The Competition Commission of India dismissed the allegations of contravention of the provisions of Section 3 of the Competition Act, 2002. The information was filed under Section 19(1)(a) of the Act.
Brief Facts:
The Informant has filed Information under Section 19(1)(a) of the Competition Act, 2002 (‘Act’) against Sanofi India Limited, alleging contravention of the provisions of Section 3(4)(d) of the Act. The dispute has arisen over the denial of the opposing party to supply its products at a wholesale price to SSNRDC.
Background of the Case:
Sanofi SA France (‘Sanofi’) is a global healthcare company based in France, which has its presence in India since 1956 through its Indian subsidiary known as Sanofi India Limited (‘Sanofi India’/‘OP’). OP is primarily engaged in the business of manufacturing and trading of pharmaceutical products in India.
SSNRDC, a partnership firm (in which the Informant is one of the Partners) with a wholesale and retail license to buy/sell pharmaceutical products in Surat, requested the OP to supply some of its products at a wholesale price which was declined by the OP stating that it does not feel there is any shortage of stocks of the said products and thus, there is no need to appoint any additional distributor in the territory of Surat. Further, OP said that SSNRDC may contact any of OP’s existing distributors in Surat for pharmaceutical products.
The Informant averred that even though the OP had asked SSNRDC to contact any of OP’s existing distributors in Surat for the pharmaceutical products, the de facto vertical agreement(s) between the OP and its distributors restricted the distributors to supply OP’s products at a wholesale price to another wholesaler such as SSNRDC, leading to constructive/implied refusal to deal and contravention of the provisions of Section 3(4)(d) of the Act.
Contentions of the Informant
The Informant averred that SSNRDC can give higher discounts to the consumers by squeezing its margin of profit in the wholesale and retail market. But it is unable to do so owing to OP’s constructive refusal to deal with SSNRDC. Consequent to this, consumers are being harmed by having to pay higher prices for products of the OP.
The Informant has, inter alia, prayed to the Commission for an order under Section 26(1) of the Act, directing the Director General (DG) to investigate into the anti-competitive conduct of the OP and to protect the interest of consumers who otherwise are being harmed in the form of higher prices of pharmaceutical products of the OP.
Contentions of the Opposite Party:
OP, in its reply, stated that for the convenience of its customers and for ensuring uninterrupted supplies of its medicines, it has, over a period, created multiple stock points (distributors) in several districts of the country including in the State of Gujarat and that it does not feel there is any issue of stock shortages due to any distribution challenge in Surat.
OP referred to the decision of the Hon'ble Kerala High Court in Suresh Lal. R. v. The Drugs Controller of Kerala & Ors. wherein it was held that there is no provision under the Drugs and Cosmetics Act, 1940 or, the Essential Commodities Act, 1955 or, in any rules or orders made thereunder which restricts the right of a manufacturer to 'channelize the supply in the market' in a way it considers appropriate and the manufacturer is enabled to engage its own stockists/distributors.
Observations of the Commission:
The Commission observed that no manufacturer or distributor should withhold from sale or refuse to sell to a dealer any drug without good and sufficient reasons. In the instant case, no such refusal appears to have happened, as the OP has asked/requested SSNRDC to contact OP’s existing distributors for the supply of its pharmaceutical products.
The Commission observed that some of the products for which the purchase orders were raised were popular pharmaceutical products and appear to have generics/ substitutes in the market which are sold by other manufacturers and therefore, the Informant is not foreclosed absolutely from dealing in such products.
The Commission further observed that the Informant has not been able to demonstrate that non-dealing of the OP directly with the Informant has caused any AAEC [Appreciable Adverse Effect on Competition] or is likely to cause AAEC in the market; the cases where refusal to deal is alleged, the same should be manifested to have or likely to have AAEC in the market in which the concerned party operates, to be held to be anti-competitive in terms of the provisions of Section 3(4)(d) of the Act read with Section 3(1) of the Act.
Further, the Commission observed that there must be some autonomy available to the manufacturers to deal with their goods the way they want, in alignment with their business requirements.
The Decision of the Commission:
The Commission was of the prima facie view that the allegations under Section 3(4)(d) of the Act remain unsubstantiated in the facts and circumstances of the instant matter and accordingly, no case of contravention of the provisions of Section 3 of the Act, warranting an investigation into the matter, is made out and therefore, the Information filed against the OP is directed to be closed forthwith under Section 26(2) of the Act.
Case Title: Mr. Pinesh S. Doriwala v. Sanofi India Limited
Coram: Mr. Ashok Kumar Gupta (Chairperson), Ms. Sangeeta Verma (Member), Mr. Bhagwant Singh Bishnoi (Member).
Case no.: Case No. 31 of 2022
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