MRTP Case No. C-127/2009/DGIR (4/28). Case: Varca Druggist & Chemist & Others Vs Chemists & Druggists Association, Goa. Competition Commision of India

Case NumberMRTP Case No. C-127/2009/DGIR (4/28)
JudgesAshok Chawla, (Chairperson), H.C. Gupta, Anurag Goel and M.L. Tayal, Members
IssueCompetition Act, 2002 - Sections 1, 19(3), 19(3)(d), 19(4), 2(1), 2(c), 2(h), 20(4), 26, 26(1), 26(8), 27, 27 (b), 3, 3 (3)(b), 3(1), 3(2), 3(3), 3(3)(a), 3(3)(b), 4, 4(2)(a)(i), 4(2)(b)(i), 4(2)(c), 41(2), 43, 48, 5, 6, 66, 66(10), 66(1A), 66(3), 66(4), 66(6), 66(7); Constitution Of India - Article 19(1)(g); General Clauses Act 1897 - Sections...
Citation2012 CompLR 838 (CCI)
Judgement DateJune 11, 2012
CourtCompetition Commision of India



    1.1 This case was initiated on a complaint filed by Varca Druggist & Chemist through its proprietor Mr. Hemant Pai Angle and two other proprietors of pharmaceutical drugs and medicines firms (hereinafter referred to as "Informants"), before the Director General (Investigation & Registrations), Monopolies & Restrictive Trade Practices Commission (hereinafter referred to as "DGIR, MRTPC") alleging that the Opposite Party, namely, Chemist & Druggist Association, Goa (hereinafter referred to as "CDAG" or "Association") is indulging into restrictive trade practices.

    1.2 The Informants have claimed that they are members of CDAG which has been formed by chemists, druggists, distributors, stockists and retailers of various pharmaceutical companies in Goa.

    1.3 The allegations made by the Informants in the complaint / information are summarized as below:

    (i) CDAG has formed various guidelines, which its members are bound to abide. The said guidelines were formed by the members of the CDAG for the benefit of its members so that the business of stocking, whole-selling and retailing could be smoothly facilitated among its members. However over a period of time due to the unfair practices of some of the members of its Executive Committee, CDAG has become a monopolistic body and has started practicing certain restrictive trade practices.

    (ii) As per the normal practices, whenever a new pharmaceutical company establishes its industry in Goa, or is interested in distributing its products in Goa, it has to appoint stockist and wholesalers for the various regions as per its requirements. These stockist/wholesalers then sell these medicines to the retailers who possess a drug license. However, as per the CDAG guidelines, the CDAG has not only directed but also forced all such companies to appoint their stockist and wholesalers only from those individuals and firms, who are members of the CDAG, thus, making it very clear that no person or firm who is not a member of the CDAG is eligible for being appointed as the stockist or wholesaler of such a company.

    (iii) Furthermore, even when such a company wishes to appoint stockist and retailers from the members of the CDAG, it is insisted and directed that no such stockist or wholesaler could be appointed unless they receive a 'No Objection Certificate' from the CDAG.

    (iv) The company desirous to appoint a third wholesaler or stockist has to fulfill the conditions placed by the CDAG that the sale of the previous stockists has to be above Rs. 2 lakh per month. The conditions further go on to restrict the company from appointing the 4th stockist till the sale exceeds Rs. 4 lakh per month. Similarly, only if the average sale crosses Rs. 6 lakh per month then the company can apply to the CDAG for appointment of their 5th stockist.

    (v) The guidelines laid down by CDAG do not permit appointing more than five stockists by any pharmaceutical company.

    (vi) A committee has been formed by CDAG which has recommended huge increase in the above mentioned slabs without taking retailers into confidence. The retailers and the wholesalers together form this association. The slab of appointment of stockist now starts from Rs. 6 lakh and ends at Rs. 40 lakh for a 5th stockist which totally extinguishes the chances of small wholesalers who could get a offer letter of a particular company to be its stockist as the CDAG bars any new appointment even though the company feels the need.

    (vii) The company is restricted to appoint another stockist for one year after it appoints a stockist, even if the company feels the need.

    (viii) It has also been the practice of the CDAG that even in cases where the 2 stockists have to be appointed, 'No Objection' by the CDAG is given only for one stockist, and the reason for such an action cannot be questioned by any member of the CDAG or the pharmaceutical company. But earlier, two stockists, who were on their good books, have been appointed.

    (ix) As per the market trends in the pharmaceutical business, the pharmaceutical companies introduce schemes for retailers. However, some financially powerful stockist-members of the CDAG who are also on the executive council refuse to pass on the benefits of the schemes to their retailers.

    (x) It is also a settled practice in the pharmaceutical business that if a particular batch of drugs or medicines has crossed its expiry date, then such drugs are to be returned by the retailer to the stockist who in turn returns it to the respective company and can claim refund. However such refund is never passed on to the retailers. Some stockists also overcharge the retailers when such products are supplied to the retailer and the retailer has no forum to complain against such a stockist as they are appointed by the company on recommendations of CDAG, and even if the company desires to take action, it cannot do so, because in that case they shall not have any stockist to distribute their products, unless the CDAG gives 'No Objection' to appoint a new stockist.

    (xi) Even a new individual or firm which possesses all the qualifications and means for being appointed as stockist, distributor or a wholesaler can't be appointed by any company, although there may be dire need for appointing such a new stockist, unless and until such a firm or a wholesaler obtains a no objection from the CDAG. Further such an individual or firm has to become a member of the CDAG, first.

    (xii) When any firm or individual wishes to bid for any government tenders, then the CDAG directs that such tenders are to be routed only through the 'authorized stockist', and such 'authorized stockist' are the members of CDAG, who control the affairs of the CDAG being financially powerful and influencing the executive council.

    (xiii) The companies are threatened with punitive actions by the office bearers and therefore, reluctantly the company has to follow the directions of the committee in fear of boycott and the small wholesalers who want to participate in the government tenders are illegally barred from doing so.

    (xiv) The members who are wholesalers and who are qualified to quote and bid for the government tenders are threatened of dire consequences if they do not route the supply from the 'authorised stockist'. The companies are also threatened of dire consequences if they do not follow the guidelines of CDAG.

    (xv) It is also a common practice of the CDAG to force and compel any new entrant who wishes to carry out business of stockist, distributor or retailer of any pharmaceutical product to become its member. If such a new entrant refuses to become a member, then the CDAG directs all its members not to purchase stocks from such a stockist and if he is a retailer then not to supply him with stocks of other companies. Similarly if a company wishes to appoint a new or a additional stockist then they cannot do so without the 'consent' of the CDAG, which is against the fundamental rights as enshrined in Article 19(1)(g) of The Constitution of India.

    (xvi) The CDAG also directs that no credit be given to retailer although as per the market practice, a credit of 20 days to one month is normally given to settle all dues. However, if a company appoints a stockist without the consent of the CDAG, then the CDAG directs the existing stockist of such a company to give credit of 3-4 months to retailers so that the retailers do not purchase stocks from the new stockist and also directs its existing stockist who are members of the CDAG not to purchase stocks from such a company so that eventually the company bows down to the demands of the CDAG. So also if the company wishes to supply its stocks directly to a retailer, then in such a case they are directed by the CDAG not to do so and demand that all stocks should be routed through the stockists who are members of CDAG.

    (xvii) CDAG's governing body i.e. its Executive Committee, comprises of one President, four Vice Presidents, one Chairman of wholesalers, one Chairman of retailers and seven Members and take arbitrary decisions and force its views on all its members as well as non-members. The Executive Committee consists of some very financially influential persons who are themselves stockist of various companies and are therefore not allowing companies to appoint new or additional stockist for fear of losing their business so much so that they have even tried to amend the association guidelines so that new companies cannot appoint new stockist. No new stockist has been appointed by any company, without NOC, for the last nine years in Goa as the CDAG does not give its 'No Objection'.

    (xviii) Some of the wholesalers are harassed by the Association to relinquish the stockist ship of a particular company, because some of the members of the Executive Committee were interested to grab the company of that particular stockist.

    (xix) The retailers are harassed by such stockist by unnecessarily making them stand in queues, demanding immediate payment, non refund on products that have crossed expiry dates, non supply of stock even when such stock is in surplus, non-passing of schemes to such retailers, even when the company has floated various schemes. As some of the stockists enjoy position of monopoly, the retailers are at their wits end.

    (xx) At the time of the Annual General Meeting (AGM), most of the members are not intimated, only those members are intimated about the date and time of meeting who are in good books with the executive council members of the CDAG. This is done with the ulterior motive of remaining in power and for the fear of being voted out by majority of the members. In case members wish to make certain suggestions, which are contrary to the opinion of the members of the executive committee of the CDAG, then the committee unlawfully adjourns the meeting and the next date of meeting is never communicated to such members.

    1.4 The Informants prayed for following reliefs:

    (i) After conducting inquiry...

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