2018 (11) TMI 851 - Commission - Indian Laws

Anti-competitive practice of mandating a No-Objection Certificate prior to the appointment of stockists in the State of Gujarat - monetary penalties imposed on the erring associations and pharmaceutical companies - Held that - Monetary penalties have been levied upon them at the rate of 10% (in case of office bearers of the erring associations) and 1% (in case of officials of the erring pharmaceutical companies) of their respective average incomes, based on the income tax returns (ITRs) for the three previous years as filed by them - In terms of Section 27 read with Section 48 of the Act, the Commission deems it appropriate to calculate penalties on the four individuals named supra, at the rate of 1% of their respective incomes based on their income tax returns (ITRs) for three years. The Commission is of the view that benefit of these mitigating factors also need to be extended qua its officials, namely Shri Srinivasa Reddy and Shri Bharat Pandya, and accordingly, they also deserve a remission in their respective penalties by 40%. Application disposed off.

Issues Involved:

1. Anti-competitive practices by chemists and druggists associations and pharmaceutical companies.
2. Imposition of penalties on associations, companies, and individuals.
3. Liability of individuals under Section 48 of the Competition Act, 2002.
4. Proceedings under Section 43 for non-furnishing of Income Tax Returns (ITRs).
5. Remission of penalties for mitigating circumstances.
6. Deletion of names of certain pharmaceutical companies from the proceedings.

Issue-wise Detailed Analysis:

1. Anti-competitive Practices:

The Commission found that certain chemists and druggists associations in Gujarat, including the Federation of Gujarat State Chemists & Druggists Associations and its district units, were mandating a No-Objection Certificate (NOC) before the appointment of stockists. This practice was deemed anti-competitive as it limited and controlled the supply of drugs, violating Section 3(3)(b) read with Section 3(1) of the Competition Act, 2002. Pharmaceutical companies like Glenmark Pharmaceutical Ltd., Divine Savior Pvt. Ltd., and Hetero Healthcare Ltd. were also found to have entered into anti-competitive arrangements with these associations, contravening Section 3(1) of the Act.

2. Imposition of Penalties:

Monetary penalties were imposed on the erring associations and pharmaceutical companies at the rate of 10% and 1% of their average incomes, respectively. Additionally, certain individuals from these associations and companies were found liable under Section 48(1) and/or 48(2) of the Act, leading to penalties of 10% (for office bearers of associations) and 1% (for officials of pharmaceutical companies) of their average incomes based on their ITRs for the past three years.

3. Liability of Individuals:

The Commission established the liability of individuals under Section 48 of the Act, as detailed in the Main Order. For instance, Shri Glenn M. Saldanha, Managing Director of Glenmark, was held liable under Section 48(1) for his company's anti-competitive practices, as he could not prove the contravention occurred without his knowledge or that he took adequate measures to prevent it. Similarly, Shri Bharat Pandya, Regional Manager of Hetero Healthcare, was found actively involved in the NOC practice, making him liable under Section 48(2).

4. Proceedings under Section 43:

Certain individuals did not furnish their ITRs despite specific directions and reminders. The Commission issued show cause notices under Section 43 of the Act. After receiving the ITRs and unconditional apologies from these individuals, the Commission decided to drop the Section 43 proceedings but imposed penalties based on their involvement in the contraventions as per the Main Order.

5. Remission of Penalties:

The Commission considered mitigating circumstances for Hetero Healthcare Ltd., which had admitted its guilt and assured corrective measures. Consequently, the penalties for its officials, Shri Srinivasa Reddy and Shri Bharat Pandya, were reduced by 40%, resulting in penalties of ?3,94,607 and ?3,772, respectively.

6. Deletion of Names of Certain Pharmaceutical Companies:

The Commission noted that the Investigation Report contained no specific findings against several pharmaceutical companies, including Abbott India Ltd., Novartis India Ltd., and Dr. Reddy's Laboratories Ltd. The Informants also failed to establish any contravention by these companies. Therefore, the Commission decided not to proceed further against them and disposed of their applications for deletion of names from the proceedings. These findings are specific to this case and do not affect any existing or future investigations against these companies.

Conclusion:

The Commission directed the concerned individuals to deposit the penalties within 60 days and informed all parties accordingly. The judgment underscores the Commission's commitment to curbing anti-competitive practices and holding individuals and entities accountable under the Competition Act, 2002.

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