Competition Commission has imposed a penalty of over Rs 74 crore on IPO-bound Alkem Laboratories and its two officials for indulging in unfair business practices. The regulator has slapped fines on All Kerala Chemists and Druggists Association (AKCDA) and one of its officials as well in the same case. In its 33-page order, CCI has also directed Alkem, AKCDA and their officials/office bearers to "cease and desist from indulging in any of the practices which are found to be anti-competitive in terms of the provisions of section 3 of the (Competition) Act".
Section 3 of the Act pertains to cartelisation. Alkem has been slapped with a fine of Rs 74.63 crore while the penalty on AKCDA is Rs 4.35 lakh. The order comes days before Alkem launches its Initial Public Offer, which is scheduled to begin on December 8 and close on December 10.
The company is looking to raise up to Rs 1,350 crore through the share sale. Apart from the company, two of its officials have been fined by the CCI, said the December 1 order which was released on Friday. While Johnson Mathew has been penalised Rs 71,371, T K Haridas has to pay a fine of Rs 34,248.
Further, AKCDA's office bearer A N Mohana Kurup has been penalised Rs 50,203. The ruling follows a complaint filed by one P K Krishnan, who is into distribution of medicines in Palakkad district, Kerala. The complaint pertained to Alkem not supplying medicines even after agreeing to do the same.
According to CCI, there have been a number of previous cases involving chemists and druggists associations where the diktats of the association are followed by the members without any hesitation. "Even though OP 2 (Alkem) acted on the directions and threats of OP 3 (AKCDA), the same cannot absolve it from any liability under the Act. Opposite Party (OP) 2 could have approached the Commission instead of complying with the directions of OP 3 which were against the order of the Commission for refusing to deal with unauthorized stockists," the order said.
Such denial of supply to unauthorised stockists to pharmaceutical companies undoubtedly affects competition in the market adversely and appreciably, CCI said.It was alleged that Alkem rejected his application for appointment as its stockist since he failed to obtain a no objection certificate from the AKCDA. In the draft initial public offer papers filed with Sebi in August, Alkem had mentioned the company was party to "two outstanding proceedings and have received notices in relation to non-compliance with the Competition Act or the agreements entered into by us".
If the company is prosecuted by CCI in the aforesaid matters or if any prohibition or substantial penalties are levied under Competition Act, it would adversely affect our business, results of operations and prospects, it had said. "Further, any adverse publicity that may be generated due to scrutiny or prosecution under Competition Act would adversely affect our business, results of operations and prospects," the company had said.
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