2018 (11) TMI 1969 - HC - Law of Competition

Direction to cause an investigation into the matter and submit an investigation report within 60 days from the receipt of the said order - allegation against the manufactures is that they were controlling the prices of the oral diabetes drugs containing the Active Pharmaceutical Ingredient (API) Vildagliptin - HELD THAT - Upon receiving the information from any person including Central Government State Government Statutory Authority or on its own knowledge under Section 19 (1)(a) of the Act the commission is expected to satisfy itself and express its opinion that a prima facie case exists and then pass a direction to the Director General to cause an investigation into the matter in terms of Section 26(1) - This direction under Section 26(1) to the Director General may be passed with or without seeking assistance from any other quarters including experts of eminence or the affected parties themselves. The aggrieved / affected parties cannot claim a right to notice or hearing at this stage. The subject provision does not contemplate any adjudicatory action on the part of the Commission. The Commission is not expected to give notice to the parties and hear them at length. It is of a very preliminary nature. There are no merit in the appeal and the same is dismissed.

Issues:
Challenge to order of Competition Commission of India (CCI) directing investigation into alleged anti-competitive agreement among pharmaceutical companies. Impugning CCI's order rejecting review and recall application. Interpretation of CCI's powers under Competition Act, 2002. Allegation of forged email and incorrect data submission by NPPA. Applicability of Supreme Court judgment in CCI v. Steel Authority of India Ltd. on forming prima facie opinion before directing investigation.

Detailed Analysis:

1. The appellant challenged the CCI's order directing an investigation into an alleged anti-competitive agreement among pharmaceutical companies, including the appellant. The challenge was based on the contention that CCI did not form a prima facie opinion before directing the investigation, as required under Section 26 of the Competition Act, 2002.

2. The appellant also contested the CCI's rejection of their application for review and recall of the initial order. The proceedings were initiated based on a request from the National Pharmaceutical Pricing Authority (NPPA) and an anonymous email alleging price control of diabetes drugs.

3. The appellant argued before the Single Judge that CCI failed to conduct a proper enquiry and form a prima facie view before directing the investigation. The appellant emphasized the importance of CCI exercising its powers under the Act and conducting a preliminary conference as per Regulation 17(2) of the CCI Regulations.

4. The Single Judge, referring to the Supreme Court judgment in CCI v. Steel Authority of India Ltd., clarified that CCI's order under Section 26(1) is administrative and preparatory in nature, not an adjudicatory function. The court highlighted that the formation of a prima facie opinion precedes an inquiry, and CCI's powers to take evidence are in accordance with the Act.

5. The appellant's counsel argued that the email was forged and the data submitted by NPPA was contested, questioning the basis of CCI's order. However, the court found no merit in these contentions and upheld the Single Judge's decision, emphasizing the preliminary nature of CCI's functions under Section 26(1).

6. The Supreme Court's judgment in CCI v. Steel Authority of India Ltd. clarified the process for CCI to form a prima facie opinion before directing an investigation. The court highlighted that the Commission is not required to give notice or hear the parties at the preliminary stage, and the right to notice and hearing arises after the investigation report is considered.

7. The court concluded that CCI's direction for investigation is administrative and does not determine rights or obligations of the parties. The appellant's appeal was dismissed, and the time for furnishing information was extended. The ancillary applications were dismissed as infructuous.

This detailed analysis covers the issues raised in the judgment, including the interpretation of CCI's powers, the importance of forming a prima facie opinion, and the application of relevant legal principles from the Supreme Court judgment.

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