CCI Penalises Jalgaon District Medicine Dealers Association and its Office Bearers for the Imposition of PIS charges on Pharmaceutical Companies

On June 20, 2019, CCI penalised Jalgaon District Medicine Dealers Association (‘JDMDA’) as well as its office bearers, i.e., the President and Secretary of JDMDA ( JDMDA and its office bearers are together referred to as ‘Parties’) on an information filed by Mr. Nadie Jauhri alleging anti-competitive conduct by that JMDA. CCI levied a penalty of Rs 80,185 (approx. USD 1200) on JDMDA for imposing a mandatory condition on pharmaceutical companies to pay Product Information Service charges (‘PIS’), which ultimately resulted in the limiting the supply of drugs in the market.[1]

PIS is in the nature of a fee charged by chemists and druggists associations for introducing a new product/drug launched by the pharmaceutical companies in the bulletins/ newsletters published by such associations. In return, the said associations publish the information and circulate it among all the dealers, distributors, etc.

CCI has previously in Santuka Associates Pvt. Limited v. AIOCD and others[2] (‘Santuka Case’), held that while collection of PIS charges may be beneficial for drug manufacturers, making the payment of PIS charges ‘mandatory’ resulted in denial of market access and limited the supply of drugs in the market, in violation of Section 3(3)(b) of the Act. Mandatory PIS effectively amounted to requiring permission of the associations to launch any new drugs. CCI then issued a public notice on January 31, 2014 directing the Chemists and Druggist Association to discontinue practice of mandating collection of PIS.

Given the above, CCI finally considered: (i) whether the PIS charges by JDMDA were mandatory/compulsory in nature; and (ii) if yes, whether office bearers of JDMDA were responsible for the violation of Section 48 of the Act.

On the first issue, after considering the statements of the witnesses and documentary evidence (emails, letters between JDMDA and pharmaceutical companies) part of the DG report, CCI concluded that JDMDA was imposing PIS charges mandatorily on the pharmaceutical companies. Accordingly, JDMDA was found to be limiting and controlling the supply of drugs in contravention of Section 3(3)(b) read with Section 3(1) of the Act. On the second issue, while the DG investigated fourteen office bearers of JDMDA, only the President and Secretary were considered to be in-charge of the day-to-day affairs of JDMDA. Thus, CCI penalised them at 10% of their average income for three financial years (FY 2013-16) under Section 48 of the Act.

Notably, the JDMA had also initiated connected proceedings before the Delhi High Court (‘DHC’) in W.P. (C) No. 11163 of 2015 challenging the prima facie order passed under Section 26(1) of the Act. Since the DHC has directed CCI to take no coercive steps against Parties, till the continuation of proceedings before it, implementation of CCI’s order is subject to the outcome of the proceedings before DHC.

[1] Case no. 61 of 2015
[2] Case No. 20 of 2011

Published In:Inter Alia Special Edition- Competition Law - August 2019 [ English
Date: August 7, 2019