Massive court battle over Dis-Chem pharmacy software

BCX and Vexall are involved in a High Court dispute over computer software used by hundreds of pharmacies in South Africa, including Dis-Chem.

Dis-Chem is a majority shareholder in Vexall, which is a software company that began trading in September 2019.

BCX lodged a case in the High Court against Dis-Chem, Vexall, and 46 former employees in October 2019, arguing that Vexall illegally poached its employees and customers and unlawfully appropriated its intellectual property.

The intellectual property in question is Unisolv, the industry-standard software used by hundreds of local pharmacies to dispense medicine.

In response, Vexall has lodged a complaint against BCX with the Competition Commission, accusing BCX of uncompetitive behaviour and contravening the Competition Act.

Poaching accusations

Last year, a number of BCX employees which were involved in the development of the Unisolv software resigned and joined Vexall.

BCX claims these resignations were orchestrated, while Vexall said the workers were either retrenched as part of a substantial cost-cutting exercise or resigned seeking job security.

After these employees joined Vexall, Dis-Chem and many other pharmacies told BCX that they would no longer procure “value-added services” from the company.

These include services such as hardware and software installation, central patient profile hosting, and inventory management services.

BCX argued that a number of these services were integral to the functionality of Unisolv and it would not be able to unbundle them from its software offering.

It added that it does not object to Vexall providing “non-integral services”, but Vexall argued that it should be able to provide all value-added services.

Vexhall vs BCX

Following the legal action initiated by BCX, Vexall laid a complaint against the company with the Competition Commission.

Vexall asked the Tribunal to prevent BCX from inducing its customers not to deal with it by making the licensing of the Unisolv software conditional upon the purchase of value-added services.

It also asked that BCX be prevented from licensing the Unisolv software on the condition that the buyer purchases value-added services.

Vexall accused BCX of being a dominant company and of “tying and bundling” – forcing its customers to purchase value-added services together with the licence in order to use Unisolv. It added that this induces customers not to deal with Vexall.

This practice would contravene the Competition Act, which prevents a dominant company from selling goods or services on condition that the buyer must purchase unrelated goods or services.

BCX denied that it is a dominant company and that it has acted anti-competitively.

BCX has also argued that the matter before the Tribunal should be put on hold, pending the outcome of the case in the High court.

Proprietary software

In response to questions sent by MyBroadband, Telkom – which owns BCX – confirmed that the company was involved in a dispute with Vexall and private pharmacies.

“The Unisolv software was developed over 25 years ago and is currently BCX proprietary software that is used by pharmacies for medicine dispensing in South Africa,” Telkom spokesperson Noma Faku told MyBroadband.

“The developer of the software is still in BCX’s employ.”

“In the matter at the Competition Tribunal Vexall has complained that BCX is withholding its software from clients who do not also take IT services from BCX,” Faku added.

“This is not the case. BCX has no difficulty with companies obtaining their IT services from third parties, but not to the extent that this infringes on BCX’s proprietary licenced software.”

She said BCX will argue that the Unisolv software is proprietary to BCX and that the company’s protection of its intellectual capital does not amount to anti-competitive behaviour.

MyBroadband reached out to Dis-Chem for comment on the dispute, but the company did not respond by the time of publication.

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Massive court battle over Dis-Chem pharmacy software