The Competition Appellate Tribunal (COMPAT) on 10 May 2016 has
passed a landmark decision setting aside the Competition Commission
of India's (CCI) decision in P K Krishnan v Paul
Madavana and Ors1, which arose out of an alleged
anti-competitive practice relating to the pharmaceutical
The CCI through its order dated 1 December 2015 had for the
first time penalised a pharmaceutical company, Alkem Laboratories
Limited (Alkem), to the tune of INR 746.3 millions for allegedly
facilitating the All Kerala Chemists & Druggists Association
(Association) in its anti-competitive practices, in contravention
of Section 3(1) of the Competition Act, 2002 (as amended)
These practices among others included (i) imposition of
conditions like requirement of a 'No Objection Certificate'
from the Association before appointment of a stockist; and (ii)
indulging in anti-competitive practices which could have potential
consumer harm. The CCI noted that pharmaceutical companies comply
with the Association's diktat under a threat of boycott.
Two office bearers of Alkem were also penalised, solely on
account of their position in Alkem even though they were not
granted an opportunity of presenting their defence. The Association
was penalised for contravention of Section 3(3)(b) of the
Alkem along with its office bearers had appealed against this
decision of the CCI before the COMPAT.
The COMPAT in its order dated 10 May 2016 allowed the appeals
and set aside the CCI's order. The key takeaways of the COMPAT
order are as follows:
While the CCI's order among other
things noted that the Association had threatened the pharmaceutical
companies to follow their diktat, it concluded that there was an
agreement between Alkem and the Association.
The COMPAT questioned as to how an arrangement between parties
entered into under coercion could be termed as an
"agreement". Besides, it was found by conclusive evidence
(both at the stage of investigation and during the final hearing
before the CCI) that the informant was a stockist of Alkem prior to
filing of the information with the CCI.
Further, no proof of any demand of 'No Objection
Certificate' was established against Alkem. The informant
admittedly this suppressed material fact while filing the
information. While this fact was not considered material in the
final order of the CCI, it was viewed adversely by the COMPAT.
On the appeal from the office
bearers, the COMPAT held that there was a violation of the
principles of natural justice by the CCI since no opportunity was
extended to the office bearers to present their defense and,
accordingly, reversed the penalty order imposed on them.
The COMPAT also made an observation
that the informant had willfully suppressed material information
from the CCI, which had bearing on the decision passed by the CCI.
However, the COMPAT refrained from passing any adverse order
against the informant on account of the apologies tendered to the
Joint Director General and the CCI.
This decision in many ways can be considered as a
precedent-setting order and should come as a respite to the
pharmaceutical companies which are under investigation before the
1. Case No. 28/2014 before the Competition Commission of
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