11 August 2018

Ethiopia: Pharma Firms Conquer Price Gouging Legal Charges

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(File photo).

Prosecutors accuse them of alleged practice of horizontal price gouging of four to 100pc

Judges at the adjudicative tribunal of the consumer protection authority have ruled in favour of eight pharmaceutical product distributors and retailers charged with alleged price gauging.

The tribunal rejected the charges of the government prosecutors, representing the Trade Competition & Consumer Protection Authority, stating that the prosecution's evidence and witnesses did not substantiate the charges brought against the companies. The companies were embroiled in a legal battle with the prosecutors for 10 months, fighting charges brought against them for practising horizontal price gauging by increasing prices from four percent to 100pc.

The charges were filed in the tribunal court on December 4, 2017. The defendants are commercially engaged in the distribution and retail market of human and animal pharmaceutical products and medical equipment. The prosecutors claim that the companies, beginning on October 11, 2017, and working across the country allegedly conspired with each other to increase prices of their products. The prosecutors sought penalties amounting to 10pc of the defendants' annual turnover.

The alleged price fixing happened a month after the 15pc devaluation of the Birr in October 2017, although the prosecutors failed to mention this fact in the charges that they filed. During the period after the central bank announced the devaluation of the Birr, investigators from the authority launched a series of probes on importers. In the end 14 importers and manufacturers in veterinary medicine, steel, pharmaceuticals, as well as Fafa Foods, were charged. They were all accused of price manipulation and distortions, which they have been fighting in court since.

Refuting the charges, the pharma companies submitted their statements of defence and preliminary objections on December 25, 2017.

Haileysus Hamasalu Dube, Ad Farms Plc and Tekabe Medical Plc lodged their preliminary objections, which were used as a statement of defence. The five co-defendants, Genetic Pharma Human, Vet Medicine & Medical Equipment Supplier; H Mark Pharmaceuticals Plc; Basic Pharmaceuticals; Tenaadam Human Medicine and Medical Equipment Wholesaler; and Life Plc also submitted their statement of defence.

In their statements, the companies, represented by their lawyers, defended against multiple charges filed against them and denied their involvement in the illegal practice of price fixing. The companies argued that the prosecutors did not bring evidence to substantiate their claims; that the charge did not specify on which products and equipment the alleged price increases were made; and argued the claims made by the prosecutors did not show which company initiated the price increase and which companies followed suit. They also denied the prosecutors' claim of alleged conspiracy with each other.

The judges of the tribunal rejected the defences of the co-defendants and proceeded to oral litigation, hearing witnesses presented by the two parties.

After trying the case for 10 months, the tribunal, presided by Kidane Tsegaye, Mekdes Mekuria and Biruh Gemeda, ruled in favour of the companies by rejecting the prosecutors' claims. In their ruling, the judges stated that the prosecution documents, evidence and witnesses did not prove the charges of horizontal price fixing and conspiring with each other.

"We appealed to the appellate tribunal," said Melake Tsehay, the prosecutor who is handling the case.

The companies are among 258 pharmaceutical product and medical equipment suppliers registered in the country. About 250 drug shops, 304 pharmacies and 1,950 rural drug vendors receive the products from these suppliers. These companies also supply 80pc of the nation's demand covered by imports. Total demand is estimated to stand between 400 million dollars and 500 million dollars a year.

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