Case No. 6 of 2012, Kailash Gupta v. All India Organisation of Chemist & Druggist and Ors
Background
On June 29, 2026, the CCI closed the information filed against the All India Organisation of Chemist & Druggist (‘AIOCD’), two pharmaceutical manufacturers’ associations, eight State and district chemist associations and 22 pharmaceutical companies, holding that no case of contravention of Section 3 of the Act was made out against any of them. The Order was passed under Section 26(9) of the Act.
Parties
The information was filed on January 23, 2012, by Shri Kailash Gupta (‘Informant’), President of the All India Chemists and Distributors Federation (‘AICDF’), a society registered under the Tamil Nadu Societies Registration Act, 1975, whose members are largely wholesale pharmaceutical distributors. It named 34 Opposite Parties (‘OP’s): ten chemist and druggist organisations, of which AIOCD (‘OP-1’) and All Indian Origin Chemist and Distributors Ltd. (‘OP-34’) operate pan-India and OP-4 to OP-11 at the State or district level; two manufacturers’ associations, being the Indian Drug Manufacturers’ Association (‘OP-2’) and the Organisation of Pharmaceutical Producers of India (‘OP-3’); and twenty-two pharmaceutical companies (‘OP-12 to OP-33’).
Allegations
The Informant alleged that AIOCD and its affiliated chemist associations used their influence over the pharmaceutical distribution network to control the appointment of stockists and the launch of new drugs. AIOCD allegedly compelled pharmaceutical manufacturers’ associations to enter into a Memorandum of Understanding (‘MoU’) under which manufacturers were expected to obtain Letters of Cooperation (‘LOCs’)/ No Objection Certificates (‘NOCs’) from the relevant chemists’ association before appointing stockists, thereby giving the associations an effective gatekeeping role over distributors.
AIOCD and its affiliates also allegedly required manufacturers to pay Product Information Service (‘PIS’) charges before launching new products. According to the Informant, manufacturers complied with these requirements because they feared coordinated boycott, refusal to deal or disruption of supplies if they did not, with the result that distributors, including members of the Informant, could be excluded or disadvantaged unless they had the associations’ approval.
Investigation by DG
The CCI formed a prima facie view on February 7, 2012, and directed the DG to investigate. Karnataka Chemist & Druggist Association (‘OP-10’) challenged the reference before the Karnataka High Court, which stayed the proceedings on August 9, 2012, and permitted the CCI and the DG to resume only on November 10, 2022. Consequently, the DG investigation stood still for a decade.
The DG submitted its report on April 4, 2024. It found that NOCs and LOCs operated as a sine qua non for the appointment of stockists and that PIS approval was a precondition for the launch of new products, holding AIOCD, Punjab Chemist Association, Amritsar Chemist Association, AIOCD Utkal Committee, Madhya Pradesh Chemist & Druggist Association, Karnataka Chemist & Druggist Association, and Bihar Chemist & Druggist Association in contravention of Section 3(3)(b) for the imposition of LOCs/ NOCs, and AIOCD, Punjab Chemist Association, and Madhya Pradesh Chemist & Druggist Association for the PIS. The MoUs between AIOCD, Indian Drug Manufacturers’ Association and Organisation of Pharmaceutical Producers of India, which prescribed prior association consent for stockist appointments, PIS approval for advertising new products, and trade margins of 10 percent for wholesalers and 20 percent for retailers on non-scheduled drugs, were found to be anti-competitive and to have been followed even after the Act came into force. 15 pharmaceutical companies were found to have implemented those arrangements in contravention of Section 3(1), and six individuals were identified as liable under Section 48.
Submissions by OPs
AIOCD submitted that the communications relied on by the DG were advisory rather than mandatory, that the MoU framework stood terminated in 2011, and that it had filed an Affidavit of Compliance and Undertaking dated January 3, 2014, pursuant to the CCI’s orders in Santuka Associates Pvt. Ltd. v. AIOCD and the connected matters, followed by circulars dated April 18, 2013, clarifying that no NOC was needed for appointing stockists and that PIS charges were voluntary. AIOCD also raised a preliminary objection that the investigation was barred by principles analogous to res judicata. Indian Drug Manufacturers’ Association and Organisation of Pharmaceutical Producers of India relied on the earlier orders in Case Nos. 20, 30, and 41 of 2011, where neither had been held liable, and on the absence of any assessment of AAEC under Section 19(3).
The pharmaceutical companies, relying on the Competition Appellate Tribunal decisions in Alkem Laboratories Ltd. v. CCI and Lupin Limited v. CCI, submitted that conduct performed under coercion cannot amount to an agreement, that they had appointed stockists without NOCs, and that trade margins followed the Drugs (Prices Control) Order and their own commercial policies. Several of them added that any penalty would have to be worked out on the turnover of the years connected with the conduct rather than on later financial years, and that the Penalty Guidelines, 2024 could not be applied retrospectively.
CCI’s Findings
The CCI first rejected the res judicata objection, holding that the scheme of Section 26 requires conduct involving different parties and different facts to be examined on its own footing.
On merits, the CCI declined to accept the DG’s findings. The evidence relied on pertains almost entirely to the period between 2009 and 2012, and does not account for the compliance measures and undertakings accepted in the earlier AIOCD matters. Torrent Pharmaceuticals Ltd. placed on record a list of 352 stockists appointed without an NOC, Cipla Ltd., a list of 34, and IND Swift Ltd., a list of 60, and the DG examined no stockist to show that any appointment had been refused for want of one. On PIS, the CCI reiterated its position that such charges turn anti-competitive only where non-payment keeps a new drug out of the market, and found nothing after the circular of April 18, 2013 to show that payment was insisted upon or enforced. The boycott allegations rested on isolated correspondence, and Panacea Biotec Ltd., Eli Lilly & Co. India (P) Ltd., FDC Ltd., J.B. Chemicals & Pharmaceuticals Industries Ltd., and MSD Pharmaceuticals Pvt. Ltd. denied having faced any boycott at all. The CCI also observed that several pharmaceutical companies had themselves complained of boycott threats and supply disruptions by AIOCD affiliates, which put them at best in the position of passive recipients or victims of prevailing trade practices rather than willing participants in any arrangement.
Dr. Reddy’s Laboratories Ltd., which had sought deferment on the ground that it had challenged the investigation before the Telangana High Court, was told that its writ petition had been dismissed on June 10, 2026, with liberty to raise all contentions before the CCI; its submissions were then considered on merits. With no OP found in contravention of Section 3, the question of liability of office bearers under Section 48 did not arise, and the matter was closed.
The outcome sits at some distance from the CCI’s earlier treatment of AIOCD’s distribution practices, including Santuka Associates (Case No. 20 of 2011), decided in February 2013, where mandatory NOCs, compulsory PIS charges, and MoU-based margins were held to be anti-competitive. The difference here lies in the evidence, which stops short of the compliance undertakings given in 2013 and 2014.
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