TaxTMI 
TaxTMI 
2015 (12) TMI 1776
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which a small percentage of country's 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 Gynaeco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the technology available with various stem cell banks has been produced before the Tribunal in the form of a chart, which is reproduced below: 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 ban....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the appellant to allow LifeCell to provide its services at the Hospital but the latter declined on the ground that it had an exclusive agreement with Cryobanks. Thereafter, Smt. Manju Jain contacted Seven Hills Multi Super-Speciality 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-comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces is also the customer of LifeCell for umbilical cord stem cell banking service. 25. As stated above, the cord blood has to be collected from the umbilical cord immediately after a baby's birth, ideally within 10 minutes. Therefore, the same 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nine, Bangalore. 13. By letter dated 27.07.2012, the Competition Commission of India (for short 'the Commission') directed Respondent No. 2 to appear for preliminary submissions. Respondent No. 2 availed that opportunity and also filed additional information dated 29.08.2012 reiterating his assertion that the appellant is guilty 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e relevant portions of which are reproduced below: "Given that the matter is currently under investigation, H Hospital was shocked to see that the Hon'ble Commission's recently published quarterly newsletter "'Fair Play" (Volume III, October - December, 2012) (Newsletter), discusses this case extensively (See Annexure 1). H Hospital was astounded to note that an article in the 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has been issued by the Hon'ble Commission." 17. Ordinarily, one may not take any exception to publication of the news about an order passed by the competent judicial/quasi-judicial forum, but if the news-item incorporates incorrect facts or does not disclose full facts, then a doubt arises about the bona fides of the author of the news-item. In the new-item in question, it was erroneously mentioned that the informant 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5.5 It is further held that OP has indulged in practice resulting in denial of market access and therefore its action is violative of section 4(2)(c) of the Act. 5.6 The tie-in arrangement between Hiranandani Hospital and M/s. Cryobanks is an agreement in contravention of section 3(1) read with section 3(4) of the Act. 5.7 In view of the above, the allegations levelled by the informant against M/s. L.H. Hiranandani Hospital are found to 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 exam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts of hospitals submitted by four umbilical cord stem cell agencies, viz. M/s. StemCyte India, M/s. Cordlife Science India Pt. Ltd., M/s. Reelabs and M/s. Cryo save India requesting H Hospital to, classify such clients/hospitals into the categories of Super Speciality Hospitals, Nursing Home (Multi-facility), Stand-alone Nursing Homes, and other hospitals, as listed in the Hon'ble Commission's order directing further investigation. 10. At the outset H Hospital submits that the purported classification of medical establishments into the categories specified in the Hon'ble Commission's order directing further 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, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... gathered from the information available in public domain that all the Hospitals in Mumbai are registered under "The Bombay Nursing Homes Registration Act, 1949". Section 2 of the Act, defines Maternity Home and Nursing Home as (3) "maternity home" means any premises used, or intended to be used, for the reception of pregnant women or of women in or immediately after child birth; (4) "nursing home" means any premises used, or intended to be used, for the receipt of persons suffering from any sickness, injury or infirmity and the providing of "treatment and nursing for them, and includes a maternity home; and the expression "to carry on a nursing home" means to receive persons in 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Trust (Public or Private), Corporation, Local Authority or run by a single Doctor. But again, this new Act has not defined/classify the nature of clinical establishments into Super Speciality, Nursing Home (Multi Facility) or Standalone Maternity Home. 3.12 In view of the above, it is therefore, difficult to classify the Hospitals into four categories as asked at point 2 of the order under Section 26(8) of the Act. However, in the following paragraphs, it is tried to ascertain the nature of Super-Speciality hospital as below: 3.13 National Accreditation Board for Hospitals and Healthcare Providers (NABH) is a constituent board of Quality Council of India, set up to establish and operate accreditation programme for healthcare organisations. 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 3.20 On analysis of these data of maternity patients, who had also availed Stem Cell Services in different Hospitals of Mumbai, the number and percentage of maternity patients in the Super Speciality Hospitals (12 in No. as per Table -2 above) are as below:- 3.21 It is seen therefore, that out of 3291 maternity patients, 1112 had preferred Super Speciality hospitals for availing the services of Stem Cell banking. Hence, the patients going to Super Speciality hospital is about 33.78% and rest 66.22% maternity patients had gone to maternity homes, standalone nursing homes and all other remaining hospitals. 3.22 Further, data from the Website of Municipal Corporation of Greater Mumbai (MCGM) is obtained in regard to no. of hospitals registered with the Corporation. A copy of the information on Hospitals of all the wards 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 He....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the distance travelled by seekers of maternity services in Super Speciality Hospitals (ii) Nursing Home (Multi facility) (iii) Stand-alone maternity homes and (iv) other hospitals patients of Mumbai is 1845 only. This sample includes all the patients seeking maternity services at all categories of Hospitals in Mumbai. A random sample of such patient's data base would include Super Speciality Hospitals, Nursing Home, Multi Facility Hospital, Stand-alone Maternity Homes and other Hospitals. Therefore, segregation of patients detail under each category of Hospital is not required at all. Rather randomness of the data base would be high if we keep the sequence of the data base unchanged and pick up a random sample with certain logic. For example, if we pick up every 5th patient from unchanged sequence of the data of patients provided by a particular stem cell provider, probability of randomness of the nature of the Hospital in that number and every multiple of that number would 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dinarily incurred by patients obtained child birth services along with the rent of such rooms. This has been specifically stated in H Hospital's submissions to the DG dated 3 April, 2013 at footnote 10 of page 14. In any event, the DG did not conduct an independent investigation of maternity service prices in exercise of his investigative duties and without any basis jumps to an incorrect conclusion that low end hospitals/nursing homes do not compete with H Hospital and to suit pre-determined outcomes. (ii) The DG has stated that H Hospital did not provide any evidence of the technical evaluation process for appointing an umbilical cord stem cell bank, as requested by the DG pursuant to the summons hearing. H Hospital's internal records of the technical evaluation of umbilical cord stem cell banks were submitted to the DG and also explained at length in H Hospital's legal submissions to the DG. The DG has ignored the evidence on record which clearly demonstrates that H Hospital conducts an annual objective selection process for choosing an umbilical cord stem cell bank to contract which leads to competition for the market. (iii) The DG has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts alone and not on an empirical or objective analysis which would demonstrate that LifeCell 's significant market shares, recent entry and exponential growth of the downstream market are evidence of fierce competition and there is no foreclosure. (vi) The Supplementary Report is flawed as it does not comply with the Hon'ble Commission's direction to provide information on the distance travelled by seekers of maternity services from (i) super speciality hospitals: (ii) nursing homes (multi-facility); (iii) stand-alone maternity homes; and (iv) other hospital patients. To support the incorrect findings on the geographic market as contained in the original DG Report, the DG seeks this information not from the categories of medical establishments as mentioned above, but from stem cell banking companies and analyses data of patients who availed of both stem cell banking and maternity services instead of those who obtained maternity services alone. This conclusion is therefore flawed and cannot be relied upon. (vii) Finally, the DG has not obtained submission or even recorded the informant's or Mrs. Jain's testimony to test the veracity....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in isolation; (iv) Fourth, the DG fails to identify what exactly constitutes a "Super Speciality Hospital". The DG's definition of the relevant product market as maternity services at Super Speciality Hospitals is subjective, arbitrary, and seems to have no basis in any acceptable definition of the same; and (v) Finally, the DG's product market definition of "Super Speciality Hospitals" is contradicted by the DG's findings in the supplementary investigation. The Supplementary Report demonstrates that there is no clear and objective definition of what a Super Speciality Hospital is and that no statute in India states or market players in the healthcare industry or the Informant itself believe, that Super Speciality Hospitals constitute a separate class of medical establishments. The results of the Supplementary Report however are no incorporated or addressed by the DG to analyse the product market as defined in the DG Report. 9. The DG's product market definition presupposes that "Super Speciality Hospitals" are in fact a separate class of medical establishments. The DG has only examined what he believes are "Super Speci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ital by a patient, by reason of price, characteristics, or intended use. When defining a relevant product market under Section 2(t) of the Competition Act, one should examine the demand-side of the market and ask whether, from a consumer's perspective, product A is a substitute for product B? Whilst the DG identifies that maternity services at Super Speciality Hospitals is the relevant product market in this case, the Dg has failed to consider whether a set of maternity service providers (i.e. "Super Speciality Hospitals") would be considered a interchangeable or substitutable by a patient (i.e. a consumer) for maternity services at other healthcare establishments, by reasons of characteristics or prices or any other features. The fundamental question in defining the product market in this case is whether maternity patients at a Super Speciality Hospital would consider maternity services at other healthcare establishments (general hospitals, specialist maternity clinics/hospitals, nursing homes and birthing centre) as being substitutable/inter-changeable, which has not been assessed by the DG. 14. Instead of conducting such an analysis, the DG merely jumps to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e factors, such as, quality of services, choice of gynaecologist, affect a consumer's purchasing behavior and are taken into account by an expectant mother in choosing a hospital for child-birth. The importance on non-price factors in defining relevant markets in the healthcare industry has also been repeatedly recognized by American Courts in antitrust cases. In FTC v. Tenet Healthcare, the US Federal Trade Commission (FTC) and the district court had defined the relevant market as consisting of only low-cost hospitals and HMOs (Health Maintenance Organizations, which provide low-cost health care) and had specifically excluded high-cost hospitals. On appeal, the US 8th Circuit Court of Appeal found that: "the fact that Cape Girardeau hospitals are higher priced than Poplar Bluff hospitals does not necessarily mean they are not competitors. See, e.g., United States v. Archer-Daniels-Midland Co., 866 F.2d 242, 246-47 (8th Cir. 1988). The district court placed an inordinate emphasis on price competition without considering the impact of a corresponding reduction in quality". The DG however has failed to analyse the actual economic strata of H Hospital's patients or other non-p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... defining a relevant product market. 28. The DG's sole basis for identifying 'Super Speciality Hospitals" as a standalone category of healthcare establishments is purported to be based on NABH guidelines (which has not been referred in the Supplementary Report). The Supplementary Report states "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, Neuroradiology, Rheumatology, Cardiac Anaesthesia, Child & Adolescent psychiatry, Paediatrics Gastroenterology, Paediatric Cardio-Thoracic Vascular Surgery, Urology, Neuro-surgery, Paediatric Surgery, Plastic & Reconstructive Surgery, Surgical Gastroenterology, Surgical Oncology, Gynaecological Oncology, Endocrine Surgery, Vascular Surgery, Hepato-Pancreato-Biliary Surgery". However, this classification of what constitutes a "Super Speciality centre" is not provided for in an NABH "guideline"; rather, this has been imported from an NABH application form for applying for NABH accreditation by "Small Health Care Or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns in statutes do not define a relevant product market, Instead, all medical establishments that share a competitive relationship and compete with H Hospital would have to be included in the relevant product market. 31. Further, the Informant, when directed by the DG to segregate hospitals into Super Speciality Hospitals, Nursing Home (Multi-facility), Stand-alone Maternity Homes, and Other Hospitals, responded stating: "We are unable to provide information in this regard". Stem cell banks were also directed by the DG to segregate medical establishments into the four above mentioned categories but were unable or did not do so - only two stem cell banks (StemCyte and Cord Line) had provided any segregation and, in fact, StemCyte, in identifying Super Speciality hospitals also stated "categorization mentioned against each hospital might not be accurate in some cases". The very fact that both the Informant and most stem cell Banks in India could not classify healthcare organizations into "Super Speciality Hospitals", itself demonstrates that the Hon'ble Commission should also not adopt such an incorrect and artificial classification and should not narrow the relevan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss in themselves, and the other medical establishments that share a competitive relationship and compete with H Hospital. Failure to properly consider factors listed under Section 19(7) of the Competition Act 34. Section 19(7) of the Competition Act contains a non-exhaustive list of factors which should be used when applying the Section 2(t) definition of a relevant product market. 35. The factors listed in Section 19(7) of the Competition Act are as follows: physical characteristics or end-use of goods; price of goods or service; consumer preferences; exclusion of in-house production; existence of specialized producers; and classification of industrial products. Though the DG has broadly stated that, "in the context of the present case if one considers the distinct price and non-price factors of Super Speciality hospitals as against other categories of hospitals, the same suggests that Super Speciality Hospitals are in fact a distinct product market in themselves. A patient desiring to avail the services of Hiranandani Hospital or Seven Hills or other Hospitals like Fortis, Kokilaben etc. would not consider a mid-level or government hospital ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....person and three Members) passed order dated 05.02.2014, whereby it held that the agreement entered into between the appellant and Cryobanks is anti-competitive being in contravention of Section 3(1) of the Act as it has caused appreciable adverse effect on competition in the market of stem cell banking and imposed penalty of Rs. 3,81,58,303/- (Rupees Three Crores Eighty One Lacs Fifty Eight Thousands Three Hundred and Three only). In paragraphs 7 to 9, the Commission noticed the preamble, some of the provisions contained in the Act including Section 3, it then referred to the agreement entered into between the appellant and Cryobanks and recorded the following observations: "20. Stem cell banking services sector is at nascent stage in India. It is a small market with very few players providing this service. Although, the DG report and OP hospital's submissions talk of 13 players in this market, the respective market share scenario of the players shows that LifeCell and Cryobanks are the two major players, collectively holding around 67% of the market share in stem cell collection in Mumbai. The exclusive contracts between a hospital and stem cell bank has a tend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of goods or provision of services. Neither has it been shown that any benefit would accrue to the consumer due to such agreements. The Commission notes that such agreement pre-closes market for new entrants. A new entrant instead of meeting productive and dynamic efficiency has to meet an efficiency in giving commissions to trick the customers to itself. This actually kills all competition replacing competition culture by commission culture. 22. A perusal of website of OP hospital shows that the hospital gives following assurance to its patients: The department of Obstetrics and Gynaecology is very vibrant. Equipment in the department is the latest and the technology is the cutting edge in this field. We cater to all the obstetric women and have a special High Risk Obstetric clinic. Foetal monitoring is done by 4D ultrasound machines that are the flagship models of the company. The department has the very latest suites for child birth such as the single room birthing complex or LDRP (Labour Delivery Recovery and Puerperium) suites. The suite helps the family to be with the laboring mother, till delivery. This helps in family bonding. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. From the above discussion, the Commission concludes that the agreement between OP hospital and Cryobank was an anti-competitive agreement in contravention of section 3(1) of the Act." [Underlining is mine] 23. In paragraphs 27 to 29 of the majority order, the issue relating to the alleged dominance of the appellant in the relevant market and abuse of dominant position by the latter in the context of the findings recorded by the Jt. DG was discussed and it was observed: "27. The second issue is about the dominance of OP hospital and abuse of dominance. For the purpose of section 4 of the Act, DG identified 'provision of maternity services by Super Speciality Hospitals' as the relevant product market and 'area within a distance of 0-12 km from O.P. hospital' as the relevant geographic market. DG carried out the patient inflow analysis from different wards to the hospitals and found that 63.70% of the maternity patients in the hospital were coming from wards S, L, N and K/E. The DG also found that two more wards T & P/S contributing 7.5% which had common boundaries with ward 'S' to be covered within the relevant geographic ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that it is not established that the OP hospital is dominant in the relevant market of 'provision of maternity services by Super Specialty/high-end Hospitals within a distance of 0-12 km from the Hiranandani Hospital covering S, L, N, K/E, T & P/S wards of Municipal Corporation of Greater Mumbai'." 24. One of the Members, namely, Dr. Geeta Gouri, passed a dissenting order. She agreed with the majority that the finding recorded by the Jt. DG on the issue of alleged dominant position enjoyed by the appellant in the relevant market and abuse thereof was legally imperfect and held that there was no contravention of Section 4 of the Act. She then referred to the data collected by the Jt. DG and pointed out that 93% of the patients had availed only maternity services in the hospital and 7% out of the total patients numbering 3602 had availed stem cell banking services between 2009 and 2012. The learned dissenting Member further observed that the agreement between the appellant and Cryobanks does not stop the latter from enrolling patients from other hospitals where it provides services. The learned dissenting Member then discussed various clauses of Section 3(4) and held that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such agreement causes or is likely to cause an appreciable adverse effect on competition in India". 60. The DG, in his investigation report, has annexed four agreements signed by OP on yearly basis. First two of these are with LifeCell and latter two with Cryobanks. It is noticed that the fourth agreement (signed with Cryobanks for the period w.e.f. 01.09.2012 to 31.08.2013) states that Cryobanks has exclusive tie-up with other hospitals as well. It has also been submitted by the OP that all agreements signed by the OP with different stem cell banks are for a period of one year only and that these are terminable on notice by either party. Further, there is a process of objective evaluation in selecting the preferred stem cell bank. The OP has also submitted that Cryobanks has been selected objectively on account of its superior technology and in consumer's interest despite the fact that it was offered greater remuneration by competitor stem cell banks. Issue: Is there is a vertical relationship between the OP and Cryobanks? 61. In the present case, while it is true that a hospital rendering maternity services does not require stem cell ban....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ernity services, but also with umbilical stem cell bank for collection of umbilical cord stem cells. Issue: Can the agreement between OP and Cryobanks be termed as a tie-in agreement? 64. Explanation (a) to Section 3(4) of the Act defines tie-in as including any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods. In line with this, the agreement between OP and Cryobanks shall be tested for tie-in arrangement. 65. The Commission, in its Order Sonam Sharma v. Apple & Anr. had discussed the intricacies of tying and bundling: "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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, reducing contracting costs, or creating dealer loyalty, they become anti-competitive when a firm uses exclusive contracts to impede efforts of new firms to break into the market or of smaller existing firms to expand their presence. In other words, it has to be established that there has been injury to competition by way of foreclosure. 70. In the present case, conditions of exclusive supply agreement do not appear to hold true for the reason that OP does not stop Cryobanks from enrolling patients from other hospitals. This is supported from the fact that Cryobanks has exclusive tie-up with various hospitals across the country. In view of the aforesaid, it is opined that there is no foreclosure and accordingly no violation of Section 3(4) of the Act. Issue: Can the conduct of OP be said to be in the nature of refusal to deal? 71. According to explanation (d) of Section 3(4) of the Act, "refusal to deal" includes any agreement, which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought. 72. From the above, it emerges that allegation pert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; (ii) the OP is able to influence less than 1% maternity patients in the area of Mumbai, if at all it does so; (iii) The effect of so called tie-in is cast on less than 7% of its customers; and (iv) As submitted by OP, the practice of having an arrangement exists in other hospitals also. As regards contention of the Informant that other stem cell banks are restricted from doing business with the patients of OP, it would be appropriate to say that OP is within its right to choose its business partners in accordance with its commercial interests. Issue: Is there AAEC arising out of the agreement OP and Cryobanks? 77. Under AoD analysis, it has been shown that OP has less than 1% market share in terms of maternity services in Mumbai. Keeping this in mind, analysis of AAEC would be done. 78. In the present case, allegations pertain to: (a) tie-in arrangement; (b) exclusive supply agreement and; (c) refusal to deal. As discussed above the agreements are not in the nature of either tie in or exclusive supply agreement. 79. Furthermore, as discussed while the agreement may be in the nature of a "refusal to deal", however, a rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m cell bank has been driven out of the 'market' that may be relatable to the agreement signed between the OP and Cryobanks. Foreclosure of competition by hindering entry into the market 84. Citing market share of OP in the relevant market, the DG has submitted that the OP has foreclosed 62.27% of the market. Earlier in the order, it has been shown that the DG has taken an incorrect relevant market into account. Accordingly, this market share is incorrect. Furthermore, for the purpose of Section 3, foreclosure effect has to be assessed from 'market' perspective, for which 'relevant market' need not be taken into account. Also, as discussed earlier, there is no evidence of any sort of foreclosure of competition by hindering entry into the market - the market here is that of stem cell banking and not stem cell banking at the premises of the OP. In view of the foregoing, I am of the view that there is no AAEC and accordingly no case for Section 3(4) violation." 25. I have heard the learned counsel for the parties, considered the written submissions filed by them and carefully examined the record of the case. Two qu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndently entered into an agreement with LifeCell; that when Smt. Manju Jain contacted LifeCell for using its stem cell banking services, the latter informed her that the appellant had directed it not to enrol any patient of the hospital because Cryobanks is their cord blood banker with effect from 01.09.2011 and the patients are not allowed to use the services of any third party stem cell banker; that Smt. Manju Jain requested the appellant to allow her to engage LifeCell for collection of cord blood samples but the latter not only declined but also put undue pressure on her to terminate the existing agreement with LifeCell for umbilical cord stem cell banking services and to avail the services of a competitor i.e. CryoBanks; that Smt. Manju Jain refused to succumb to the undue pressure exercised by the appellant and opted for another high-end multi-speciality hospital for maternity services. These and other facts mentioned in paragraphs 23 to 30 of the information, some of which are factually incorrect and misleading, could, by no means, be in the personal knowledge of Respondent No. 2. The same could have been supplied only and only by LifeCell with whom Smt. Manju Jain had entere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ready entered into an agreement with LifeCell for obtaining stem cells from her umbilical cord (placenta)? (c) Whether the appellant had coerced her to terminate the agreement entered into with LifeCell and to avail the services of Cryobanks for stem cell banking? 29. The non-examination of Smt. Manju Jain was fatal to the allegations levelled by Respondent No. 2 that the appellant had indulged in anticompetitive activities and this omission would acquire greater significance in the backdrop of the fact that between 2009 and 2011, the appellant had entered into similar agreements with LifeCell with exclusivity clause and nobody including Respondent no. 2 had come forward to complain against the same. Of course, Respondent No. 2 has not offered any explanation as to why a qualified person like him did not complain against the agreement entered by the appellant with LifeCell. 30. What is most surprising is that the Commission did not independently examine the various factors enumerated in Section 19(3), (5), (6) and (7) for deciding what constituted relevant market for the purpose of the present case. Both, the Jt. DG and the majority of the Commission were under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. Explanation.-For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding (4) 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 provision of services, including-- (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse eff....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntion of the provisions contained in subsection (1) of section 3 or sub-section (1) of section 4 either on its own motion or on-- (a) [receipt of any information, in such manner and] accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or (b) a reference made to it by the Central Government or a State Government or a statutory authority. xxx xxx (3) The Commission shall, while determining whether an agreement has an appreciable adverse effect on competition under section 3, have due regard to all or any of the following factors, namely:-- (a) creation of barriers 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 33. While recording a finding that the appellant is guilty of violation of Section 3, the Jt. DG and the Commission completely overlooked that the agreement entered into between the appellant and Cryobanks did not, in any manner, restrict the choice of the service provider in the relevant market i.e. market for stem cell banking. By virtue of the agreement, the appellant could provide stem cell banking services to the patients who wanted to avail such services only through Cryobanks but the latter was free to enrol any patient(s) for such services to be availed in any other hospitals, maternity homes etc. That apart, there were 13 other players in the market of stem cell banking and the patients were free to avail services of any of these service providers according to their convenience and financial capacity. The Jt. DG and the Commission confused the basic issue by presuming that the stem cell banking service was an integral part of the maternity services provided by the appellant hospital and this confusion has resulted in miscarriage of justice in as much as the appellant has been found to be guilty of violating Section 3(1) of the Act without any evidence that the refusal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt alleged that Respondents Nos. 1 and 2 had entered into some secret exclusive contracts/agreements with Respondents Nos. 3 and 4 for sale of iPhone in India, even prior to its launch, as a result of that, Respondents Nos. 3 and 4 got exclusive rights to sell for undisclosed number of years. It was also alleged that the handsets sold by Respondents Nos. 3 and 4 were compulsorily locked and would work only on their respective networks and none other. The informant further alleged that with a view to maximise its profits, Respondent No. 3 had manipulated its internet services in such a manner that they were no longer usable on iPhones and introduced iPhone-specific plans, which were costlier than their normal internet plans and in this manner, the customers were made to pay extra for using internet on their iPhone. Another allegation made by the informant was that the prospective iPhone purchasers had to leave their respective network providers and to compulsorily opt for expensive mobile telephonic services. The Commission analysed the allegations made in the information and issued an order under Section 26(1) for investigation by the DG, who submitted report with the finding th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es all variants of iPhone. In the opinion of the Commission, relevant market cannot be segmented variant-wise (as has been proposed by the Informant) unless it is established that different variants have such distinct characteristic so as to be viewed as a distinct product by the customers the only test that has been enshrined in the Act is substitutability/interchangeability from demand perspective. 58. Coming to the issue of dominance of Apple, it is noted from various independent reports that Apple's share in smartphone market in India was around 3% during 2008-11. On this screening criterion, the argument of Apple's dominance falls flat. However, the DG has analysed dominance of other factors as envisaged under 19(4) conditions and has concluded that even then, Apple cannot be said to be in a dominant position. The Commission endorses the view of the DG. 59. As regards the dominance of OP3 and OP4 in the second relevant market, the DG has held on the basis of section 19(4) conditions that neither Airtel nor Vodafone has adequate market power so as to be deemed dominant. Also, the argument made by the Informant that OP3 and OP4 hold nearly 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ementary products, the tied sales of machines and maintenance services, as well as technological ties that force consumers to buy two or more products from the same supplier due to compatibility reasons. More often, tying is a sales strategy usually adopted by the companies to promote/introduce a slow-selling or unknown brand when it has in its portfolio a fast-selling or well known product, over which it has certain market power. 67. Price bundling is a strategy whereby a seller bundles together many different goods/items for sale and offers the entire bundle at a single price. There are two forms of price bundling - pure bundling, where the seller does not offer buyers the option of buying the items separately, and mixed bundling, where the seller offers the items separately at higher individual prices. From producers perspective, mixed bundling is usually preferable to pure bundling, both because there are fewer legal regulations forbidding it, and because the reference price effect makes it appear even more attractive to buyers. Bundling is used as a strategic pricing tool by the producers to price discriminate among groups of buyers with different preference sch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d product. That is, the seller has to have such power in the market for the tying product that it can force the buyer to purchase the tied product. 3. The tying arrangement must affect a "not insubstantial" amount of commerce: Linked with the above requirement, tying arrangements are generally not perceived as being anti-competitive when substantial portion of market is not affected. 70. The present case involves a distribution/sales arrangement between Apple and Airtel/Vodafone is a case of 'contractual tying' wherein the handset manufacturer and service provider have joined hands to offer a packaged product to a customer. Tying arrangements are common in the wireless-telecommunications industry. Worldwide wireless networks compete for exclusive contracts to offer popular mobile devices. However, the Commission deliberated on whether such tying arrangements are anti-competitive. An agreement between two parties in a vertical chain to be anti-competitive essentially requires that the intention of such an agreement was foreclosure in both the relevant markets resulting in considerable consumer harm. But as pointed out that for a v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otal 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. C. Effect of the tie-in arrangement between a handset manufacturer and a service provider vis-a-vis consumer choice. 74. Relying on the market share statistics of smartphones in India as provided by the DG, the Commission observes that Apple had a share of less than 6% in the market of smart phones during the period 2008-11. Furthermore, share of GSM subscribers using Apple iPhone to total GSM subscribers in India is miniscule (less than 0.1%). Similarly, relying on the data provided by the DG on mobile service provider, the Commission observes that no operator has more than 35% market share in an otherwise competitive mobile network service market. As none of the impugned operators (OP3/OP4) have market-share exceeding 30%, that smartphone market in India is less than a tenth of the entire handset market and that Apple iPhone has less than 3% share in the smartphone market in India, it is highly improbable that there would be an AAEC in the Indian market. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 the basis of the counter-factual posed, the Commission opines that there is no anti-competitive effect of the tie-in arrangement as alleged by the Informant. In fact, there is some suggestion in the literature that the earlier tying arrangement between the iPhone and the service providers in other jurisdictions may have spurred wireless service providers to invest in innovation in mobile devices. Such innovation has resulted in an explosion of new mobile devices and continued growth of the mobile communications industry. It has not caused the disastrous results on competition or the formation of double-monopolies that some have feared. Hence, the belief that the tying arrangement has caused serious harm is misplaced." 35. In the order under challenge, the majority of the Commission has not even referred to the view taken by it in Shri Sonam Sharma's case what to say of discussing the same. In her minority opinion, Dr. Geeta Gouri h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 seriously canvassed the question of "relevant turn over". The argument that the appellants, United Phosphorous Ltd. and M/s. Excel Corp Limited, are the multi product companies was not seriously disputed by Shri Balaji Subramanian, learned counsel for the CCI. We have no reason not to accept that factor. As regards the arguments based on EU and OFT guidelines, we are of the opinion that those guidelines are undoubtedly relevant in arriving at the issue of deciding upon the turn over. However, those guidelines cannot be treated as be all and end all in the matter and would have to be considered in the light of the facts of each case. We, however, accept the contention that in the circumstances of this case the relevant turn over should be considered in case of the two appellants who are multi product companies. To that extent we generally agree with the sentiment expressed in the relied upon judgment of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rall 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 hospital and accordingly imposed penalty, which is legally impermissible in view of the Tribunal's order in M/s. Excel Corp Care Limited Vs. Competition Commission of India and others. (iii) Since the term 'turnover' appearing in clause (b) of Section 27 has not been defined, the same must take its colour from the preamble, definitions of various terms and other provisions of the Act including Sections 3 and 4, the contravention of which can invite an order of penalty and other consequences enumerated in Section 27. In this connection, reference can usefully be made to the proposition laid down by the Supreme Court in Central Bank of India Vs. State of Kerala and others -[ (2009) 4 SCC 94] on the interpretation of statutes. The question considered in that case was whether Section 38-C of the Bombay Sales Tax Act, 1959 (for short "the Bombay Act") and Section 26-B....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 ordinary meaning of that word or phrase in its context in the statute? It is only when that meaning leads to some result which cannot reasonably be supposed to have been the intention of the legislature, that it is proper to look for some other possible meaning of the word or phrase.' The context, as already seen in the construction of statutes, means the statute as a whole, the previous state of the law, other statutes in pari materia, the general scope of the statute and the mischief that it was intended to remedy. In Poppatlal Shah v. State of Madras 1953 Cri LJ 1105, this Court while construing the word 'sale' appearing in the Madras General Sales Tax Act, 1939 before its amendment in 1947, observed: it is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a statutes are to be t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne 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 particular goods, product or service. An enterprise may be engaged in manufacture, production, supply, distribution, etc. of multiple products. Another enterprise like the appellant may be engaged in providing multi-dimensional services. Such enterprise may be found guilty either of entering into anticompetitive agreement with reference to particular product/goods or services or may be held guilty of abuse of dominant position in respect of such product/goods or services, but the finding of violation of Sections 3 and/or 4 of the Act recorded by the competent authority i.e. the Commission cannot be made applicable to agreements entered into between the enterprise and another person in respect of other products, goods or services qua there is no allegation of anti-competitive agreements or abuse of dominant position and the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any Technology Launch Operation Partner Year Base 1. Life Cell International CryoCell International USA 2004 Chennai 2. CryoBanks India CryoBanks International, 2006 Gurgaon USA 3. Reliance Life In-house 2002 Mumbai Sciences 4. CryoSave.India CryoSave 2007 Bangalore International, Belgium 5. Cord Life India CordLife Intenrnational, Singapore 2008 Kolkata 6. Jeevan Cord In-house 2008 Chennai Blood Bank 7. Rotary Narayana Narayana 2008 Bangalore Cord Blook Bank Hridhalaya Document 2 Sr. No. Cord Bank Company Company profile 1. LifeCell, Associated Based in Chennai with CRYO- CELL, USA, world's first & biggest cord blood bank; Exclusive technology tie- up Indian Market India's first & largest private stem cell bank; Started its operations in 2004; First Stem Cell Bank in India to be accredited by AABB; Close to 32000 clients Additional Enrollment fees features Associated with LHHH for past 2 years; dedicat....