Competition Commission of India (CCI) has imposed a penalty of Rs.3.81 crore on Dr. L.H.Hiranandani Hospital, Mumbai for violation of Section 3 & 4 of the Competition Act. The informant Mr. Ramakant Kini had approached CCI alleging that the hospital had abused its dominant position in the area of stem cell banks and did not allow the stem cell of the child to be collected by any other service provider except M/s Cryobank with whom it had an exclusive agreement.

Consequent upon detailed investigation by DG-CCI, the Commission had arrived at the conclusion that exclusive arrangements between two undertakings do not accrue any benefit to the consumer and are rather at the cost of consumer. Such an agreement has anti-competitive effect in any market. CCI also considered it as an abuse of dominance by Hiranandani Hospital and the conditions put up on its patients that in case one had to avail stem cell banking system, they will only have to avail services of Cryobank, as abusive and violative of Section 4 of the Competition Act. CCI, under Section 27 of the Act, has passed the following order:-

“(a) The agreement of OP hospital with Cryobank for the years 2011-12 and 2012-13 are declared null and void.

(b) The OP hospital shall not enter into a similar agreement with any stem cell bank in future.”

These directions have to be complied with immediate effect.

The Commission has also imposed a penalty of Rs. 3,81,58,303/- calculated at the rate of 4% of the average turnover of OP hospital. The penalty is to be deposited within 60 days of receipt of the order.

Detailed order can be seen at CCI’s website www.cci.gov.in

Abuse of dominance: exclusive stem cell banking tie-up found anticompetitive; hospital prohibited from similar agreements. Exclusive contractual tie-ups for stem cell banking between the hospital and a single service provider were held to be anticompetitive and an abuse of dominance because they foreclosed consumer choice and provided no consumer benefit; the commission declared the agreements void, prohibited similar future agreements, and imposed a monetary penalty payable within the prescribed period.