When Does a Cartel Stop Being a Cartel? Revisiting the CCI's AIOCD Closure Order

[Gunjan Sharma is a fifth-year undergraduate law student at Rajiv Gandhi National University of Law, Punjab. She has a keen interest in competition law and data privacy]

Introduction

On 29 June 2026, the Competition Commission of India (“CCI”) closed a fourteen-year-old investigation into one of the most ambitious cartel and boycott cases in the pharmaceutical distribution sector.  Kailash Gupta v. All India Organisation of Chemists and Druggists & Ors. (“AIOCD”) began in 2012 with allegations that AIOCD, its regional affiliates, two manufacturers' associations, and twenty-two pharmaceutical companies had operated a coordinated system of No Objection Certificates (“NOC”), Letters of Cooperation (“LOC”), and Product Information Service (“PIS”) charges to control stockist appointments and punish non-compliant manufacturers with boycotts.

The Director General's (“DG”) investigation report, finally submitted in April 2024, found contravention under Sections 3(1) and 3(3)(b) of the Competition Act 2002 (“the Act”), against a wide swathe of the opposite parties. In its detailed order, CCI found that the DG's evidence, largely drawn from the period 2009 to 2012, did not establish that the impugned practices were mandatory, coercive, or ongoing after AIOCD filed a compliance affidavit with the CCI in January 2014. No contravention was found against any of the thirty-four opposite parties (“OP”), and the matter was closed under Section 26(9) of the Act.

However, the final order is defensible on one reading and contentious on another. This blog argues that the CCI's reasoning conflates two distinct questions that Section 3(3) of the Act does not require to be conflated: whether a contravention occurred during a defined period, and whether that contravention is still occurring at the time of adjudication. Unravelling these two questions finds relevance well beyond this case, and it goes to how the CCI treats evidence, compliance affidavits, and the “relevant turnover” doctrine in any investigation that takes over a decade to conclude.

The Case in Brief

The Memorandum of Understanding (“MoU”) framework at the centre of the case had a long history, dating to bilateral agreements between AIOCD and manufacturers' associations from 1982 onward, culminating in the 2003 MoU between AIOCD (OP-1), IDMA (OP-2), and OPPI (OP-3). According to the DG, the MoU required pharmaceutical companies to obtain the concurrence of state associations before appointing additional stockists, prescribed trade margins for wholesalers and retailers, and mandated PIS approval before advertising newly launched products.

The DG's report relied heavily on correspondence, executive committee minutes, and oral statements from AIOCD office-bearers, dating almost entirely to 2009 - 2012, to conclude that the MoU was still being implemented after the Act came into force, and that NOC/LOC and PIS requirements operated as de facto preconditions for market access.

Crucially, however, this was not AIOCD’s first encounter with these allegations. Pursuant to the final orders passed by the CCI in three earlier proceedings; M/s Santuka Associates Pvt. Ltd v. All India Organisation of Chemists and Druggists & Ors., M/s Peeveear Medical Agencies, Kerala v. All India Organisation of Chemists and Druggists & Ors., and M/s Sandhya Drug Agency v. Assam Drug Dealers Association and Ors., the CCI had directed AIOCD to file an undertaking confirming discontinuation of exactly these practices. AIOCD complied on 3 January, 2014, filing an ‘Affidavit of Compliance’ and circulating clarificatory communications to its members and to OP-2 and OP-3 stating that NOCs were not required for stockist appointments and that PIS charges were purely voluntary.

The CCI's closure order focuses almost entirely on this affidavit. Due to reasons of the DG not being able to point to any material evidencing renewed or continued enforcement of NOC/LOC or PIS requirements after 3 January, 2014, the CCI held that the presumption of appreciable adverse effect on competition (“AAEC”) under Section 3(3) of the Act could not be sustained. Consequently, the same reasoning was extended to the twenty-two pharmaceutical companies alleged to have implemented the MoU.

The Conflation at the Heart of the Order

Section 3(3) of the Act does not, as a matter of doctrine, require a contravention to be continuing at the time the CCI adjudicates it. A cartel arrangement (as defined under Section 2(c) and Section 3(3)(d) of the Act), once proven to have operated during a defined window, attracts liability for that window regardless of whether it has since been abandoned. This was precisely the logic underlying the “relevant turnover” doctrine articulated by the Supreme Court in Excel Crop Care Ltd v. CCI (“Excel Corp Care”), which held that penalties are calculated by reference to turnover generated during the period of contravention, not the date of the order. Several opposite parties in this very case invoked Excel Crop Care for exactly this proposition, arguing in the alternative that even if liability were found, penalty should be confined to FY 2009 - 2011 (see, e.g., the submissions of OP-13 and OP-20 at paras 42 and 51).

Yet the CCI's conclusive reasoning does not engage with the 2009 - 2012 evidence on its own terms and pivots towards the question of what happened after 2014. The CCI, while addressing the evidence pertaining to the practice of boycott, frames the deficiency as an absence of evidence “after 03.01.2014”. This, however, portrays the wrong question. The CCI failed to examine the material collected by the DG, such as the clauses requiring state association concurrence for additional stockists, the 2010 guidelines on LOC/NOC procedure, the executive committee minutes recording concern about stockists appointed without NOC, and the admissions of AIOCD's own office-bearers. Such evidence would arguably be enough to show that these were mandatory preconditions during 2009 - 2011. And if the same is true, then the 2014 undertaking only tells us whether the conduct continued and not whether the conduct happened in the first place. Therefore, the lack of sufficient evidence post 2014 should affect how much penalty is imposed and not whether liability exists at all. The CCI’s final order falls short in explaining why the pre-2014 evidence which the DG evidently found compelling enough to build an entire investigation report around, simply falls away just because the conduct wasn’t shown to have survived a unilateral complaint letter.

The Affidavit as a Substitute for Evidence

The final order treats the absence of reported violations since 2014 as tantamount to evidence of compliance. However, it is argued that the absence of reported violations is a weak proxy for absence of the underlying conduct, particularly for practices such as informal NOC requirements, verbal boycott signalling, and quiet supply stoppages. Such practices by their very nature would not generate paper trails once the regulated entity is aware it is under scrutiny and has just given a written undertaking to the regulator.

The DG's own report noted that several pharmaceutical companies, such as OP-15, OP-22, OP-23, and OP-24, themselves reported experiencing boycott threats or supply disruptions. OP-3 (OPPI) stated in its own response that the PIS mechanism, while introduced for legitimate informational purposes, had been “misused through delay in approvals, excessive charges, boycott threats, and other coercive practices.”

The structural risk that the order poses is straightforward: if a trade association can neutralise a decade of documented conduct by filing a unilateral compliance letter, and if the CCI subsequently treats silence in the record as proof of continued compliance rather than as an evidentiary gap to be tested, then a perverse incentive emerges. The regulated entity can formalise a paper trail of compliance while the underlying practice continues informally, now protected by a higher evidentiary bar for reopening the investigation.

Why This Matters Beyond One Case

This is not a merely domestic peculiarity. Other competition law regimes have witnessed and worked through this tension. Under the European Union competition law regime, the Commission can penalise conduct for the period during which it operated even where the infringement has since ceased. Cessation does not affect the underlying finding of contravention. (Refer Article 101 TFEU, Regulation 1/2003). United States antitrust law goes further still; once a conspiracy is shown to have existed, the burden shifts to the defendant to prove affirmative withdrawal, in the nature of active disclosures to authorities or clear communication to co-conspirators. Mere cessation does not suffice. (Refer United States v. United States Gypsum Co.) Measured against either standard, the CCI's approach sits closer to being at the permissive end of comparative practices.

The fourteen-year gap between the original complaint and the DG's report, itself the product of a decade-long Karnataka High Court stay, meant the CCI was assessing 2009 - 2011 conduct in 2026, with the informant having abandoned the proceeding entirely by the final hearings. Exercising caution about reopening stale, thinly corroborated allegations against thirty-four parties is not unreasonable. But the reasoning the order supplies for that caution matters, because it will be read as precedent for how the CCI treats compliance affidavits and historical evidence in future cartel and boycott investigations that take years to conclude. Looking at the CCI's history, this is not a small category of cases.

The Lasting Instinct

None of this is to suggest that the CCI's approach is without a defensible basis. A fair reading in the order’s favour would point to three things: a genuine staleness and thinness of correspondence from over a decade earlier, the institutional value of taking a voluntary compliance undertaking at face value rather than treating it as presumptively hollow; and the absence of any fresh complaint pointing to post-2014 conduct. On this view, the CCI was not avoiding the evidence so much as declining to convict thirty-four parties on inference built from a decade-old record. This can be counted as an institutional instinct.

If the operative understanding of the order is genuinely that a documented period of contravention remains actionable regardless of subsequent discontinuation, subject to relevant-turnover-based penalty, then the order should have tested the pre-2014 evidence against that standard before turning to the affidavit. If, instead, the operative principle is closer to the idea that a credible compliance undertaking, once filed, shifts the burden onto the DG to prove renewed breach, with silence in the record read in the regulated entity’s favour, that is a different rule altogether. And it carries real implications for how trade associations under investigation might structure their response to CCI scrutiny going forward. The concern raised here is not that the CCI's instinct is illegitimate, but that the order unfortunately does not tell us which of the interpretations it means to establish. That ambiguity, more than the outcome itself, is the more lasting problem with Kailash Gupta v. AIOCD.