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25 July 2019
By way of a 8 November 2018 order, the Competition Commission of India (CCI) dismissed allegations that the Retail and Dispensing Chemists Association,(1) which is located in Mumbai, limited and controlled the free supply of products by charging the manufacturers of pharmaceutical products for a product information service (PIS).
The CCI directed an investigation by the director general after forming a prima facie view of violation by the RDCA based on the information filed by a manufacturer of pharmaceuticals in Mumbai. The investigation found that the RDCA was levying and collecting PIS charges in the region. The investigation also concluded that although the PIS was being paid voluntarily by the companies, the RDCA was providing approval to launch the products of the pharma companies.
The investigation found that a sum of Rs500 per product, per district was collected from the pharmaceutical companies, which voluntarily approached the Maharashtra State Chemists and Druggists Association (MSCDA) for the purpose of advertising their products through RDCA bulletins.
It was also discovered during the investigation that although many drugs were launched, information about the drugs was not published in the bulletin even a long period after the payment of PIS charges. In addition, the companies were not provided with copies of the bulletins despite making PIS payments. The investigation found that the letter forwarded by the companies to the MSCDA for publication in the bulletin mentioned a "contribution" and the MSCDA stamped where "product approval for advertisement" was stated.
Based on these findings, the director general concluded that the RDCA's practice of charging PIS charges to companies was not for advertisement purposes. Instead, the payments were made to secure the goodwill of the association and ultimately to obtain permission from the RDCA to launch a new drug. The director general concluded that the collection of PIS charges was in contravention of Sections 3(1) and 3(3)(b) of the Competition Act 2002, as the levy of such charges limited and controlled the free supply of pharmaceutical products.
The CCI relied on the order passed in Santuka Associates Pvt Ltd,(2) which found that the decisive factor in determining whether the practice of issuing PIS charges is anti-competitive lies in the nature of the charges (ie, whether they are mandatory or voluntary). The CCI referred to its public notice on 30 January 2014, which emphasised that the practice of issuing compulsory PIS charges to pharmaceutical firms when releasing a new drug is an anti-competitive practice.
Conversely, the voluntary payment of PIS charges would not amount to a violation of the Competition Act. Therefore, the primary question before the CCI was whether the payment of PIS charges by the companies to the RDCA was mandatory in nature. In addition to the admission of pharmaceutical companies that the PIS charges were paid voluntarily, the CCI also observed that some pharmaceutical companies sold certain products in Mumbai without paying any PIS charges and the evidence on record did not reveal a single instance of the refusal of publication of any information after not paying PIS charges.
The CCI observed that certain evidence on which the investigation by the director general relied to conclude that the PIS charges were not aiding the advertisement of the product did not corroborate the conclusion of the investigation as most of the companies claimed that the PIS charge was beneficial and aimed at spreading awareness.
In the investigation the director general had also mentioned that the letter forwarded by the companies to the MSCDA for publication in the bulletin mentioned a "contribution" and the MSCDA stamped where "product approval for advertisement" was stated. The CCI emphasised that the use of the term 'contribution' did not prove that the PIS charges were mandatory and were being paid to seek the association's approval to facilitate the launch of a pharmaceutical product.
Therefore, in the absence of any corroborative evidence and in light of the statements given by the pharmaceutical companies that the PIS charges were not mandatory, the CCI disagreed with the findings of the investigation and found that the conclusions were based on mere conjecture. Therefore, it exonerated the RDCA of the anti-competition charges.
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email (email@example.com). The Vaish Associates website can be accessed at www.vaishlaw.com.
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