This Article is written by Sanjana Buch, an LLM graduate from GNLU who was previously an Associate at Solicis Lex, Mumbai and is now a part of the Legal Parley Team.
COMPAT to the rescue of two Pharma Companies:
The Competition Appellate Tribunal (“COMPAT”) recently came to the rescue of two large pharma companies through its recent judgement in a matter under Section 3 of the Competition Act, 2002 (“Act”).
The above order has again brought in a reform into the pharmaceutical industry which has constantly been subject to legal scrutiny during the past few years.
Facts of the Case:
The Competition Commission of India (“CCI”) through its order last year penalised two major pharmaceutical companies viz. Sanofi Pasteur India Private Limited (“Sanofi”) and GlaxoSmithKline Pharmaceuticals Limited (“GSK”) stating that the companies were involved in the cartelisation of vaccines prepared for treatment of meningitis procured by the Government for protection of pilgrims taking the Hajj pilgrimage.
The result of this investigation and finding was that Sanofi and GSK were both held guilty of entering into an anti-competitive agreement specifically prohibited under the Act.
The Government of India through the Ministry of Health and Welfare invited tenders for the purpose of procuring the vaccines in compliance of a mandatory Saudi Arabian law requiring mandatory vaccination for Hajj pilgrims before entering the country for this religious journey.
CCI’s Observation:
The findings of the CCI indicated that the companies were involved in a mutual arrangement whereby one of them would participate as bidders in one year whereas the other would choose not to do so in order to oust other competitors from the market.
Further, it was also observed that the companies would also indulge in price variations during the bidding process so as to promote a collusive rigging in the industry. The CCI upon finding the existence of bid rigging, imposed a collective penalty of Rs. 64 crores in relation to the supply of the vaccine for Quadrivalent Meningococcal Meningitis (QMMV).
COMPAT’s Observation:
The COMPAT, however differed in its view from the CCI and termed the findings of the CCI to be ex facie erroneous and legally unsustainable in nature. It was of the opinion that the existence of suspicion whether it be strong or not cannot be made into the ground for establishing bid or collusive rigging.
The tribunal further observed that there must be the existence of cogent material to prove an anti-competitive agreement. It was also noted by the bench that there existed clear differences in the bids submitted by both companies taking into account several factors such as the quantities of dosage quoted by both parties, the grounds non-participation in the bidding process for specified years etc.
Thus, the COMPAT disregarded the evidence produced in order to connect the parties’ conduct as collusive in nature and set aside the CCI’s order holding the companies guilty of violation of Section 3(3)(d) and Section 3(1) of the Act. In addition to setting aside this order, the Compact also quashed the penalty imposed by CCI upon the parties on the ground of going beyond the mandate of Section 27 of the Act.
Conclusion:
The order serves as a breather for pharmaceutical companies seeking to increase their presence in the Indian vaccination market through public private partnerships floated by the government in their procurement activities. It also imposes a check onto the powers of the CCI to ensure a fair use of its discretionary adjudication process.
Picture Courtesy: Flickr
