Case Law Details
Pinesh S. Doriwala Vs Sanofi India Limited (Competition Commission of India)
CCI held that that no manufacturer or a 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 supply of its aforementioned pharmaceutical products. In this regard, the Commission also notes that the OP has appointed 17 distributors in Surat. Thus, prima facie, it appears that SSNRDC is free to obtain OP’s products from its existing distributors and the OP does not interdict, in any manner, its distributors from dealing with SSNRDC. However, SSNRDC in the absence of being appointed as a distributor does not appear to be entitled to procure the supplies at a wholesale price but only at a retail price, which according to the Informant defeats the purpose.
Further, SSNRDC requested the OP to accept its purchase order and supply pharmaceutical products at a wholesale price (price to stockiest). Some of the products for which the purchase orders were raised have been stated to be in relation to purportedly popular pharmaceutical products of the OP namely Allegra, Avil, Cardace, Combiflam, Lantus and Amaryl. The Commission in this regard notes that the drugs as aforementioned appear to have generics/ substitutes in the market which are sold by other manufacturers and the Informant is not foreclosed absolutely in dealing in such products.
The Commission further observes that the Informant, has not been able to demonstrate that non-dealing of the OP directly with the Informant has caused any AAEC or is likely to cause AAEC in the market, except the Informant getting lesser margins when not dealing directly with the OP for its products. In the instant case, the Informant has the option to approach other pharmaceutical companies offering similar drugs in respect of which the SSNRDC has been endeavouring to obtain wholesale licence from the OP. Further, as per the documents enclosed, it appears that the Informant is already engaged with some pharmaceutical companies such as Cipla Ltd., MSD Pharmaceuticals Pvt. Ltd., Sun Pharma, Abbot India, etc. in the capacity of a wholesaler. Thus, the Commission is of the prima facie view that 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 anticompetitive in terms of the provisions of Section 3(4)(d) of the Act read with Section 3(1) of the Act, in terms of adversely affecting intra-brand competition and/or inter-brand competition, as the case may be.
Further, the Commission observes 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. Nobody can ask for an absolute right to deal with a particular business.
Thus, in view of the analysis supra, the Commission is 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.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
Order under Section 26(2) of the Competition Act, 2002
The present Information has been filed by Mr. Pinesh S. Doriwala (hereinafter referred to as ‘Informant’) under Section 19(1)(a) of the Competition Act, 2002 (‘Act’) against Sanofi India Limited (hereinafter referred to as ‘Opposite Party’/‘OP’), alleging contravention of the provisions of Section 3(4)(d) of the Act.
2. It has been stated in the Information that Shri Shriman Narayan Rahat Dava Centre (‘SSNRDC’) is a partnership firm (in which the Informant is one of the Partners) with a wholesale/ retail license to buy and sell pharmaceutical products in Surat, Gujarat. That, SSNRDC offers pharmaceutical products to the Indian Army, senior citizens, disabled individuals and NRIs, among others, at a discount rate, which varies between 20% to 35% of the Maximum Retail Price (MRP). SSNRDC also provides convenient method of payment and delivering pharmaceutical products at the doorsteps of its customers without any advance payment. Further, it offers substantial concessions to its customers on medicines that are used in case of angiography and heart surgery as well as for medicines that are used for examination/test purposes in medical institutions.
3. As per the Information, 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’). It has been stated that the OP is primarily engaged in the business of manufacturing and trading of pharmaceutical products in India. It is stated to be offering pharmaceutical products of leading brands in therapeutic uses for diabetes, cardiology, thrombosis, antihistamines and central nervous system to the consumers in India since many decades.
4. It is submitted that, by virtue of its legal right under Clause 28 of Drugs (Prices Control) Order, 2013; on 09.05.2020, SSNRDC requested the OP to supply some of its pharmaceutical products at a wholesale price (price to stockiest). The said purchase order was made in relation to specific pharmaceutical brands viz. Allegra, Avil, Cardace, Combiflam, Lantus and Amaryl.
5. It has been averred that the OP did not respond to the said request of SSNRDC. Subsequent to which, SSNRDC sent an e-mail dated 02.06.2020 to the OP reiterating its request about the purchase order raised on 09.05.2020. As the OP neither responded to the said purchase order nor to its aforementioned mail, SSNRDC issued a legal notice dated 26.06.2020, calling upon the OP to supply the aforementioned pharmaceutical products as mentioned in the said purchase order.
6. The Informant has stated that its request was denied by the OP vide reply dated 13.07.2020, stating that there is no shortage of stocks of the said pharmaceutical products and it cannot appoint any additional distributor in Surat. It is averred that, instead of supplying the products sought, the OP asked SSNRDC to contact its existing distributors for the same.
7. Subsequently, in its efforts to get the supply of OP’s products, SSNRDC raised a complaint against the OP on 14.08.2020 before the National Pharmaceutical Pricing Authority (‘NPPA’), alleging refusal to deal/supply. The OP in its submission dated 22.09.2020 made before the NPPA, reiterated that there is no shortage of stock and SSNRDC could contact any of its existing distributors for supply of its products. Then, SSNRDC approached District and State Food and Drug Administration during 3rd and 4th quarter of 2021 raising the aforesaid issue, but all its efforts were in vain.
8. In order to meet the demand of its customers for pharmaceutical products of the OP, SSNRDC once again approached the OP on 26.05.2021, by raising a second purchase order along with a demand draft of Rs. 1,00,000/- drawn in favour of the OP as an advance payment against the delivery/supply of pharmaceutical products, to which also the OP did not respond favourably. Thereafter, SSNRDC issued a legal notice dated 14.09.2021 notifying to the OP to accept the second purchase order. The OP replied to the said notice on 11.11.2021, citing similar reasons and retained the demand draft (which got expired by the time when the present Information was filed).
9. The Informant has been allegedly aggrieved by OP’s refusal to deal with SSNRDC. It has been averred that even though the OP has asked SSNRDC to contact any of OP’s existing distributors in Surat for the aforementioned pharmaceutical products, but the de facto vertical agreement(s) between the OP and its distributors restricts the distributors to supply OP’s products at a wholesale price to another wholesaler such as SSNRDC, leading to constructive/implied refusal to deal.
10. The Informant has stated that the nature and characteristics of the Indian pharmaceutical market is distinct from other markets as it is highly fragmented with over 3000 pharmaceutical companies. In such a fragmented market, OP’s pharmaceutical products have been able to maintain their respective leading positions in terms of sales value and volume for a very long period in the markets for antihistamine oral solid, basal analog insulin, oral anti-diabetic, angiotensin converting enzymes (ace) inhibitor and oral pain relief.
11. The Informant has submitted that, as per the Annual Reports of the OP, some of OP’s pharmaceutical brands such as Allegra & Avil [anti-histamine oral solid (Allergy)], Cardace [Angiotensin Converting Enzymes (ACE) inhibitor], Combiflam (Oral Pain Relief), Lantus (Diabetes drug), Amaryl (Oral Anti-diabetic) are market leaders in terms of sales value and volume in their respective market segments. It has been stated that, as per the Annual Reports of the OP, all of the six pharmaceutical products continuously featured amongst top 100 brands in the Indian pharmaceutical market for many years. The Informant further pointed out that out of 47,478 brands marketed in India presently, the OP has three brands namely, Allegra, Lantus and Combiflam that have been featuring in top 100 brands in India for the last 15 years.
12. The Informant has stated that it is not commercially viable for SSNRDC to procure pharmaceutical products of the OP from its existing distributors/wholesalers who will supply products at a retail price and not at wholesale, owing to which SSNRDC would not be able to compete with the existing distributors/wholesalers of OP. It has been averred that SSNRDC has the ability to 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 which, consumers are being harmed by having to pay higher prices for products of the OP.
13. Based on the averments made above, 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.
14. In the ordinary meeting held on 14.09.2022, the Commission considered the Information filed in the matter and decided to pass an appropriate order in due course.
15. At the outset, the Commission notes that the crux of the allegation as raised in the Information is that SSNRDC, a partnership firm 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. It has been averred that the OP by asking SSNRDC to contact any of its existing distributors/ wholesalers, has constructively refused to deal with the SSNRDC and thereby indulged in contravention of the provisions of Section 3(4)(d) of the Act.
16. Having perused the Information and the documents filed in support thereof, the Commission deems it appropriate to note the response of the OP given vide reply dated 13.07.2020 (to the legal notice of the Informant dated 26.06.2020) in which the OP has stated that for the convenience of its customers and for ensuring uninterrupted supplies of its medicines, it has, over a period of time, 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. The Commission also notes the submission dated 22.09.2020 made by the OP before NPPA referring 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.
17. In relation to the averment in the Information regarding exercise of a legal right under Clause 28 of Drugs (Prices Control) Order, 2013. The said provision is extracted hereunder:
“Manufacturer, distributor or dealer not to refuse sale of drug– Subject to the provisions of the Drug and Cosmetics Act, 1940 (23 of 1940) and the rules made thereunder, –
(a) no manufacturer or distributor shall withhold from sale or refuse to sell to a dealer any drug without good and sufficient reasons;
(b) no dealer shall withhold from sale or refuse to sell any drug available with him to a customer intending to purchase such drug.”
18. Based on a prima facie appreciation of the said provision it appears that no manufacturer or a 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 supply of its aforementioned pharmaceutical products. In this regard, the Commission also notes that the OP has appointed 17 distributors in Surat. Thus, prima facie, it appears that SSNRDC is free to obtain OP’s products from its existing distributors and the OP does not interdict, in any manner, its distributors from dealing with SSNRDC. However, SSNRDC in the absence of being appointed as a distributor does not appear to be entitled to procure the supplies at a wholesale price but only at a retail price, which according to the Informant defeats the purpose.
19. Further, SSNRDC requested the OP to accept its purchase order and supply pharmaceutical products at a wholesale price (price to stockiest). Some of the products for which the purchase orders were raised have been stated to be in relation to purportedly popular pharmaceutical products of the OP namely Allegra, Avil, Cardace, Combiflam, Lantus and Amaryl. The Commission in this regard notes that the drugs as aforementioned appear to have generics/ substitutes in the market which are sold by other manufacturers and the Informant is not foreclosed absolutely in dealing in such products.
20. The Commission further observes that the Informant, has not been able to demonstrate that non-dealing of the OP directly with the Informant has caused any AAEC or is likely to cause AAEC in the market, except the Informant getting lesser margins when not dealing directly with the OP for its products. In the instant case, the Informant has the option to approach other pharmaceutical companies offering similar drugs in respect of which the SSNRDC has been endeavouring to obtain wholesale licence from the OP. Further, as per the documents enclosed, it appears that the Informant is already engaged with some pharmaceutical companies such as Cipla Ltd., MSD Pharmaceuticals Pvt. Ltd., Sun Pharma, Abbot India, etc. in the capacity of a wholesaler. Thus, the Commission is of the prima facie view that 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 anticompetitive in terms of the provisions of Section 3(4)(d) of the Act read with Section 3(1) of the Act, in terms of adversely affecting intra-brand competition and/or inter-brand competition, as the case may be.
21. Further, the Commission observes 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. Nobody can ask for an absolute right to deal with a particular business.
22. Thus, in view of the analysis supra, the Commission is 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.
23. The Secretary is directed to communicate to the Informant, accordingly.
