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AgVetLink: Number 58, October 2006

Refusal to Supply PAR Products to Approved Traders

The ACVM Group has modified the conditions of registration for PAR veterinary medicines so that they may be sold only by traders approved by the Group. It has also implemented the ACVM Standard for Prescription Animal Remedy Veterinary Medicines, including expectations in regard to trading. This has eliminated the legal anomaly regarding restricting supply of these products to veterinarians and a few established wholesale organisations.

Approved traders

Now anyone who can demonstrate that they have the capacity, capability, security and documented quality systems can apply to the ACVM Group to become an approved trader. A few applicants have gone through entry audits to confirm that they meet our expectations and have been approved (see page 12).

One of these approved traders has advised us that he is unable to procure stock for sale. Registrants have refused to supply product to him.

At the time the PAR standard was being finalised, some registrants and wholesalers said that they would refuse to supply product to non-veterinary traders even if they were approved by the ACVM Group. We advised at the time that it was their decision but it might breach the Commerce Act 1986.

When the approved trader contacted the ACVM Group about having met the requirements of approval but was not able to procure any stock for sale, he was advised that the ACVM approval made it legal for him to hold and supply PAR products. It did not provide any compulsion on any party to supply stock for sale. He was advised to contact the Commerce Commission if he felt that he was being unfairly excluded from the marketplace.

Commerce Commission

The person lodged a complaint with the Commerce Commission. The complaint was examined in regard to sections 27, 29 and 36 of the Commerce Act 1986, which relate to anti-competitive behaviour and manipulation of the market by persons with sufficient market power to restrict, prevent or eliminate any person from any market.

The Commission came to the conclusion that there was no collusion or arrangement between parties that could be considered to be a breach of sections 27 or 29. It also concluded that there was no party who had sufficient market control to restrict, prevent or eliminate any person from the market. The Commission concluded that, on the evidence at hand, and in light of previous investigations by the Commission of registrants, wholesalers and veterinarians, each party was acting on their own and for their own reasons. The reasons given for refusing to supply product to any person were:

• satisfaction with current distribution arrangements;

• concern about incurring disproportionate costs in supplying products to non-veterinary parties in order to ensure same standards of safety and appropriate stewardship of the products;

• concern that supply might damage the value of PAR brands sold by non-veterinarians; and

• a non-veterinarian PAR trader would not be able to give veterinary advice, thus providing a lower quality dispensing service.

The Commission judged these reasons to be consistent with how a firm would act in a competitive market and that they do not demonstrate an abuse of market power.

ACVM Group intent

The Group’s intent was to ensure that those who could legally trade in PAR products were not hindered by any regulatory restrictions inadvertently and inappropriately imposed under the ACVM Act. This has been done. It appears that some parties are individually making marketing decisions that, for their own commercial reasons, restrict the supply of products to certain approved traders.

This decision is not an ACVM matter, nor is the ACVM Group going to advocate for any change in that practice. The Group has resolved the anomaly in its policy and made sure that trade can occur legitimately, providing a mechanism by which parties can become approved.

The ACVM Group will continue processing applications for approval as PAR traders because it is confident that, once approved and operating within the context of the approval system, non-veterinarians would be able to provide reliable dispensing services.

However, in the future, the Group will emphasise the limitations of the approval in regard to the procurement of product for sale. This may discourage applicants, but the issue will be left to interested and affected parties to determine if the current practices are fair and reasonable.