TaxTMI 
TaxTMI 
2015 (12) TMI 1776
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....population can afford. 2. The last century has also witnessed several innovations in the field of medical science and what was not even imagined till 19th Century has become a reality. The continued research undertaken across the globe has given new advantages to the consumers of medical services. One of the recent developments is collection of stem cells from the umbilical cord and placenta of the newly-born child, which can be used for treating over 75 diseases including serious ailments like cancer, genetic disorders such as thalassemia and sickle-cell anaemia. The umbilical cord blood and cord tissue can be easily collected, processed and preserved through the innovative concept of stem cell banking for future use. 3. In India, cord blood banking was started in 2002 by Reliance Life Sciences. As on today, several stem cell banks are operating in different parts of the country, the details of which are given below: 4. Appellant, Dr. L.H. Hiranandani Hospital (for short, 'the appellant') is a public charitable hospital established at Powai (Mumbai). It provides various healthcare services including Obstetrics and Gynaecology/Maternity, Oncology, Paediatrics, ENT, Ophth....
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.... 8. It is the case of the appellant that Cryo-Save based in Bangalore and Babycell based in Lonavala were prepared to pay higher amount per case, it chose Cryobanks because of better technology. The relevant portions of the agreement entered into between the appellant and Cryobanks to which reference has been made in the majority order of the Commission read as under: "Operational Issues: * All Gynaecologists on Dr. L.H. HIRANANDANI HOSPITAL will be informed of the Cryobanks International India - DR. L.H. HIRANANDANI HOSPITAL tie up for providing the Stem cell bank services to its patients. * Dr. L.H. HIRANANDANI HOSPITAL will offer exclusively Cryobanks International India stem cell banking services for its patients for a period for one year. * At no point during the time of agreement period with Cryobank International India recommend any other Hospital to DR L.H. HIRANANDANI HOSPITAL clients patients and DR. L.H. HIRANANDANI HOSPITAL will not recommend any other stem cell banking service to its patients. * Data for the obstetrics patients will be provided by DR L.H. HIRANANDANI HOSPITAL administration to Cryobanks International India. &nb....
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....y Hospital (which was about 500 yards away from her residence) and delivered her child in that hospital. 10. Though, Smt. Manju Jain did not file any case/complaint before any judicial/quasi-judicial forum including the Commission with the allegation that the appellant's refusal to allow LifeCell to provide stem cell banking services had forced her to avail maternity services in another hospital at the eleventh hour, Respondent No. 2, Shri Ramakant Kini, who claims to be a lawyer by profession and is also a qualified practicing Chartered Accountant and Company Secretary, but is not shown to be a relative or an acquaintant of Smt. Manju Jain, got in touch with a firm of lawyers, namely, Dhall Law Chambers, B-88, First Floor, Sector - 51, Noida, and got drafted and filed an information under Section 19(1)(a) of the Competition Act, 2002 (hereinafter referred to as "the Act") about alleged abuse of dominant position by the appellant and anti-competitive agreement entered into between the appellant and Cryobanks and prayed that an investigation may be conducted under the Act and the appellant be penalised for abuse of its dominant position and violation of free and fair competitio....
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....e has to be collected by the obstetrician or by the hospital staff. Alternatively, a paramedic of the concerned stem cell banking company can collect the sample with the permission of the hospital or the nursing home, where the customer is delivering the baby. Therefore, it requires a great amount of coordination and cooperation between the hospital and stem cell bank for efficiently servicing the requirements of the consumer. 26. In the present case, Patient contacted LifeCell for using their stem cell banking services. To the surprise of the Patient, LifeCell informed their inability to provide services as they have been directed by the Respondent not enrol any Patient of the Respondent, as CryoBanks is their "cord blood banker" with effect from 1 September, 2011 and the Patients are not allowed to use the services of any third party stem cell banker. The email communication between the Patient's Husband and the Respondent is marked and annexed herewith as Annexure III. 27. Surprised by this, Patient requested the Respondents to allow them to engage LifeCell in relation to collection of cord blood samples. The Informant submits that the Respondents not only re....
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....of abuse of its dominant position in the relevant market. 14. By an order dated 19.09.2012 passed under Section 26(1) of the Act, majority of the Commission directed the DG to cause detailed investigation into the matter. One of the Members, Shri M.L. Tayal, passed a dissenting order and held that no prima facie case is made out for investigation under Section 26(1) of the Act. 15. At this stage, I deem it necessary to mention that even before the investigation could commence, the Commission gave publicity to order dated 19.09.2012 in its quarterly Newsletter- 'Fair Play' (Volume 3 : October - December 2012), the relevant portions of which are extracted below: "INVESTIGATION INITIATED Alleged Abuse of Dominant Position by Vertical Agreement between the Hospital and Cord Stem Cell Bank Service Provider Stem cell therapy has revolutionised the practice of regenerative medicine. Given its commercial viability, competitive concerns are emerging in the business model of cord stem cell banking in India. There are companies like LifeCell, Cryo-Cell etc., which provide various services relating to collection and preservation of the cord blood and cord tiss....
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.... Newsletter refers to the Hon'ble Commission's findings in a majority prima facie order (which is not in the public domain) in great detail, without even mentioning that there was a dissenting prima facie order or that the prima facie order was passed ex parte. This therefore suggests to ordinary readers (who are not well versed with the Hon'ble Commission's procedures) that the Hon'ble Commission has applied its mind to the facts and found H Hospital to have (albeit prima facie) abused its dominant position. Such detailed disclosure about this case in the Newsletter has attracted much media attention and has been extensively covered in articles carried by leading newspapers' which quote heavily from the Newsletter. H Hospital submits that, as the national competition authority responsible for deciding competition law matters, it is incumbent upon the Hon'ble Commission to exercise extreme care and caution to ensure that no information which could cause harm to a party under investigation is made public during the pendency of proceedings. It is precisely for this reason that Regulation 47 of the Competition Commission of India (General) Regulatio....
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....was not allowed to avail LifeCell's 'umbilical cord stem cell banking services'. This is so because the informant, who is a male, could not have availed any such services at any hospital and it was not even alleged by him that the appellant had denied him such services. The statement in the news-item that the patients were forced to take services of Cryobanks if they wanted to preserve the stem cells of their new-born babies is misleading and conveys a totally wrong impression that the appellant was compelling the patients to avail stem cell banking services of Cryobanks as a condition for providing maternity services to them. Not only this, the news-item conveys an impression that the appellant was already found to be in a dominant position in the market of providing maternity services in high-end multi-speciality hospitals in the particular area. The worst was that the news-item did not make a mention of the dissenting order passed by one of the Members of the Commission. Such type of misleading news-items definitely cast a shadow on the fairness on the totality of the procedure adopted by the Commission. 18. The Joint Director General (for short, 'Jt. DG'), ....
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....o be correct. The investigation has established that the conduct of M/s. L.H. Hiranandani Hospital is in contravention of the provisions of section 4(1) read with 4(2)(a)(i), 4(2)(c) and section 3(4) of the Act. 5.8 Confidentiality as per regulation 35 of the CCI (General) Regulations, 2009 was sought on behalf of the OP vide letter dated 22.3.2013 and 09.04.2013. Confidentiality granted vide order dated 03.05.2013. A copy of the order is enclosed as Annexure-12 of the report. The report may kindly be placed before the Competition Commission of India for consideration. Dated : 09.05.2013 (Sunil Kumar) Joint Director General" 19. The Commission examined the report of the Jt. DG in its meeting held on 11.06.2013 and passed an order under Section 26(8) for further investigation. That order reads as under: "The Commission examined the DG's report in this case and noted that the definition of the market, both in terms of product and geography, required further data analysis. From the report/annexures, it appears that DG had collected extensive data in respect of use of maternity/delivery facility by persons who are/were inclined to use s....
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....rther investigation, being Super Speciality Hospitals, Nursing Home (Multi-facility), Stand-alone Nursing Homes, and other Hospitals is devoid of any commonly accepted definitional basis and would therefore be wholly subjective. In the absence of clear and established parameters in respect of each of these purported categories, classification of the medical establishments contained in the lists provided by the Hon'ble DG would be arbitrary and therefore cannot be relied upon in any meaningful way. 11. In any event, without prejudice to the above, H. Hospital submits that the purposes of the present competition law analysis (i.e. for determining whether the relevant product market of maternity services), the relevant question for defining the product market in the instant case is the maternity services involved and not the kind of medical establishment that the maternity services are provided in, i.e. the relevant product/service is maternity services and not the medical establishment in which it is provided. A patient cannot substitute child-birth for an appendectomy, even if both services can be provided at either a nursing home or super-speciality hospital, as has been deta....
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.... a nursing home for any of the aforesaid purposes and to provided treatment or nursing for them; 3.7 None of the other category of Hospitals i.e. Super Speciality, Multi Facility or Standalone Maternity Homes etc. is defined in the said Act. Plain reading of these two definitions suggests that Nursing Home includes every kind of premise used for the persons suffering from any sickness, injury or infirmity. As per the definition, Nursing Home includes Maternity Home also. 3.8 Similar provisions are enacted for the Registration of Hospitals in Delhi in "the Delhi Nursing Homes Registration Act, 1953". The definition of Maternity Home and Nursing Home is similar to the definition as provided in "The Bombay Nursing Homes Registration Act, 1949" and no other category of Hospitals are defined in this Act also. 3.9 To overcome the limitations of the above Acts, Government of India notified another Act as "The Clinical Establishments (Registration and Regulation) Act, 2010 on 18.08.2010. The application of the Act in a particular State of India is subject to its adoption by that State. It is gathered from the information available in public domain that Govt, of Maharashtr....
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....ions. International Society for Quality in Health Care (ISQua) is an international body which grants approval to Accreditation Bodies in the area of healthcare as mark of equivalence of accreditation program of member countries. 3.14 Accreditation is "a public recognition of the achievement of accreditation standards by a healthcare organisation, demonstrated through an independent external peer assessment of that organisation's level of performance in relation to the standards." 3.15 As per the guidelines of NABH, Super Speciality centres are the centres which provide the following services : Cardiology, Clinical Haematology, Clinical Pharmacology, Endocrinology, Immunology, Medical Gastroenterology, Medical Genetics, Medical Oncology, Neonatology, Nephrology, Neurology, Neuro-radiology, Rheumatology, Cardiac Anaesthesia, Child & adolescent psychiatry, Paediatrics, Gastroenterology, Paediatrics Cardiology, Hepatology, Cardio-vascular & Thoracic Surgery, Paediatrics Cardio-Thoracic Vascular Surgery, Urology, Neuro-surgery, Paediatrics Surgery, Plastic & Reconstructive Surgery, Surgical Gastroenterology, Surgical Oncology, Gynaecological Oncology, Endocrine Surge....
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....ards and its summary are enclosed as Annexure-F of the report. 3.23 It is seen that corporation has put clinical establishment in following five categories. i. Municipal Hospitals ii. Municipal Maternity Home iii. Municipal Dispensaries iv. Municipal Health Posts v. Private Hospitals and Nursing Home 3.24 It is therefore clear that establishments of MCGM are not categorized into either of the categories mentioned in the order u/s. 26(8). Total no. of establishments registered with MCGM (all categories) are 1808. It is also evident that the 12 Super Speciality Hospitals (as per Table-2), Nursing Home (Multi facility) and Stand-alone maternity homes are registered as Private Hospitals and Nursing Home. Total number of Private Hospitals and Nursing Home registered with MCGM are 1443. Total number of Municipal Hospitals and Municipal Maternity Homes are 50 only which is falling under the category of Other Hospitals. If we keep 12 Super Speciality Hospitals out of this number, 1431 Private Hospitals & Nursing Homes and 50 other Hospitals are left for other maternity patients availing stem cell banking services. 3.25 Hence, ....
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....ould not be compromised in any manner. 4.3 In view of this a random number 1 is chosen and every next 5th sample i.e. Hospital appearing at number 6, 11, 16 and so and so forth are considered for calculating the distance travelled by the maternity patients to the Hospital. If the Hospital appears in the series is located at places other than Mumbai, the same is ignored and Hospital appearing at next number has been considered. Further sequence has been maintained. Detail working sheets (along with 3 sample snap shots) of the calculation of distance travelled by the patients are enclosed as Annexure - G of the report. Summary of the Distance travelled by patients is tabulated as below: Table -5 Distance Travelled (Km.) Number of patients 0-5 212 6-10 80 11-12 8 13-15 22 16-20 27 More than 20 15 Total 364 4.4 It is seen therefore that out of total 364 patients, 82.41% i.e. 300 patients are travelling a distance of 0-12 Km. only from their Home to the Hospitals where maternity services and stem cell banking services were availed by them. 4.5 Information as sought vide order u/s. 26(8) dated 11.06.2013 is submitted as above." ....
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....mbilical cord stem cell bank to contract which leads to competition for the market. (iii) The DG has stated that an exclusive tie up with an enterprise not based on any qualitative criteria does not keep in mind the choice and well-being of patients and runs contrary to patients' interests. As mentioned above, the evidence in this regard has been neglected by the DG. The records of the stem cell bank on the basis of technical and objective parameters. This has been completely ignored by the DG and in no way considered in either of the DG Reports. (iv) The DG has incorrectly observed that H Hospital did not have an exclusive tie-up arrangement with another stem cell banking service provider in earlier years. However, H Hospital had submitted executed version of two agreements with LifeCell, for the years 2009-2010 and 2010-2011. The LifeCell Agreements were for a period of 1 year each, by which H Hospital was bound to offer exclusively LifeCell stem cell banking services for its patients for a period of one year. Critical methodological inconsistencies in DG Reports (i) The DG has erred in concluding that Super Speciality Hospitals constitute a se....
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....Mrs. Jain's testimony to test the veracity of the claims made. II PRODUCT MARKET DEFINITION 7. The DG has defined the relevant product market in this case as the market for the "provision of maternity services by Super Speciality Hospitals". In doing so, the DG has failed to follow the tests for defining a relevant product market as provided in the Competition Act, adopted incorrect methodologies and has failed to consider maternity services providers that compete with H Hospital and are considered as interchangeable and substitutable by a consumer. Accordingly, it is H Hospital's position that the DG's product market definition is incorrect and the correct product market definition should be the market for maternity services at hospitals, specialist maternity hospitals/clinics, nursing homes, birthing centres etc. for the reasons set out below. Overview of Methodological Errors of the DG 8. H Hospital submits that the DG has made a number of conceptual errors in the product market definition analysis which, inaccurate in itself, has also resulted in an incorrect conclusion on the relevant product market: (i) First, the DG fails to define the relev....
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.... an assessment of whether they are considered interchangeable/substitu table for other medical establishments by a consumer. In doing so, the DG has failed to recognize the extent to which other hospitals, maternity specialist hospitals, nursing homes, maternity homes, etc., are demand-side substitutes and the extent to which they compete with and constrain H Hospital. It is H Hospital's position that Super speciality Hospitals are not, including on account of lack of any clear and objective definition, a separate class of healthcare establishments and are also considered by a patient to be inter-changeable/substitutable for other medical establishments. 10. Each of these fundamental inaccuracies on the part of the DG which have led to an incorrect product market definition is dealt with in turn below. Failure to satisfy the test for relevant product market under Section 2(t) 11. A relevant product market is defined under Section 2(t) of the Competition Act as "a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and inte....
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.... and social strata of the consumer (patient) peer pressure, social perceptions, brand value of the hospital at par with the social status, complication attached with the maternity, other health issues, relation with the doctors, relation of the family with the hospital and doctors etc. matters to the patient and her family in deciding a Super Speciality Hospital. Therefore, one cannot include all sorts of hospitals/clinics in a sweeping manner within one single market as contended by the OP without any regard to the features and pricing of the product in question", (emphasis added). Though the DG makes this observation, this is a purely subjective statement not based on any evidence, empirical analysis, or survey which is reflective of demand-side substitution in the purchasing of maternity services. The DG has only observed "[i]f a low end hospital or nursing home sets its prices equal to or above Hiranandani or other Super Speciality Hospital, then it will lose patients and would be out of business". The DG only compares an extremely low-priced medical facility to H Hospital and concludes there is no substitutability. The DG has failed to consider the next best credible alternati....
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....ure that would result in such patients choosing to obtain maternity services at Super Speciality Hospitals, to the exclusion of other maternity service providers such as maternity clinics, nursing homes, general hospitals, etc." No definition of Super Speciality Hospital 26. It is imperative to note that the DG has failed to define what exactly constitutes a "Super Speciality Hospital". In fact, the original DG Report merely notes that "the range of services and facilities that Hiranandani Hospital or any other Super-Speciality Hospital would possess" are: (i) LDRP (Labour, Delivery, Recovery, Postpartum) Suite; (ii) NICU (Neonatal Intensive Care Unit & OT (Operation Theatre) on the same floor; (iii) 4D Ultrasound Scan; (iv) In-House Blood Bank; (v) In-House NICU; (vi) High Risk Pregnancy handling; (vii) Infertility Treatment; (viii) Pre Natal/Ante Natal care. 27. In listing the above facilities available at a Super Speciality Hospital, the DG has failed to examine whether general hospitals, nursing homes, or even single speciality maternity hospitals, are equipped with any of these facilities or provide any of these services. In this regard, it should be no....
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....ed to be based on an NABH guideline, is based on an application form for classification as a different category of healthcare organization and should be rejected by the Hon'ble Commission. In any event, such a classification is not reflective of patient choice or demand side substitution and does not reflect actual considerations to be taken into account in defining a relevant product market, as required under the Competition Act. 29. Notably, the Hon'ble Commission in its order dated 11 June 2013 under Section 26(8) of the Competition Act, directed the DG to conduct a further investigation and specifically directed the DG to provide information on the "[d]istribution of the clients of stem cell banks by category (a) Super Speciality Hospitals; (b) Nursing Homes (Multi facility); (c) Standalone Maternity Homes; and (d) Other-Hospitals". In providing a response to the Hon'ble Commission's query, the DG's Supplementary Report notes "[n]one of the other category of Hospitals, i.e., Super Speciality, Multi-Facility or Standalone Maternity Home etc. is defined...it is therefore difficult to classify the Hospitals into four categories as asked by point 2 of th....
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.... in the Supplementary Report, contradicts and discredits the DG's definition of the product market (as defined in the DG Report.) These findings of the Supplementary Report have also not been addressed or taken into account to further determine what the correct product market should be in this case. 32. H Hospital further submits that classifying medical establishments into Super Speciality Hospitals is inaccurate. Various hospitals and nursing homes may have super specializations in relation to one or two verticals/service lines, such as Asian Heart Institute, Mumbai or Columbia Asia Hospital, Bangalore, which are super specialized in cardio-thoracic care or NIMHANS, Bangalore, which is super specialized in neurosciences and psychiatry. However, such super specialization does not imply specializations across all verticals and rarely, if ever at all, will any medical establishment be a "Super Speciality Hospital" across all disciplines. 33. In light of the above, it is submitted that the DG's purported classification of Super Speciality Hospitals as separate from any other type of healthcare organization is devoid of any definitional basis (whether under any....
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....als that would cause consumers to find that maternity services at Super Speciality Hospitals and other providers of maternity services are not interchangeable or substitutable with other maternity service providers. In addition, Section 19(7) lists "existence of specialized producers" as a factor that should be considered by the Hon'ble Commission in defining a relevant product market. In the context of maternity services, there are various maternity-specialist hospitals, nursing homes and maternity clinics, such as Dr. Phadkes Maternity Home, Ashwini Maternity Home, and Mukund Hospital, that cater to the provision of maternity services, but the pricing and other characteristics and features of such establishments have not been considered by the DG. This is dealt with further in paragraphs 39 to 53 below. 36. In order to define a relevant product market in accordance with the provisions of Section 19(7) of the Competition Act, the DG should have analysed actual prices, existence of maternity-specialist healthcare organizations, availability of facilities, compared the differences in quality of services provided, etc. of maternity services at different types of healthcar....
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....OP hospital & Cryobank as each player, instead of competing with other players for efficiency and competitive price, would endeavour to pay commission to different hospitals and mop up clients. The adverse effect on competition is much more telling in this particular market because of the total dependence of the expecting mothers on the maternity service providers to get access to the stem cell/cord blood from newly born children born in the hospital. Consumer may further suffer in the long run when the tied up stem cell banker, due to inefficiency vis-a-vis other competitors or otherwise, exits or the level of services provided by him falls. In such a scenario, exclusive arrangements like the one in question in this case would result in total failure of service for consumer who wanted stem cells of the child to be preserved for future use. Though the enterprises may choose their business models which suit their respective requirements, in the peculiar facts and circumstances of the present case, the Commission is of the opinion that the agreement between OP hospital with Cryobank has adversely affected the growth of the stem cell banking market. Given the peculiar nature of the se....
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.... the bank into a specially brought kit. The hospital had assured every patient as noted above that family of expecting mother shall remain in the delivery/child berthing room till delivery. There could be no issue in allowing staff of stem cell banks to collect umbilical cord blood. However, OP hospital to protect its Rs. 20,000/- commission sacrificed the interest of its patients. 24. It is a well known fact that an expecting mother has to repeatedly consult her gynaecologists for various problems which she faces during 8-9 months period. No excepting mother, particularly at advanced stage of pregnancy, would like to change the doctor or the hospital as she develops a trust in the treatment of a hospital. When at the last stage of pregnancy, the woman is told, if she wants stem cell banking of her choice, she has either to change the hospital or to engage the Cryobank with whom OP hospital had agreement, no woman admitted in a super speciality hospital, to save few rupees will change the hospital. Mrs. Jain probably changed the hospital because she had already paid money to LifeCell for her child's stem cell banking. This, however, is not indicative of patients switchi....
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....ic market should not be bound to 12 km distance travelled but should include a catchment area, where the patient has to travel 16 to 20 km or roughly 12 km crow flight (straight line).Considering 12 km of actual distance travelled as more appropriate geographic area in view of the time consumed in travelling, DG came to conclusion that the OP hospital was dominant in relevant market of super specialty hospital within a distance of 0-12 km from OP hospital covering wards S, L, N, K/E, T&P/S. It found the condition put by OP hospital on its patients that in case one had to avail stem cell banking system, it will have only to avail services of Cryobank, as abusive and violative of section 4 of the Act. 28. The Commission considered the submissions of the parties and findings of the DG on this issue. The gamut of evidence collected by the DG focused mainly on the market share of OP hospital and the conclusions were consequently derived on that basis. At the outset, it may be clarified that market share of an enterprise is only one of the factors that decides whether an enterprise is dominant or not, but that factor alone cannot be decisive proof of dominance. Also, the Act has not pr....
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....eement with a particular stem cell bank that results in denial of market access to other stem cell banks; and (ii) there is a tie-in of stem cell banking service with maternity services at the premises of OP due to which consumer choice is restricted. 56. In its investigation, the DG has concluded that tie-in arrangement between Hiranandani Hospital and M/s. Cryobanks is an agreement in violation of Section 3(4) of the Act, thus creating appreciable adverse effect on competition in India. 57. The OP has rejected the conclusion of the DG in this regard and submitted that maternity patients of the OP are not necessarily required to purchase stem cell banking services. Accordingly, there is no tie-in for maternity patients. Further, the OP has quoted Commission's Order in Sonam Sharma v. Apple & Anr. (Case No. 24/2011) to highlight conditions of tying to conclude that the same are not present case. On the basis of submissions made, I shall record my views on section 3(4) violation in the ensuing paragraphs. 58. According to Section 3 of the Act, "No enterprise or association of enterprises or person or association of persons shall enter into any agr....
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.... is important to note that hospital on its own does not produce anything that is used by stem cell banks; rather, hospital comes into the picture vis-a-vis stem cell value chain because delivery happens within the premises of hospital. Therefore, a hospital, apart from providing maternity services, becomes a platform where the patients deliver the baby and the stem cell banks collect the umbilical cord cell. To that extent and as discussed earlier in the Order (under economics of health care industry), a hospital and a stem cell bank may be said to be vertically related but this falls short of being in a vertical relation in a conventional sense. The definition of vertical integration requires a reference point with respect to which a firm is vertically integrated. That reference is a final consumable product. The hospital's inpatient and outpatient care are considered to be the final consumable output. Each consists of a package of services produced when a patient visits the hospital. 62. To refine the vertical integration definition, four dimensions have been proposed by Harrigan : stages, breadth, degree and form. The "degree" of vertical integration is the productio....
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....that vertical agreements of short duration terminable with a short notice by either party may be anti-competitive if effect of the agreement results in foreclosure. 67. It is evident from the submissions of the parties and the DG Report that OP provides maternity services to all those who seek its service. It is also submitted that it refuses all stem cell banks other than Cryobanks in its premises for stem cell banking services. The DG has submitted that during 2009-12, a total of 3602 patients enrolled at OP for maternity services, out of which only 252 availed stem cell banking services from its premises. It is evident that 3350 patients availed only maternity services during the period under reference and that these patients were not compelled to avail stem cell banking services from its premises. In view of this, it cannot be concluded that the agreement between OP and Cryobanks is a tie-in agreement since more than 93% of the patient had the choice of availing only maternity services. Issue: Whether the agreement between OP and Cryobanks is an exclusive supply agreement? 68. As per explanation (b) to Section 3(4) of the Act, "exclusive supply agreement" includes a....
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.... 73. Every exclusive deal or requirements contract with one supplier (or distributor or other customer) could potentially be characterized as a refusal to deal with the supplier's competitors. In fact, any contract could be characterized as a refusal to deal with other suppliers to the extent of the business covered by the contract. Antitrust does not impinge on most companies' choices to deal, or not to deal, with other companies. However, antitrust laws frown upon such refusals that have a foreclosure effect on substantial amount of a market i.e. whether the contravening entity has a substantial market power so as to adversely affect competition in its favour. 74. Importantly, any allegation of refusal to deal has to be analyzed under the 'rule of reason' approach rather than 'per se' approach that condemns it for being anticompetitive. While doing so, it has to be seen whether there has been/likely to have anti-competitive effect in the market. In NYNEX Corp. v. Discon Inc., the US Supreme Court reversed a decision by the Second Circuit that had suggested that a single contract between a single buyer and a single seller might be illegal per se. ....
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....iers to new entrants in the market; b. Driving existing competitors out of the market; c. Foreclosure of competition by hindering entry into the market; d. Accrual of benefits to consumers; e. Improvements in production or distribution of goods or provision of services; f. Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services. Creation of barriers to new entrants in the market 81. While it is true that OP has placed restriction on other stem cell banks in its premises, it is definitely not correct to say that it has created barriers to new entrants - no evidence has been adduced by DG in this regard. The DG, in his supplementary report, has submitted that there were atleast 13 stem cell banks and that market share of Cryobanks in Mumbai was 34.54% (2011-12). Driving existing competitors out of the market 82. Citing exclusive tie-in arrangement between OP and Cryobanks, DG has observed that other competitors in the market of stem cell banking services are not allowed to cater to the maternity patients of OP. It is also submitted that ....
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....nformant, the Commission is expected to act with caution where the informant is a third party or a busy body, who may be espousing the cause of someone-else with ulterior motive. A careful reading of the allegations contained in the information filed by Respondent No. 2 leaves no manner of doubt that in the garb of espousing public cause to highlight the alleged anti-competitive practice adopted by the appellant by insisting that the expectant mothers must avail stem cell banking services from Cryobanks, Respondent No. 2 had, in fact, espoused the cause of 'LifeCell', with whom the appellant had similar agreements in 2009-10 and 2010-11. As mentioned earlier, Respondent No. 2 had not come forward with the assertion that he is related to Smt. Manju Jain or was authorised by her to lodge a complaint against the appellant. The informant also did not claim that he is otherwise acquainted with Smt. Manju Jain and was espousing her cause against the appellant's refusal to allow LifeCell to provide stem cell banking services to her. In the absence of any direct or remote nexus between Respondent No. 2 and Smt. Manju Jain, the only possible source of information, which constitu....
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....ct of the case and conducted the entire exercise with a pre-conceived notion that the appellant was a super-speciality hospital and had acted in violation of the provisions of the Act. The findings recorded by the Jt. DG and the majority of the Commission, which have been extracted hereinabove unmistakably show that they are based on pure conjectures and imaginations and not on any concrete evidence. Although, Respondent No. 2 did not produce any evidence, the Commission proceeded to decide the matter by assuming that the agreement between the appellant and Cryobanks had adversely affected the growth of stem cell banking market and the same had the effect of foreclosing the competition in the stem cell banking market and create entry-barriers for competitors. 28. Another grave error committed by the Jt. DG and the Commission is non-examination of Smt. Manju Jain, who was the most important player in the entire episode involving alleged anti-competitive action of the appellant in collaboration with Cryobanks. Admittedly, the information lodged by Respondent No. 2 centred round the allegation that due to the anticompetitive agreement entered into between the appellant and Cryobanks,....
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....is purpose, it will be apposite to notice the provisions of Sections 3 and 19(3), (5), (6) and (7) of the Act. The same read as under: "Section 3 - Anti-competitive agreements - (1) No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. (2) Any agreement entered into in contravention of the provisions contained in subsection (1) shall be void. (3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which-- (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) s....
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....r classes of persons to whom goods are sold or from whom goods are bought; (e) "resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged. (5) Nothing contained in this section shall restrict-- (i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under-- (a) the Copyright Act, 1957 (14 of 1957); (b) the Patents Act, 1970 (39 of 1970); (c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999); (d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999); (e) the Designs Act, 2000 (16 of 2000); (f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000); (ii) the right of any person to export goods from India to the extent to which the agreement relates exclusively to the....
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....es; (d) exclusion of in-house production; (e) existence of specialised producers; (f) classification of industrial product" 32. A plain reading of Section 3 makes it clear that sub-section (1) thereof can be invoked only if the agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services causes or is likely to cause an appreciable adverse effect on competition within India. Sub-section (2) of Section 3 is declaratory in nature. It provides that any agreement entered into in contravention of the provisions of Section 3(1) shall be void. Sub-section (3) contains a presumption of an appreciable adverse effect on competition if the agreement has any of the effects/consequences enumerated in clauses (a) to (d). Sub-section (4) lays down that any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provisions of services including those specified in clauses (a) to (e) shall be an agreement in contravention of sub-section (1) if such agreement c....
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.... as Consumer Protection Act, 1986 ('the Act of 1986') which mainly deals with protection of consumer interest against the deficiencies in services or goods being purchased by the consumers from sellers. Therefore, there is a clear difference between the two statutes stated above. The Competition Act is primarily concerned with ensuring and maintaining free and fair competition in Indian markets and the Act of 1986 is looking after individual consumer grievances against unfair trade practices and deficiencies in goods/services. 7. Finally, section 3 deals with two kinds of agreements. Section 3(3) of the Act, deals with horizontal agreements i.e., where the parties are engaged in identical or similar trade of goods or provision of services which determines the purchase or sale price, limit or control the production, indulge in bid rigging, etc. Whereas section 3(4) of the Act, deals with vertical agreements which are tie-in-arrangement, exclusive supply agreement and refusal to deal between the parties who are at different levels of production chain in different markets. The informant did not substantiate how the agreement between OP1 and OP6 has infringed section 3(1) of ....
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....9;, the Commission observed: "56. There are two issues that need to be highlighted before commenting on the dominant position of the opposite parties. Firstly, the business model/strategy of Apple in India need to be emphasized. At the time of launch of iPhones in India, Apple did not have its own retail stores. It might have been a conscious decision of Apple to sell the iPhones through existing mobile network operators (MNOs) in a locked state apart from APRs. This arrangement suited both Apple and MNOs since the former did not have to incur establishment/marketing expenditures while the latter were guaranteed of turf-client for the period of lock-in. In any case, the locked-in customers had the option to get their phone unlocked by paying some fees. It is observed that similar arrangement has been made by Apple in many countries where it launched its iPhones. For instance, in the US, AT & T has been the exclusive network of the iPhone. 57. Secondly, the Commission notes that while the Informant has submitted that information pertains only to iPhone 3G and 3GS, it is not clear whether data relied in the information to portray Apple's position includes all vari....
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....ore so when they are competitors in the same market. 62. In view of the above discussion, Commission opines that since dominance does not get established, there can be no case for abuse of dominance under Section 4 of the Act." The Commission then discussed whether the agreements between the respondents were anti-competitive, referred to Section 3 of the Act and proceeded to observe: "66. A tying arrangement occurs when, through a contractual or technological requirement, a seller conditions the sale or lease of one product or service on the customer's agreement to take a second product or service. In other words, a firm selling products X and Y makes the purchase of product X conditional to the purchase of product Y. Product Y can be purchased freely on the market, but product X can only be purchased together with product Y. The product that a buyer is required to purchase in order to get the product the buyer actually wants is called the tied product. The product that the buyer wants to purchase is called the tying product. Examples of tying include the tied sales of machines and complementary products, the tied sales of machines and maintenance services, as....
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....vement as also addressing pricing inefficiencies. Generally, the following conditions are necessary and essential in respect of anti-competitive tying: 1. Presence of two separate products or services capable of being tied: In order to have a tying arrangement, there must be two products that the seller can tie together. Further, there must be a sale or an agreement to sell one product or service on the condition that the buyer purchases another product or service (or the buyer agrees not to purchase the product or service from another supplier). In other words, the requirement is that purchase of a commodity was conditioned upon the purchase of another commodity. 2. The seller must have sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product: An important and crucial consideration for analyzing tying violation is the requirement of market power. The seller must have sufficient economic power in the tying market to leverage into the market for the tied product. That is, the seller has to have such power in the market for the tying product that it can force the buyer to pu....
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.... not have an outlet to sell its iPhone, a high-end smartphone. Instead of investing money on creating sales and service outlet and incurring advertisement expenditure, Apple's strategy was to have tactical agreement with network operators, possibly the best partners for selling mobile handsets. This arrangement also helped Apple in gauging the public perception for iPhone before actually selling iPhone through its own retail stores. The mobile network companies who spent money on creating distribution channel and incurring advertisement expenditure wanted the iPhone to be locked-in for some period so that they would be able to recoup their investment over a period of time. 73. To assess the alleged anti-competitive effect of the tie-in arrangement between Apple and Airtel/Vodafone in line with Section 19(3), the Commission examined the following: A. Share of markets: Market share of Apple iPhone in the smartphone segment; subscribers using Apple iPhone as a percentage of total GSM subscriber. B. Sanctity of exclusivity under multiple arrangements of Apple with other service providers as well as premium resellers, apart from the cited opposite parties. ....
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....king fees is free to choose the network operator of his choice. 77. On the basis of facts submitted by the DG, none of the OPs have a position of strength to affect the market outcome in terms of market foreclosure or deterring entry, creating entry barriers or driving any existing competitor out of the market and within the theoretical framework of tying arrangement, the anti-competitive concerns in terms of section 3(4) violations does not hold. On the other hand, Commission has reasons to believe that the distribution arrangement between the impugned parties helped create a market for iPhone in India wherein domestic consumers got an opportunity to purchase a contemporary handset which was otherwise available through the grey market. 78. The Commission does not find any evidence to show that entry-barriers have been created for new entrants in the markets i.e. smartphone market and mobile services market by any of the impugned parties. Similarly, nothing has been brought to the notice of the Commission to reveal that existing competitors have been driven out from the market or that the market itself has been foreclosed. 79. Under these circumstances, on t....
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....iew expressed by the Tribunal in Appeal No. 79 of 2011-M/s. Excel Corp Care Limited Vs. Competition Commission of India and others decided on 29.10.2013 along with Appeals Nos. 80 and 81 of 2012. In that case, the Commission had imposed penalty on the appellants @ 9 % of the average turnover of three financial years. While modifying the order of the Commission, the Tribunal made the following observations: "60. The arguments put forward by Shri Ravinder Narain, Shri Ramji Srinivasan as also by Dr. V.K. Aggarwal are more or the less correct when they point out the total absence of reasons as to why the CCI decided to inflict the penalty @ 9% of the average turn over. Time and again we have been reiterating the necessity of the reasons while ordering the penalty. We hope that the CCI take serious note of that factor. This is particularly true as the CCI is an adjudicatory body as declared by two Supreme Court judgments. The role as an adjudicatory body would cover all the aspects of hearing and deciding. 61. There can be no dispute that where harsh financial penalties are inflicted the reasons become all the more necessary. 62. All the learned counsels very se....
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....ated that the other products of those companies have no connection and do not depend upon the product involved in this matter, that is ALP Tablets. We, therefore reject the argument of Shri Balaji Subramanian." [Underlining is mine] (ii) It is not in dispute that the appellant is a multi-speciality hospital and its total annual turnover is the income derived from the services provided in different specialities and not maternity services alone. The figures provided by the appellant (paragraph 47 of the written submissions filed on 20.03.2015) show that the total commission earned by the appellant from Cryobanks was Rs. 85,45,567/- from September, 2011 to August, 2012 and September, 2012 to August, 2013. The total maternity revenue generated from maternity patients who availed Cryobanks' services during the aforesaid period from 2011 to 2013 was Rs. 3,96,76,307/- and overall maternity revenue for the same period was Rs. 4,92,80,090/-. The average maternity turnover for preceding three financial years i.e. 2009-10, 2010-11 and 2011-12 was Rs. 2,01,89,412/-. Unfortunately, the Commission clubbed the revenue generated from all the services provided by the appellant h....
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....f statutes, one of which is the rule of contextual interpretation. This rule requires that the court should examine every word of a statute in its context. In doing so, the Court has to keep in view preamble of the statute, other provisions thereof, pari materia statutes, if any, and the mischief intended to be remedied. Context often provides the key to the meaning of the word and the sense it carries. Its setting gives colour to it and provides a cue to the intention of the legislature in using it. In his famous work on Statutory Interpretation, Justice G.P. Singh has quoted Professor H.A. Smith in the following words: No word, says Professor H.A. Smith 'has an absolute meaning, for no words can be defined in vacuo, or without reference to some context'. According to Sutherland there is a 'basic fallacy' in saying 'that words have meaning in and of themselves', and 'reference to the abstract meaning of words', states Craies, 'if there be any such thing, is of little value in interpreting statutes'. ... in determining the meaning of any word or phrase in a statute the first question to be asked is - 'What is the natural or ordina....
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.... in isolation. Statutes have to be construed so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the Court construed the expression 'prize chit' in Srinivasa (1980) 4 SCC 507 and we find no reason to depart from the Court's construction. 27. In R. v. National Asylum Support Services (2002) 4 All ER 654, LORD STEYN observed "the starting point is that language in all legal texts conveys meaning according to the circumstances in which it was used. It follows that context must always be identified and considered before the process of construction or during it. It is, therefore, wrong to say that the court may only resort to the evidence of contextual scene when an ambiguity has arisen." [Underlining is mine] 39. Section 3 speaks of anti-competitive agreement and Section 4 deals with abuse of dominant position. A finding that the particular agreement is anti-competitive or any enterprise or group of enterprises are guilty of abuse of dominant position can be recorded only with reference to the ....