CCI drops competition case on NOC, PIS charges and boycott allegations in pharma distribution
1. Background of the proceedings
The matter originated from information filed under Section 19(1)(a) of the Competition Act, 2002 by Shri Kailash Gupta, President of All India Chemist and Distributors Federation (AICDF), against a wide set of chemist and druggist bodies, pharma manufacturers’ associations, and pharmaceutical companies. The Informant alleged violation of Sections 3 and 4 of the Competition Act, 2002.
AICDF, a society registered under the Tamil Nadu Societies Registration Act, 1975, represents wholesale pharmaceutical distributors across India through state and district-level affiliated bodies whose members are primarily wholesaler-distributors.
The information was filed on 23.01.2012 against 34 opposite parties (OPs), covering:
Pan-India chemist associations:
- All India Organisation of Chemist & Druggist (AIOCD / OP‑1)
- All Indian Origin Chemist and Distributors Ltd. (OP‑34)
Regional/state chemist associations:
- Retailers and Distributors Chemist Association of NCT of Delhi (OP‑4)
- Punjab Chemist Association (OP‑5)
- Amritsar Chemist Association (OP‑6)
- AIOCD Utkal Committee (OP‑7)
- Madhya Pradesh Chemist & Druggist Association (OP‑8)
- Rewari District Chemist & Druggist Association (OP‑9)
- Karnataka Chemist & Druggist Association (OP‑10)
- Bihar Chemist & Druggist Association (OP‑11)
Manufacturers’ associations:
- Indian Drug Manufacturers’ Association (IDMA / OP‑2)
- Organisation of Pharmaceutical Producers of India (OPPI / OP‑3)
Pharmaceutical companies:
OP‑12 to OP‑33 including, inter alia, Dr Reddy’s Laboratories Ltd (OP‑12), Ranbaxy Laboratories Ltd (OP‑13), Torrent Pharmaceuticals Ltd (OP‑14), Cipla Ltd (OP‑16), Glaxo SmithKline (OP‑22), Pfizer Ltd (OP‑23), Sun Pharma (OP‑26), and others.
2. Core allegations raised by the Informant
The Informant’s case centred around the following alleged practices in the pharmaceutical distribution chain:
Mandatory NOC/LOC for stockist appointment
AIOCD (OP‑1) and its affiliated associations were alleged to have required:- No Objection Certificates (NOCs) / Letters of Cooperation (LOCs) from district or state chemist associations,
- as a pre-condition for appointing new stockists,
thereby controlling who could operate as authorised stockists in a given territory.
Product Information Service (PIS) charges
It was asserted that OP‑1 and affiliated associations:- extracted Product Information Service (PIS) charges from manufacturers on the pretext of circulating product details,
- and that these “charges” functioned as a de facto gatekeeping fee for launching new products,
creating a situation where manufacturers allegedly feared disruptions if they did not pay.
Trade margin fixation
The Informant further claimed that:- trade margins for wholesalers and retailers, particularly on non-scheduled drugs, were effectively decided through arrangements coordinated by OP‑1 and manufacturers’ associations under Memoranda of Understanding (MoUs),
- and pharmaceutical companies were expected to adhere to these prescribed margins.
Boycott and refusal to deal
According to the Informant, non-cooperation with the above mechanisms led to:- collective refusal by chemists to deal with particular manufacturers or stockists, and
- group boycott measures against members of AICDF and other market participants,
allegedly attracting
Section 3(4)(a)–(e)relating to exclusive supply, refusal to deal, etc.
The MoU framework between OP‑1, OP‑2 and OP‑3 was alleged to embody these conditions, and, in the Informant’s view, was void under Sections 3(1), 3(2) and 3(4) of the Competition Act, 2002.
3. CCI’s prima facie view and High Court proceedings
On 07.02.2012, the Competition Commission of India (CCI) formed a prima facie opinion under Section 26(1) that the matter warranted detailed investigation and directed the Director General (DG) to investigate the conduct of the OPs.
Subsequently, the Karnataka Chemist & Druggist Association (OP‑10) filed Writ Petition No. 24297/2012 before the Hon’ble High Court of Karnataka, challenging the Commission’s order and DG’s notice. The High Court, by interim order dated 09.08.2012, stayed both the CCI proceedings and the DG’s information-gathering notice under Section 41(2) read with Section 36.
This stay remained until the Hon’ble High Court, by order dated 10.11.2022, disposed of the writ petition and permitted CCI and the DG to resume investigation and proceedings.
4. DG’s investigation: scope and methodology
Post-vacation of the stay, the DG:
- issued notices to all relevant OPs for data and documents,
- recorded statements of key office bearers, and
- relied on both documentary material and oral testimony.
The DG submitted a detailed investigation report on 04.04.2024 (confidential and non-confidential versions), analysing conduct of chemist associations, manufacturers’ associations, and pharmaceutical companies, particularly focusing on the period 2009–2012.
4.1 Key conclusions reached by the DG
(a) NOC/LOC as precondition for stockist appointment
The DG concluded that several chemist associations treated NOCs/LOCs as mandatory for stockist appointment, thereby limiting and controlling supply.