Karnataka High Court refuses intervention in CCI probe against chemists' association

Karnataka High Court refuses intervention in CCI probe against chemists' association

The bench stated that the petition was premature, as the show-cause notice issued to it was not an order

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

Terming the association's plea as premature, Justice K S Hemalekha granted the union the liberty to submit their objections along with the information and documents to the CCI director general within four weeks.

The bench further said that on receiving the information, the CCI would provide the association the opportunity of hearing in accordance with the law and pass the order. The proceedings would be completed within four weeks.

The bench stated, "The 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. The contentions of both the parties are kept open."

The matter arose when in 2012, the All India Chemists Distributors Federation (AICDF) President Kailash Gupta filed a complaint against the All India Organization of Chemists and Druggists (AIOCD), the Karnataka association, and several others allegedly involved in unfair trade practices violating the Competition Act, 2002.

It maintained the AIOCD was compelling the association of manufacturers to enter into a memorandum of understanding, based on unreasonable demands. This was being done to arm-twist the market to its advantage. It further said that AIOCD and its affiliate associate was collecting product information service charge from the manufacturers for every drug introduced in the market.

The complaint read, "The amount is collected to give information to the public about the product. It is alleged in the information that AIOCD is engaged in an unjustified characterization of the supply and distribution of pharmaceutical products. The trade organization has created a company and is acting in contravention of the Competition Act."

The CCI directed its director general to investigate and submit a report within 60 days. The DG then issued a notice to the petitioners to furnish the requisite information. Aggrieved by it, the petitioners approached the court.

The bench referred to the notice issued to the petitioners by the assistant director-general of the CCI.

It observed, "It is a notice directing the petitioners to furnish the necessary documents to hold an investigation under the Competition Act, which is at the preliminary stage. The director-general would be handicapped as it usually has access only to the information furnished by the informant or information available in the public domain, and information available through preliminary conference under the CCI Regulations, 2009."

It added that the notice was for a thorough fact-finding exercise to be able to assimilate all credible data to analyze and render its findings. It was for conducting the inquiry for proceedings and was not an order in conclusion.

Stating that the petition was premature and could not be interfered with, Justice Hemalekha ruled, "It is just a show-cause notice to the parties by invoking the Competition Act, failing which, the penalty would be levied if the same was not in compliance with the direction."