High Court Refuses To Halt CCI Probe Against Karnataka Chemists And Druggists Association, Calls Plea 'Premature'

The Karnataka High Court has refused to interfere with the investigation initiated by Competition Commission of India against the Karnataka Chemists and Druggists Association, which is accused of anti-competitive unfair trade practices.

Terming the association's plea premature, Justice K S Hemalekha granted the union a liberty to submit their objections along with the information and documents to CCI Director General within a period of four weeks, in response to the notice issued to them.

Further, the bench said on receipt of such information or material and explanation from the association, the CCI shall proceed to pass orders by affording opportunity to the association in accordance with law. The entire proceedings be completed within a span of four weeks, it added.

"It is needless to mention that this Court has not expressed any opinion on the merits or demerits of the case and if any, it is to the extent of disposal of the petition only. All the contentions of both the parties are kept open," said the court.

Case Details

All India Chemist And Druggist And Distributors Federation (AIOCD)'s President Kailash Gupta had filed a complaint in 2012 against All India Organization of Chemists and Druggists (AIOCD), the Karnataka association, and several others making allegations stating that they have violated Section 3(4)(a) to (e) of the Competition Act and indulged in anti competitive unfair trade practices.

It was alleged by the complainant that the petitioners indulged in anti competitive unfair trade practices, which are violative of Sections 2, 3 and 4 of the Act.

It was said that AIOCD is compelling the Association of Manufacturers to enter into a memorandum of understanding with them and such memorandum of understanding was based on the unreasonable demands of AIOCD, which are being used to arm twist the market to its advantage. Further, it was said that AIOCD and its affiliate associate was collecting product information service charge (PIS) from the manufacturers for every drug that is introduced in the market. 

"The amount is collected to give information to the public about the product and it is alleged in the information that AIOCD and its office is engaged in an unjustified characterization of it supply and distribution of pharmaceutical products. The trade organization has created a company under the name and was acting in a manner which is contravention of Section 6(1) of the Competition Act," the complaint said.

The CCI directed its Director General to investigate the complaint and submit a report within a period of 60 days. The DG then issued notice to the petitioners to furnish requisite information. Aggrieved by the said notice, petitioners approached the court.

Findings

The bench, referring to the notice issued by the CCI Assistant Director General to the petitioner, said:

"Perusal of the notice depicts that it is a notice directing the petitioner to furnish the necessary documents to hold an investigation under Section 26(1) of the Act, which is at the preliminary stage. The Director General would be handicapped in as much as it usually has access only to the information furnished by the informant or information available in public domain and on information available through preliminary conference if any under Regulation 17 CCI Regulations 2009."

It added that the notice issued is for a thorough fact finding exercise to be done and to be able to collect and assimilate all the credible data and information to analyse and render its findings

The court said that the notice ordered to the petitioner was for conducting enquiry and investigation for proceedings under Section 26(1) of the Act and was not an order in conclusion.

"It is just a show-cause notice to the parties by invoking Section 43 of the Act, failing which, the penalty is said to be levied, if the same is not in compliance with the direction," it added.

The petition filed by the petitioner is premature and the same cannot be interfered at this stage, said the court. 

Case Title: THE KARNATAKA CHEMISTS AND DRUGGISTS ASSOCIATION & Others v. COMPETITION COMMISION OF INDIA & Others