Penalty of Rs. 7463.10 Lakh Imposed on Alkem Laboratories for Anti-Competitive Practices

Competition Commission of India (CCI): Pharma enterprise Alkem Laboratories Ltd is found guilty for causing potential consumer harm due to its anti-competitive conducts and for lessening of competition in healthcare sector in Kerala. The competition regulator in its detailed order found that Alkem was following anti-competitive dektats of All Kerala Chemists and Druggists Association (AKCDA) i.e. mandatory NOC from the AKCDA before appointing anyone as stockist or distributor of drugs. It must be noted that the Competition Commission in serious of orders has declared practice of mandatory NOC from trade associations as anti-competitive practice causing appreciable adverse effect on competition as it contravenes section 3(3)(b) read with section 3(1) of the Competition Act, 2002.

Alkem had refused to supply its drugs to the informant and appoint him as its stockist in absence of NOC from the AKCDA.

CCI observed that the AKCDA is an association of enterprises not itself engaged in the supply and distribution of drugs and medicines in the market and Alkem  is the manufacturer of drugs and medicines, therefore any agreement [following the anti-competitive guidelines of AKCDA by Alkem] being not between entities engaged in identical or similar trade of goods or provision of services, as envisaged under section 3(3) of the Competition Act, does not fall within the ambit of the said sub-section. Further, such an agreement between them cannot also be considered to be an agreement between entities at different stages or levels of the production chain in different markets in terms of the provisions of section 3(4) of the Act.

However, following its ruling in Dr. L. H. Hiranandani Case, [2014] CCI 37 the CCI opined that an agreement, even if it is not falling under section 3(3) or 3(4) of the Act, is amenable to its jurisdiction under section 3(1) if the same has an appreciable adverse effect on competition (AAEC).  Thus, CCI construed instructions to Alkem and its agreement to such instructions as an agreement amenable under section 3(1) of the Act and found them to causing AAEC in healthcare sector.

Considering the mitigating factor, i.e. appointment of informant as stockist after information is filed, the CCI imposed penalty on Alkem @ 3% of average turnover in last three years. AKCDA is also penalized for prescribing NOC requirements. [In Re P. K. Krishnan and Alkem Laboratories Limited, decided on 01-12-2015]

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