy frzrr ari existing companies and new rmrnpanies ti} appstrint at éeast two stsckisstss me in Narrh G03 and ether in Semi': 630a. The third resaruricsn previded that it wmrid be mandarery for air ,x\\~ 7'. A ;::-:=,-russai of the minutes of two other meeiings cf the Executéve Elrammitiee and As2<9cia>';i0n avaiiabie on §'e<.::.<::rd wouid smw fnai the GP Asseciaticn haa been inaisfmg can mbtainihg LOG {miter (sf ccmsseni) and NBC fmm it tsefore appeintment of any whoiesaier, stackist in the area by 5-tsmpanies. Any cempany which reséstaci the dictates of GP was boycotted by the members, in pursuance csf gui:::¥e%ine$ circagiars and themembesfs of the assomiaiion faithfuiiy fcitowadj 'the digﬁates :23'? the asscmiaiianw 'The campanies were derzieri L{)(.'; for aippainiment cvf additianai ~5i;or:.k':si3 and did mt appoint hadciitimvnai sieckisiss under the fear cf baycati 0'? their preducts. Fm' exampﬁe Mia. 'Raikar Ssstributcrs' were deniezci appmintnzent of acidiiianai smckist in Gaza dsspiie existing stackésts having given NSC that ii may amzsinﬁ: mme stockists.

S. f.3'£}'éA£3 had been ::.x3m;:>uisc:ri§y czharging PES: from every mmpany which intradumd any new drug at 3 new variant of exésiirzg drug' PES was. being charged at 3 fixed rate and a cognpany was bmmd in pay this ammuni if it wanted 'it: 333% Eta moxziwzft within £303. En saga sf mwpayment <13'? MS charges, gaenaitias ware imposad by CBAG and threat 0*? bmycatt Es. these, Praﬁuci mf«.:m*nat§on Sewitze {P§8) is as service mavided by {ZDAG by pubﬁshing the infmrnatien aboui the drug :2»? the czempany in its periodicaé pubiication which is circuiated to the chemists and druggisis witmn Goa. CBAC3 charges separate PBS far the same: drug mean in cases cf quarﬁity varianis is. if a company has same nut with 3 versions cf a drug, say in 19 mg, 28 mg. and 48 mg, it wiﬁt ham ts pay sazpamrte PS8 fer each versien. F'ayme:'1t of 53:8 is compuisary fm 23%! {he mmpanées.

9. in the wake of above facts am; zyacﬁges 01' C{}A£3 in cmtro%iing the entire of (3:33, the: informant arguezd that MCEU, guideiines, acts and deees ef CEZIACB emeunied to violation 0'? provisions of the Cempetitien Act and wanted that the Commiseien ehczuid remain CE}!-KG from en'f«;>rv.:ing anti eemeeiiﬁve guicéeiinee and such guicieiinee sheuki be scrapped. The Corrameeien sheuid amend the guicieiinee and shoum p§eeL_5;rders fer freeing the buemees; of suppiy ef drugs frem the ctutches of {3£Z3AG.

'U3. T eit was submitted that CQAG had Vbeeeme a menepeiiei bedy and was practicing and dcsing acts whéch were anti cetrzpeiiﬁive. The practice of CEEAG farming; eemperﬁee to eppeint eteckiste and wheieeeiers from enty theee pereene whe were members <3'? {EDAG ameunted to kiiiéng ef cempeiiﬁen. impesitien 0:' penaitiee by C2£3:'~'\<f3 and boycefl:

threat was vioieiéve of the previsiene ef the Ciomeetiiien Act. 1'2. The ebeve matte? wee ﬂied in June, 2208?} under MRTP Act befere Direcios' Genera; iinvestigetien 3: Regietretien}. The _informer:'t was perhaps unaware ef the Ccsmpetiticm Act having came into force an 29:" May, EBG9. Hewever, the eomeieini was-2 feawerdeci it) the Cemgzsetitien Semmiseicm es. E'~.iiRTP Act has? ceased te exist, 'E2. The main ergumeni of the {JP is that the Aeeecieties: wee werking for the weifere ef its members and for betterment of the Bede. it was regulating the trade in such a manner that it was fer 'the benefit :31' 'the members 3; <:eneLamers. E? is steteci the? Unien Heeith Ministry have cansiituted Nieeheiker Committee which reemmmemiee that Chemists. & Pharmacists ihreugh their eeeeeéetien shame act as a watch dege ﬁe prevent entry :31' spurieus drugslmeeieines purchased frem amautherized reeeurces and had epeciféceiiy reiterated the: Ni indie orgenizeiien ef Ehemists & Dreggiets eheuid authmritias to eiiminate sa%e <3? spurious and sub standard drugs by their me.«mbers. $1 is mated that the Associaticrm CDACS was éssuirzg NOE after verifying the anteecedents of the Stnckists. whoiesaéers and reiaiissrs tr: ensure that nmbmdy deais with spurious drugs. Therefzareg whatever was baidngé dune was 'bemg done far the mimefit of the CO§"iSUET1€§'S.

723. The argument of the apposite paﬁy musﬁa faéé. Fcsrmatitsn (sf an assafciation is a fm*;c2amAemai righi of peopie: of Endia, but no assaciaiimn {EEG be farmed fur iiiegai purpases er ta parpatuate iiiegaéity. A parusaﬁ sf minutaaa ca'? AGM of {JP wouid show ihai:

the whcie affcnt of the GP ha$ been to promo? the sizaabie pmfizt margin Cr? as mambers. whatéher wiiaiaseiierg :32' retaiiers. OP had am business it) reguéate the pmfst margins er issue Eetter of ctcmsenis or N063 to pamans 'Em doéng izzusinass in wmtziesate or reiaii sgugsegﬂy ﬁne 0'? tﬁrugsimeeriicines. Oniy few pmfassicms have been given respxzznsdbééity af keegiaxg a watch on the mofessianais by Eegisiature by enaéting necesssaw statuieas, Tm eﬁecied badies of Advacaies, CA3, CS3, ECWAS & Dcrsmczrs have been given statuiary pcswers to reguiate the professian. N5 such pawer has been given by 'seg'asiature-3 ta chemists 3: Bmggists .%'~'~.ss0c%at§t:ns either at siaie level 0:" natianai iavel in reguiate business, fix m:arg§ns & ens:.n'e~ profits Oi" >20 reguiate the entry and exit 'me perstm in this busineas 03' is ﬁx warms of minimum tum {saver etc. The entry ink) this business is reguéated by a host of szentrai ruies and reguiationa and a complete administraiive structure is there at state and centrai iewsi ﬁnder Drugs & Clasmaiéc Act 3:

Ruies:-.. it is the state which grants as" remakes Sécence to da 'wade in this fieid. Na assaciation can sugar §m;:»<:3s-*2 its awn dictate zavw" fetaiéera at w;hm§ese§1ers abaut .-- ».., wrrethisr he wants to enter the fieici and compete with anthers er mt' CQAG or any rather agsociatien 0? existing rataiiers or whczsie sails-rs cannm decide rim' has business. to decide vrrrather a new entrant in the field shauid be there or not. Thsare can be no worse anti campetirive act than deriiai Qf market acceszz to a_ §'J%i'S{)¥"i.

A 14, Section 3 sf the Cempatiiian Act {the Act} rsmvides that where an agrraemem i$ erxterad {Tints batween rantarprisea Or ass_ec:i--atécsn 0:' enterprises etc. etc. or a practice is T rzarried on or a ziacision is 'taker: by any associaricsn er enterprise or aasociarimn mi' :.iiii3a'r~;r>ns insiudirigi carreis engaged in icirs-ni'i<:ai er simiiar trade crf gczrssds err pravésien 2:»? service, which diraciiy 0!" indirectiy causes Car iéirzeiy ta cause an apraraciabie ardverse effect an 'tha rzampetrrion within Errriia, such an agreement shaii be mid. Secrian 3(3) provides that if decision cur rxracrice ciatermines purchase rrr $333 prim, it Shaii be preérrmed to have an appreciabie adxrerae effect err corrrpssstitiarr. Simiiariy, if fire actions er ciecisiarrs. ar practices iimii err rxarztroi productianfsuppiy, market rrf prcwision :2'? services, if: sshaii be pr»=:~:$urried is have appraciabie adverse: effecr en campeétiiiun. Sectirsrs 3 prehibirtss an aigr'eerrrar':i in resraeci: Q? suppiy, productian, disiributicrr, storage, acquisition or mntroi <33' gc>0d$ which causes at is Sikely its cause an appreciable adverse eﬁact an cornpetitiarr within india.

'£5. Cartai is deﬁned untziar sectirrn 2(9). Cartei inciudes an asgesiation of producers, seiﬁers, distributors' traders er service prszwiders wire by agreement amcmg themseives Eimii, ccrntrei car attempt ta crsrztrrsi r>;c>§~r:r<:'i'.%®n,r ciisiributiori, gaie er _r:>r%c.e of, or iraﬁe in 90063 czar provisicrn 0? services. _~.

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36. En order in form a cartel, it is nu? necasaary that a formai asseciaticn should be get registered. A cartei can be farmed by an infarmai associaticm 0*? ente=2rpa'§ses as wet! as by 3 formai registered ékssoeiaiian cf enterprises. The saordinaﬁcrn beatween the 3nterp:'§se$ can be achieved through medium of eéihgzr of the assocﬁaticzns. Formaticzsn :3'?

a trade assacéaticm bcacozrxes handy whare cartei ccmsists 02" a iarge nu:'ni3ez' :27? ﬁrms. in such C€:iSE3S Wham iracée assaciaticns are famed for tme purpose <31' cartaiization, tha cenwpliance :3? the Mes maria by the carts! needs to be mmétoresi and is menitoreci through ihe Executive Cammittee er the members of ihe Assaciaticm. jV\ihVere arziy a few ﬁrms unite to form a cantei, it is re§ati\:eiy_ easy far each firm to manimr {me ancﬁzher. Hawaver, where Earga numbers are there, this meniioring and pezmaiizing is dame thrcnnsgh reperéing by thé membersé. The: mernbem keep cm giving infarmaticm is the Executive Cammittee abaui the vioiaiéon as E': ezemes ta iheir krzawéedgew Then the executive cammiiiee takes actimn.

'£7. The ﬁagisiature was aware that assnciations can take the shape :3'? carteis and that is why in aectian 2(a), the asssecziaiiazn sf gmducersa, genera, etc. has been incéuded in the ziefiniiion of cartais. Simiiariy, the §egis§atu:"e in section 3 aim envisaged a siiuatian where enterprises may form an assaciaticsn $219' take such deciséms or ad-:3;::'t such practices; which wens: akin it: a cartai. The censtitutim :33' an assosiatitrsn and %ac£capting¥ cf his Memarandum of Armies eff Asscscimian, its ruiaa byewiaws, guicieiines i%t$a§f is 3 decisian G'? the eniermise. Every individuai member wm subscribes. to me Memoramium of Ass«::ciation and becumsvs; member cw? iha Assomiaﬁgan either at the iima :3'? inception or iats:-2: (m, is a party is t ;e..ﬁe§g;.j§ian as rec:Qr'¢3ec:i 3n the form at' by--§aw$, "\ . . . .

guidei';nes, was 8: {eguIaﬁc:m*«:~ gzaismﬁ The decisions of the Executgve \ A' ""'~<-.,,,,,_u.r ' 4:

C} Ccsnwmittee :31' the Association eiected by the gem-ssrai bociy er? the associatian are mt cmiy the decésions on behai'? cf Asssocriatian but amoumt to the decisions of the members of 'me A:ssac§ation. it is quiie goossibie that .~?.~oms members may rm? agree with the danisian of Exsacutive Canwmiitea. These members who dc: moi; jagrge with such dacisicms which affect the trade 02' sewice BYE supgosed to Gamay their disagreeineni T with 'E§'}6WC3§C§$iOE3S to the Assaciatian. E"? m membm crzmvays disagreement it: the decision :33' the E>:e-::ut§ve bady, it is p:'ess.s:'n:3d that he agrees wi':h the decision. 'S8. .+'>m'ass:x;iaiimn may have two faces' G516: that of the iooking 'after the weifara cf the Assuciatiian members and ether face that :3'? kiiiing the compatiiian ameng the members and in ensure c:30peraﬁs:3s's in earniﬁg assured pmfits. as waii 35 iaking such decisicms which are anii campetétive, The Sammission has is aciapt as fum':i:on:-3% agaproach. Thosa acticms of the Assaciation whim': are «my in the name efwveifare :3? the 'members 0? the associafsen iike ensuring that the members get nretiit from whoéesaiars, they are rm': harassed by the autharities, arganizizﬁ weﬁare: schemes, cuitureﬁ pmgrammas etc. are the measures of an assacistieza which ma met it: be abjected in. However, those ﬁmcrtéans and decisians Q'? the assccasiaticsn which viaiate Competition iaw are to be csawsidered in a different perspectixse and Gamma': be cnnsiderezﬁ as Eegitimate functions 0'? the assecéaﬁan. An assaciaiian of enterprises can be held reagonsibﬁe as 3 bady fear ant; mmpaiitive decisions and the members of the .=9\sss.<3ciaiion irzdivimsaéiy can aése be heéd raspansibie for those dacisions and psactices which are anti campeiitive and Shaw fcrmatizzm of a cartei. paragraph 4 above. would shew that th§ :5 \ \ '.

of 3 cartel. The guidaiines issued by {.'}Da'4'-\C':'« that no ccsmpany can appaint stockist without Qbiaéning LOCI or no sicckist wouid be aiicswed to be appointed unless the previous stockist had reached a certain minimum turnover, car uniess he is made stackisi far agthe divisians, are in the nature :23' iimiﬁng the pmvisicmg, of ser\e'it:e_. 2:}. Appaintmem sf stockist, v§haiesa£ers is far 'he purpaswe <31' suppiy of drugs. These drugs are Suppiéed by stackistste Vwhcziesaiersand hy whoiesaiars is me s'etai£e:'s. "i"hism {main of suppiy of drugs exists as that tha suppiies go to "me uitimaie ccmsumers uninterrupted. in t'né;~s mariszet 02' suppiy of drugs C}{3.+'\€3 by its guideﬁes, actions. and . pens}? pravisicms had put iimits to the provisiczm of the? -smvices, The demsion regarding number of stm<:ki$ts is be appainted in a particuiar teryitcsry is taken by pharma csmgzarfses based on demarad far cémgs. Any restriciian Ton such matters coléeciivew impcssad GE" mandated by an asscsciaiion cf cmmpssztitors net aniy énfringes can the freedom of trade as guaranieed by Cmnstituiion sf maﬁa but a§ss:2 erecis barrier to ccmpetitizm. it may again be raitarated here that there exists Ha gmxarnmeni reguiaiszsry mechanism which ensures the fuifiiﬁmeni 0? reguiaimy reqVuir&=2ment$ fez' issuing %i(:en:§e~s to aii sates, eatatsiishments gsertaining to drugs incmciing whcﬂasaiers ancé reiaéiers. Three ccznduct er? the GP in ierms-2 cf impasiiian of restricticm on apg>0intmet'1t--of aiockisis is anti cempatitive. The restrictive guideiines and norms i:*npV!ementes:§ by 'the asscscmion, seen an s:.0Vn}un<:iion with the actian taixan fer n(m~c:0mpiiance, estabiish that 'éhe ccanciuct cf the CDAG amounts to Eimiténg the number of gkiayers and caniroiiing the :~3up;:»¥y cf drugs 'in _}_:§<m 3{3){b) of the: Competition Act, EGQE.

2'1. The guidelines issued by CDAG and far which penaities are impased by CURB éimit tha pmvision of service of SU§)§3l}' of drugs to the retaiiers as yvaii as to the censumars. CDAG has even i'3E'lSL§:"&';Ed that whoiesaiers and retaﬁers aiso cannat fxsmctisq the territmry sf (533 without c;b':a§n%ng-- NOB {mm the Asscsciaiion and without ,. be-czeming member of the assaciaiian. A c:oi§er..:tEve ccsercive acztéon 35 taken by (SEEMS 'ihrmsgh ifs mneamhers, if any one dares ':0 defy the guideiénes cf CDAG.

22. The undVispuied evédance showss that CBAG has fixed trade margins at whoiesaie and retaii ieveis far .3}? rzorw-scheduied drugs at "3C:% and ;?;0% acrczss states. it went a . .-

step further and thrdugh the MOU far its members anti mutated ex/an disceunts to be extended by whoiesaﬁars and reta§Eers. The reievant cﬁauses :3'? the Mai} as posted an SSAG websita 33$ on -4.§.20'i2, are as under:

Purchase & Pavment "¥(b}: H; is agreed that maximum cash dismuni csffereci is Retaiﬁers shouioﬁ be 2% cmiy. The mi53in'sum purchase by Retaiiers fa: e§i§.;i%3EEEty (31? cash discount is in he decided by the carscemad Wimﬁesaier.

1(9): N0 ether indirect céiszzoamt shouid be given such as seiiing to F*éetaiier<s arm? Dacmrs without i.E:'»Tf§iving free buffer either in excess in 'the trade offew officsiaﬁty aparated by tha cmmpany er giving free other groducts where rm trade offer is operated $33} the company. Any such things wiii be ccmsidared as indirect digcount.

Md): vvhazesaeer shou1c§,.f§:-§g\c§ .

Q.' Earger amers ﬁ'{§i'§§ gataiie ' S \ « \ /' r'- *-,~' .51)., «T E"-3 _c,:a '${<a-5): Any whmiasaiar fmmd vioiating the above was will be Eiahhe ta strict aciien taken by CDAG on 'ma re:c0mrr1ende2f.ir.:m of the diiscipiinary comrwbiea appsinied far the purpzzusse.

1) For first virslation 'a fine Rs.25{3C'sf~ wit? be impmse-ad beside warning letter '».»{:ii§ be written to the Whmesaier.

2) [Piaf Second \.*Vi<:siaa'tir:'m a {fine Cr? F:3.5{}(}{):'* was; he imgzmssed and aiscz axecuiive committaa wiiﬁ not issue any NBC ':0 such a whaiesaéer far a perimj Q'? 1 year fer bang appainted 353 a"isioc.k§st any campany.

'Em: Retailers should not ream in any unheaithy conzpetétion by giving discount is their susmmers and shouid not operate any beneﬁciary schemes in attract the cusiamerss, 1(9) Any Retaﬁies' fauna? xzimating the abmre miss wiii be iiabie ta 3ii'§€,T~'§ actécm taken by CDAG an the racommendaﬁion Q'? the ﬂiscipiinaw Committee appmintad for the purpose.

1} Far firs': vimiation a ﬁna of Rs.2§(}{},f-- wiii bee Empossssei besécie warning, ietter wiii be written to the concerned Retaiier.

2) Far seconci vioiatécm a fine of Rs.50{3{3f~ wiit be imposed and 3H whmiesaiez' wéii bayceﬁ £~;u{:h retailer far 3 period of 3 months.

111

"3

51.'.

"a)Vv'Eth imrnediatez effect W§m§esalea'3 cezaufd extend a maximum of 32% Cash Déscczum for immediate cash payment or payment with current dated czzheques tc» retaiie=.:~r's, \Nhc:§e3aEer3 are 3'E¥QUE3Si8d not {Cs offer mare ihan 2% C-1). and in case of cheque paymarz': the Gheqases shouid be deposited in the bank immediatafy.

T Féétaiiefs piease aria mt dame:-xwd more than 2% and do not give poshziateﬁ cheques er tie ask whcieasaiers 'ta pnesani Cheques £31310 the bank."

in the statamenis made izsefore the 8.53., Shyri Hemam, Pei ;'>mg§e, Member of Chemist & Druggist Assaciatierz, (303, hag submﬁied as under:

"Q§3=A£5 is affiiéated in AKECEE and foﬁmws the gu§de¥ine$ of ASQQD. in tha guideiineg, the margins have been fixesf far drugs far both wiwoiesaﬁers and retaiﬁers. The margins are fixed at the time 0*? giving HS appmvaés. The PS8 is cméected in the name of advertisements ;;3ub§§ss":e:i is': ﬁhe magazines iii-:3 -'Eu§§e;tin--c:um~fF'§S'. Far PiS, R3588 per gnrtrxiuct per $trangthffx::rmu%iaiion is charged. i am giving you ccymes of ap;:»r«::wa§s given by AEQCD pubiished in 'Bu££eiin~cum«P§S' which wmsid shew that Protiuci §n'f0:'mati<:xn service is charged by as:~:=.c>ciai§or2:-3.. Trade margins fixed by AEQCD faiiawed by GEMS and P153 chargeci by them may have émpaxzx an prices :3? drugs. {Sircuiar ciateci 4.6.2010 of {ZDAG (a copy of which is being submit'»:ed) aisc: brings :3u'g_.'3:£<m*:'"i§'g §§§§\+eciatian writes it: the campanies far v\ effecting variation in prices."

25. The cxircmsiar dated 'H.08a20OQ issued by the CDAG damsnstraims the attempt to resmc': competitian between retaiiers by denouncing the praatice cf extantﬁng ciiscaajnts in the and f;L1Si{}f'ﬁ63:i'S. The aércuiar reads :» "We have been receiving a ﬁct 'of 2i:{3:'ﬁ?§Z>§E3§WC$ that many rataiiers are giving dismunts which run evan upio 18%.

Piease be aware that cut Assmciatian and its parent body -~ The JXBCSCEE2 thrive hard in bargain iha companies and maintain nu: trade margins on medicines. These irade marggsins are just encsugh {and scssne osazasians not enaugh} "I0 sasstain murselves 8: have a respaciabie iiving.

Péeaae aiscs be swam that a big pharmacy retaii chain in the Sozztharn ﬁndia which was; brashiy advm*ii$ing am? giving cifisczaaznts to czusmmers, is tmziay in bankruptcy, with imssés amaurzfmg is cmres £3'? rupees, Giving ciisceuntss met (my atiismstr-2; the ether retaéiarss in the neighhourhczsci W¥"'iQ tie no': give ciiszsceunts, but it aim ieacés to um=:~thica% practéces and is aciuaiiy hampering your awn pmfits in the Song run. You: giving discsunts is not oﬁly destroying the neighbeurirsg miaiiers, but wiii aim eventualiy destroy you '(Oil F'%~=3a5e% note, strict acstisn wi§§ be taken against any retaiiera found given dissaunisa.

We thera«':'Qre appeai tr.) you in step giving discaunisa. Heip us ':0 keep the 'trade healthy & aiive."

The ciireeiions given by {ZBAG ta retaié chemists that they shsuid mi enter ima "'~.

fact *?§>:ed the prices of a§E drugs for the consumer as MR3" and me discount can be givezen to the consumers. Simiiariy cjirectiang and guie:ﬁei§ne.<3 given by CEAG is its w%ha£esa§er~:, and stgcklsts about fixing thé cziiszzamts in cage of no;n.~s<:hedu§ed drug amt) resuits irzta *€i>::ing the psices. The whaiesaiers Gamma': giw-....additianai discaunts '$0 the retaiiars for shcswing better per'foz'mam:e nor a whxsiesaier can try is increase 'ate saia by Qffering {mare §iisc0unts..? Thus there is nu price competitkzn in the sake 0'? drugs between the whoiesaﬁers hecausa every whaiesaier has to saii a mug at the same price despite the fact that ha has wide margins mat of which he gwe further dismunts to the c:ustomers'uEt§maieiy which wm go in the cmnsumers.

2?'. The drugs theme ﬁays are quiﬁa Gs'3S'£¥y. Same sf the £:ii"U§$ cast in iakhs. Many of these are assgentiaé drugs used in saeriaus aéimants, if a drug essta R332 ,{}i.'.'»,i)D{3 '£'m"~a pack of one month, 'the discsunt of 28% wauécl asﬁaunt 'cc Rs¢2G.{1G€I3, Even if im whczlesam or the reiaiier can affczrzti 'to give adciiiiarzai céismurﬁ m the ccmsumes', they cm ' not givg discmsnt to {he ::.cm$umer because at! :3? them have ieineti hands and formed a carieﬁ that he riigcount wauki be given is the czcmsumesz 28' This carteiizaticxn had taken mace because aii the members have subacribad tea the decisians of the Assuciatitm that they wouicé abide by the guideiines éssxsed by the .5xa$ocEai;':an in respect ca' remit and wheiesaia discounts. The asscsciation had fixed cash d':sc0unts and had 3530 given wrections in' mm trarmferring tzxf ham-'-.~ﬁt:~3. is the consumers. "fhe de=.cis'sen {sf 'the assocéatian ':3 the ﬁeciaicm :3'? 'tha mamiaers of ihe Assaeiatixzm, it is apparent that am the members of the Associatimn tagether acted as a 2:2-Mei by subsczrébing 'arc: the Memorzanduém Qggssmiatéegand guiaieiines and by faiicwéng ',3 1?

the guideiimas were bmught to the notice of the Executive Qommittee and the Executim C~:3+mmitte:s.~ decided tc: take action against ihe visiators.

% :29, E, tixerefarie, cansider that the facts waved in this ease cieariy Show that 'there was 3 came? 3? the members of the .Ixss%oe.;€aii«::s'a in the reiexzarzé: market :13' suppiyidistribmian of drL:g$ Em c:-rdar ':0 RH! the compeiiﬁern among the reiaii-era, arrmm;

the whaiesaiera and among the stockisis, SEAS and its membarsTTcar1s§Tde[:ed[the T competitian as 'unmaithy'. But far these ciecisimas sf SEAS, the campaniesirnamsfacturers weuici aissczs have been <':oT::':;;>e§i£-;<.§ 'ix: give better discounts in order ta ccanipeta so that the seas cf their medicines womd increase but the cartaiization by CDAE has ensured nf ﬁxing the prim and aﬁruggs are mew sc:i«:*.3 at pm determined prices §.e. MR? ta ins mnsumer wimaui any compaiiticm amang the chemista.

33. On mnaideraiion of aii aawdences imzéuding the ccpies cf PES Buéietinﬁ staiements of persms recorded in the ceuras: sf proceedings, varicsus circuiars issued by the CBAG, ii: is evident that the Assczciatiun nan: eniy pveaarébed the margins far w?::3§esaEe:'s and retaiiers as detemxineci in the agreement entered inio between AE{3CD, E{)?v'{A arid OP1 but 323:; dictated the maximum dismunts is me offered is the retaiiers and in the cbnsuémers. Whiia trade margins and ieveis of dismunis may rand to mnverge acwss piayers man 'ihmugh a market driven meshanism, caiiective draterminatimz {:55 the same by an associaiicm of. mmpetiiczws is against {ha principieg sf mompeﬁtéen and is in mniraventien of Sacticm 3(3) an' the Competition Act, 2982.

31. Anmhar feamre Q? the Associatian is is ask for charges fer PES. This has been Prado-rﬁcion infarmatiaan Service, A company which produces 21 new drug is bgund to give infmnatign 01' this drug in various medicai gbumais anti research }ouma§s. it is mm that PES is the cmiy made of giving infcsrmatisn of their pmduci either t0 the ummaéte c:<:ans_ume;'e3 or to tha chemists. En indie: Rosemay §?"sz?.:'5?2, a missionary from UK had started first drug informatien centre at Clhréstian Medi<.:a¥ Cimiﬁege, Veiiare in eariy '¥€--}7CJ.

This azentre prcwides Vinfmmation cm drug to members, pharmacists, nurses and ather puarsonnet of various dsrepartments. The cenire has estabiished severat ather drug _§nfq:Amation centres in other piaces outside Veeiiora. Vxfhiia ir2 _*t§x;e gaast, the dmggg avaiiable were few in number and the need far drug §r1fo:'ma%ien was minimai mt rmw the siiuatéan has changed and the number 0? {mags has imzreasessi phemmenaiiy. Apart fmm {mag infcarmatian Centres :3? Chrisﬁan Madicaé Elmiiege, 'v'e§§:.:~re, there are various cathes' jauma§s who puhiish drug infmma'z§cm§ The Est of {base jzmrnaés is avaiiahie at iniernei: amtﬁ aimost every medicai pmfessicanai Es aware aboui these gcsurnaig. L§n§~:ing ctaf gsayment of P¥$ and making Qaymem 0'? W8 compuisory for companies is ancisvﬁher high handeﬁ practice cs'? GDAG. Since the amaunt chargeci is nei; 3ign%ﬁc:ani, the issue is worm ignming.

32. Fmm my above discussicm, 3 find that CSAG as. an assozsiation of en*:er;:2ris%es' has viaiatezi sectian 3{3)(a) & {b} 'by issuing; varieus guideiines and errforcing them anti the members cf the Association were guilty 29? forming a maria: for determining the saie mice of the cimgs at MR?' with no disc:-zzunts to cugtamer. "E"§me adverse effect of the zzieazisiizns 0'? Associatidn and cf its members can competition $3 353%? evident in view sf presumption drawn by iaw. 'Section 313} prg_§§%§es-i&g§\§vhere dsacisiarzs of ass:-staciaiion of czartei directiy or indirectiy deéiermineﬁ' Rjimitsy Bi" cantraig suppiy of prQ%1'l§I?.'.3?"1S, the C-emmission ehaii presume that such dersieiene eeueed eppreciebie adverse effect on eompetétéztm.

33. The next issue which arieee is abate impoeiiien of penaity under section 2? of the 'f»'»{E'::t. if the Clomméseien after incguiry finds that any egreemeni us' gjiectice 0;' decieien referred it: under eestion 3 was in contravention ef the prowsiene L»? the Act, it sheuéd pass cease and desist order and dedere euch part cf tirxe egreement as. void. if: shcméd czieciere the vieietive practice & ciecsieien es void. The Cemmiseien can eiso §m;3eee peneiéya ' Siege e Memerendum 0? eeeocietien eferme en agreemem breiween the members, the Memerencéum of Aeeecietion, guideiieee, byéewe farm en egreemen':

beiween its members, téiese memorandum cf asseeiatéen, guideiiraes and eye Eewe if vieietéve ef eeetien 3 are is be cieeéereci ee nuii and veéti.

34. S therefere, ceneider {heat ihe guideﬁnee enumerated ebeve in paragraphs :1 3: 22 ineiucimg prescribing dieeedete margins, cash ciieeeunt ere mm and void. Sirniieréy, CEEACE has no euthmity ta issue NSC: at LOC fer eppeintment ef wheieeeiers. smekiste er retaéiers. Aii guideiirzee, instructions, e&rcuie:'e regefding issuance ef NQC, LDC by CEDAG are heid anti eempetitive and sheii be veieci and not binding are the members and conwpenies. The guidelines and circulars and erticiee of MQL3 reetreining c:empe:'1iee,!e':eekéete frem diz'ectiy SU§';i§}§'y'§i'3§ mecsiieines te hoepiteie, nursing hemes; or bum gzsurehesers are nuié and voie and are 3:: deciered.

35. 'E etee Lceneider that the membere and ihe Associatien must be imposed epprepriete peneﬁy for vieeletiien ex' the ggjeeieiqgge ef the Act. As per rescue, the As:-zacéetion has 243 reteii members 5 § :

K 5::

\ \ \ 2C1 more than 390 members 0:' the association. AH these members thraugh their Assaciaiion have been foiiczwing the posing: fa carteiizaiion thmugh and with the heip of their Assmziatian. They are 523% Eiabba 'ma pay penaity threugh the fwseciatian. Savcdon E3"? prcw'v::f#:=.:sa-"t.ha't the Ciommissian may impese such penaity as it may {§e*'"" fit subgectt to E'.'é§.;-s 'the ccmciiiion that the penaiiy shsuici not be mare 'man 'm% of the average tum aver far the East three preceding fmanciaé years. An Asssoniatian crf enterp:'%sesA in iiseif may not have significant turnovar. That ﬁnes not mean that an Asseciation C2'? enterprises induigmg irgc rr:*:..rie:~E activity, highiy affecting the campaﬁiésn smuéd gs) sz'.:.:.>t_3'_;:§«.=>h Mijf it is 30, it wéit be easy for the enterprises ta énduige: into eaﬁeéizaiian & escape pen;-my by farming an asszzmiatimn. That ceuéd never bag the inieniimn of £e§isEature. E ctonsides' that. whﬁe impasséng penaity, the Casnmissicm has is fake ink; accaunt 'Che awarage {um over :3'? an its members and thereaﬁer imgmsa a reasmabie pe~na¥'zy which shoutci mist exmsseci '§€3% of the toiai tum ever of its members. if we mnsider thai iheaverage turnover of each retaiiar was about Rs-2&2 iakh par mcsnth or R324 ia%s:h$ per annum, the tcstai tum war of aii the retaiiers wouki Em Rs.2»£ iakh x 240 (members) 3 Rs.5'?'.€~3 craves. Arzrj if we consider that the average' turnover :3? each whoiesaiar per annum wag R55 craxres, the iota! turnover :2'? ail the whaiesaiers wouici be RS6 mares x 85 iwhcziesaiers} = R3325 mores. Thus this tatai tum {war of 315 {ha membexrs wéeuid be apprex. Rs.382.€z «:.rora&, say R3383 craves. Gensidering this iL:mmrer in mind, § think 3 pefxaiiy cs'? R220 csroras an CEEACE wcmid bé: the apprapriaie penaity. £'3DA{3 wczuid recover this penalty frcsm aii its members and ahaii deposit this ameaunt wiih the Comméaséon within a periad \\ V3f§C?}i:'£\:%§\~E'.§f Assaciaiion and guicisssiinas shaii be en? 81:} days. it is aﬁso dweatad t%xas~jg4§§§:

3 _\ 2 .3 \ 21 madiﬁed by Game and 31! Qﬁemcziing siauses V8; guitieiéines as enumerated in para-grap'hs4 & 22 shave shaii be drogzaped.

38, The competition bodies of different gmisciictions have issued guiciaﬁnes of ties and d0n"is;r;"'1*iir'§**tiweir assaciatimns. Same of the «::ion't:~3 are recguireed vita be €rcﬁ'E?:;'=;x;%'.:r3 by assaciatians of enterprisczess as under 2»

22) D6) rmt[is?sz;se gu':de!mes:'bye~§awsfinstruciionsafcmutT T E} price at which products or sewizztes are to be gaurczhased or sugspiiedi *5 . 1.

ii} thé Reva? mi' ciéactmnts to ba given by the pmciucer, sieczkésts, xreholesaiefg iii} requirement of obtaining LDC, NSC from the assaciatian for any persen ta enter the tracie.

iv) instructiims to the cempany as ':«::.= when ahauid be amaointed as steckisi, whaiesaier etc. 3?. The Q03? :2»? the trade assemiatian shouid be to keep within the boundaries sf Cosﬁpeiitioné Law, Saies territaries shcauid mi be fixed, Comgmksow service in the nature of PE shouid not be there. NC! restrictian on saie xraaiumes m suppiy to hospitaés and other insiitmiicans smuioi be there. Ne penaity Shtﬁuid be impaseci for giving dimounis Gr miner benefits in the consumers either by the stackisis m by whaiesaiers or by the retaitez'. Aiimcaticn of custamers and restrictions an Types sf pmc§uc:t or mama:

division shouid net be there.

38. in cases where azxbmgsanies are heid guélty cf the pmvision of the Compeiiiicm Act;

Sectian 48 of the Campatiiian Act provédg' that ;;2§;:rsos:3 r§=:sp::3r2s%b3e for the conduct :2?

'€32 '§"'\gL:i§ty far rsoniraventian Q? the act 22 and sham béﬁ Eiabie to be pumshad. The Campany has been deﬁned in this sectien as a body ccrrpcarate or a firm er association of ir:div§»:iuais. However, Assaciation of enterprésas has net been mnsidered as a company. 2 therefore, cansider that the Qfﬁcgg bearers 02' CQA1§,g;;.§Qg§d mat' be cavered unﬂar sectien 48 and (my GDAG an;i_,_3,ts mernézeers weutri be the entzerprise which' can be punishad. 89 no penalty is Eeviabie on the mffice bearers.

Sax Eviernbaz' {S3 N.' '.3.-' ' N'. ..-:"""'"wv:"' ' " W. ~z 3;: {\&'}§''} Iv ' xusmszz k \§8ii €3§.:'ss&£z'.sr 313%,} gr: mum.-':r2.E:a

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Varca Druggist & Chemist & Ors vs Chemists And Druggists Association, ... on 11 June, 2012