USV not dominant player, hence no case: CCI dismisses petition by pharma wholesaler

New Delhi: Noting that the drug firm USV does not seem to enjoy the dominant position in the portfolio of medicines that it sells and hence no case can be made against it under Competition Act for the particular portfolio of medicines, the Competition regulator, Competition Commission of India dismissed a complaint filed against the company and its C&F, by a pharmaceutical wholesaler alleging unfair practices and violations of the act

The petition before CCI was filed by one Mr. Makarand Anant Mhaskar a pharmaceutical wholesaler against  USV Private Limited ("USV") and its C&F Agent, Kundan Pharmacon ("Kundan") alleging a contravention of the provisions of Section 4 of the Competition Act. He informed that being a pharmaceutical wholesaler he had placed an order for the purchase of drugs from USV on 31.07.2019. Kundan vide its letter dated 06.08.2019, confirmed receipt of the said order of the Informant along with documents and demand draft.

He alleged that USV imposed the following unfair conditions on him (informant):

• Collection of goods from Pune C&F agent (Kundan), which is 360 km away from the Informant's location.

• The Informant is not entitled to return any product purchased from USV for any reason whatsoever including those on account of expiry or damage.

• Advance payment to be paid every time.

• The Informant cannot purchase the products of USV from any other C&F agent.

He averred that all required documents were provided and terms of advance payment were also accepted. It was alleged that drugs were not supplied by Kundan on the ground that the Informant rejected the condition which provided that the Informant is not entitled to return any product purchased from USV for any reason whatsoever including those on account of expiry or damage. It had been further alleged that another order was placed by the Informant on 11.09.2019, as per the requirements, but the same was not executed and the demand draft, which was held for two months, was also returned on 30.09.2019.

He demanded Commission should take appropriate action against USV and Kundan for imposing unfair and discriminatory conditions.

After going through all the documents, the CCI noted firstly noted that since Kundan was merely a C&F agent of USV, therefore, for the purpose of analysis under the provisions of Section 4 of the Act, USV is the relevant entity and the Commission has accordingly analyzed the case from that perspective.

" The Informant has not brought on record any material (except for a few emails exchanged between USV and Informant) which could throw light upon the nature of the business relationship between itself and USV. The Informant has merely alleged that USV is dominant without substantiating the grounds on which such assertion is made," the CCI noted

The commission went through what constitutes abusive conduct under Section 4(2) of the Act 

 The Commission notes that the abusive conducts, as set out under section 4(2) of the Act, can fall into two broad categories viz; 'exclusionary' and 'exploitative' practices. Exclusionary abuses are those practices adopted by a dominant firm that drive competitors out of markets or create entry barriers for its competitors. On the other hand, exploitative abuses are those practices in which a dominant firm takes advantage of its market power by inter alia charging discriminating and unfair prices or imposing unfair terms and conditions on its customers. The Commission observes that in the instant matter there is neither any allegation of any exclusionary abuse nor it prima facie appears to be a case of such conduct. The Commission, thus, notes that the matter may fall under the exploitative abuse, provided the dominance of USV in the relevant market and some abusive conduct in terms of the provisions of Section 4 of the Act, is established against it.

The Commission observed that in the instant matter, the primary grievance of the Informant pertains to certain conditions imposed by USV. Amongst those conditions, in the opinion of the Commission, the main grievance of the Informant appears to be the condition whereby it cannot return the products to USV 'for any reason whatsoever, including expired products'. The commission then analysed whether the act by USV falls under the same or not

To analyze the aforesaid grievance, the position of USV in the pharmaceutical sector needs to be assessed. From the information available in the public domain, the Commission observes that USV is a 55-year-old healthcare company that began as a joint venture with USV&P Inc. The USA, a subsidiary of Revlon. Its product offering presently includes Active Pharmaceutical Ingredients (APIs) which are marketed globally in 65 countries. A perusal of the website of USV states that "In the financial year 2018-19, our total income was Rs 31,065 million. Our Indian business contributed 83% to the revenue and the rest was from the export of APIs and Finished Dosages." (https://www.usvindia.com/aboutus.php, Retrieved on 29.11.2019 at 10:12 AM ).

Further, based on the data of its official website, the Commission observed that USV in the Indian pharmaceutical market has a presence in the following portfolios: • Diabetes • Cardiovascular • Orthopaedics • Nutritional • Dermatology/Cosmetology • Gynaecology • Paediatrics • CNS • Respiratory

The commission concluded that based on the data USV did not enjoy the dominant position for the said portfolio

As per the CMIE's Prowess IQ data, accessed on 23.01.2020, sales data across pharmaceutical companies show that numerous pharmaceutical companies have sales more than that of USV and as such the USV does not seem to enjoy the dominant position.

The commission further noted that it was also not the Informant's case that the drugs for the above-mentioned portfolios are only available with USV and no substitutes are available. He merely stated that USV has imposed certain unfair conditions in its dealing with the Informant.

....In absence of any evidence of the dominant position of USV, no case is made out against OP- 1 under the provisions of Section 4 of the Act.
...In view of the foregoing, the Commission is of the opinion that there exists no prima facie case and the information filed is closed forthwith under Section 26(2) of the Act...

You can read the full order by clicking on the following link

https://www.cci.gov.in/sites/default/files/42-of-2019.pdf