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AZB, TTA win for GSK, Sanofi in Compat, overturn Rs 64 cr cartel penalty [READ ORDER]

Compat said that CCI there was not enough evidence and that, in any case, CCI screwed up in assessing the companies’ fines

The Competition Appellate Tribunal (Compat) has set aside Rs 64 crores of fines ordered by the Competition Commission of India (CCI) against Sanofi Pasteur India and GlaxoSmithKline Pharmaceutical, which the CCI had found cartellised the market for meningococcal vaccines, which are procured by the Government of India for vaccinating Hajj pilgrims.

The Compat held that there was insufficient evidence of collusion, and also added that the CCI had incorrectly calculated the fines based on the total turnover of the companies, rather than just the turnover due to the drug, which was “minuscule”.

Sanofi Pasteur, which had been fined Rs 3.04 crores by the CCI, was represented by the competition team of Vinod Dhall-Talwar Thakore & Associates led by Vinod Dhall assisted by associates Sonam Mathur, Mansi Tewari and Sanjeev Kumar.

Sanofi instructed advocate Rajshekhar Rao before Compat.

GSK, which had been fined Rs 60.48 crore by the CCI, was represented by AZB & Partners competition team partner Sameer Gandhi with associates Rahul Rai and Akshat Kulshestra.

Senior advocate Ramji Srinivasan. argued for GSK before Compat.

==Read the Compat order here.

The Compat, headed by chairman GS Singhvi, and members Rajeev Kher and Anita Kapur, held yesterday:

54. In the case before us, there is no evidence direct or indirect of any meeting between the two appellants, the bids given by them were not identical inasmuch as the quantity quoted by GSK was 1,00,000 doses and the quantity quoted by Sanofi was only 90,000 doses. The prices quoted by the appellants were also different.

Another important distinguishing feature is after cancellation of the bids submitted pursuant to tender notice dated 25.06.2011, GSK did not participate in the two limited tender notices issued in August 2001on the ground that the time for supply of medicine was extremely short and it was not possible to fulfill the commitment, which could be made to the competent authority and there is not even a semblance of evidence what to say of a cogent evidence to show that the GSK’s non-participation in the re-tender bidding process was a part of the arrangement between the two appellants or GSK had colluded with Sanofi to ensure that it could get the contract for supply of the tendered quantity of QMMV

55. It is also unfortunate that both the DG and the Commission completely overlooked the highly contumacious conduct of Respondent No. 2, who always challenged the conditions of eligibility by filing two writ petitions in the high court. In the first writ petition, he produced a fabricated document to persuade the high court to grant relief. It is a different thing that he could not mislead the high court and the writ petition was dismissed by a detailed reasoned order. In the second writ petition, he succeeded in persuading the high court to pass an interim order but did not participate in the tender issued on 17.08.2011. It participated in the second tender after knowing the prices quoted by the appellants in response to tender notice issued on 25.06.2011. This was clearly part of the design of Respondent No. 2 to secure the contract. In our view, while adjudicating upon the allegations of anti-competitive conduct of other party, the Commission is duty bound to take cognizance of the conduct of the informant and take appropriate view of the matter.

56. On the basis of the above discussion, we hold that the finding recorded by the Commission that the appellants are guilty of collusive conduct and violated Section 3(3)(d) read with Section 3(1) of the Act is legally unsustainable and the impugned order is liable to be set-aside in toto.

In respect of the quantum of the fine imposed by CCI, the Compat held:

58. Even if we were to assume that the Commission had taken a deliberate decision to impose penalty @ 3% of the turnover of the appellants based on the financial statements filed by them, the same is legally unsustainable because the Commission has taken into consideration the entire turnover of the appellants of which QMMV is a miniscule fraction. This Tribunal has repeatedly held that while imposing penalty under Section 27(b), the Commission can take into consideration turnover of the relevant product and not the entire turnover of the industry/enterprise. Reference in this regard may be made to the latest order dated 01.03.2016 passed by the Tribunal in M/s. ECP Industries Ltd. Vs. Competition Commission of India in Appeal No. 47 of 2015 in which the penalty imposed by the Commission on the total turnover of various types of cylinders on the appellants was quashed because the relevant product was only 14.2 Kg. LPG cylinder. In that order, the Tribunal has noted various earlier orders and reiterated its view that the word ‘turnover’ used in Section 27(b) and proviso thereto would mean the turnover of the relevant product and not the entire turnover of the industry/enterprise.

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