Tag Archives: CCI

penalty for bid rigging

https://pib.gov.in/PressReleasePage.aspx?PRID=1762993

The Competition Commission of India (‘CCI’) passed a final order against two firms, viz ; PMP Infratech Pvt. Ltd. and Rati Engineering, for indulging into concerted practices leading to bid rigging of tender floated by GAIL in 2017–18 for the  restoration of well site located in Ahmedabad and Anand areas of Gujarat.

Based on investigation and electronic/documentary evidence collected by the DG as well as other evidence available on record, CCI found that the two firms were in regular touch with each other regarding the tender floated by GAIL and even after the submission of their bids. Further the bids of two firms were submitted from same IP address from the premises of PMP Infratech Pvt. Ltd.’s office at Ahmedabad, with a one-day gap. CCI found such conduct to have contravened the provisions of Section 3(3)(d) read with Section 3(1) of the Competition Act, 2002 which prohibit anti-competitive agreements including bid rigging.

The CCI imposed a monetary penalty of Rs. 25 lakh on PMP Infratech Pvt. Ltd., Rs. 2.5 lakh on Rati Engineering and Rs 1 lakh and Rs 50 thousand on their respective individuals who managed and controlled the firms, besides passing a cease-and-desist order.

Leave a comment

Filed under competition laws

CCI penalty on beer companies

https://pib.gov.in/PressReleasePage.aspx?PRID=1757712

The Competition Commission of India (‘CCI’) passed a final order against three beer companies, namely United Breweries Limited (‘UBL’), SABMiller India Limited (now renamed as Anheuser Busch InBev India Ltd. after being acquired by Anheuser Busch InBev SA/NV) (‘AB InBev’) and Carlsberg India Private Limited (‘CIPL’) for indulging in cartelisation in the sale and supply of beer in various States and Union Territories in India, including through the platform of All India Brewers’ Association (‘AIBA’).

As AIBA was found to be actively involved in facilitating such cartelisation, CCI also held AIBA to be in contravention of the provisions of Competition Act, 2002 (the ‘Act’), apart from the beer companies. The period of cartel was held to be from 2009 to at least 10.10.2018 (the date on which the Director General (‘DG’) conducted search and seizure operations at the premises of the beer companies), with CIPL joining in from 2012 and AIBA serving as a platform for facilitating such cartelisation since 2013. All three beer companies were lesser penalty applicants before CCI.

Based on evidences of regular communications between the parties collected by the DG during search and seizure, and on the basis of the disclosures made in the lesser penalty applications, CCI found that the three companies engaged in price co-ordination in contravention of the provisions of Section 3(3)(a) of the Competition Act, 2002 (the ‘Act’) in the States of Andhra Pradesh, Karnataka, Maharashtra, Odisha, Rajasthan, West Bengal, National Capital Territory of Delhi and the Union Territory of Puducherry, in collectively restricting supply of beer in the States of Maharashtra, Odisha and West Bengal in contravention of the provisions of Section 3(3)(b) of the Act, and in sharing of market in the State of Maharashtra as well as co-ordination with respect to supply of beer to premium institutions in the city of Bengaluru in contravention of the provisions of Section 3(3)(c) of the Act. CCI also found co-ordination amongst UBL and AB InBev with respect to purchase of second-hand bottles. Further, 4 individuals of UBL, 4 individuals of AB InBev, 6 individuals of CIPL and the Director General of AIBA, were held by CCI to be liable for the anti-competitive conduct of their respective companies/ association, in terms of Section 48 of the Act.

Giving benefit of reduction in penalty under the provisions of Section 46 of the Act of 100% to AB InBev and its individuals, 40% to UBL and its individuals and 20% to CIPL and its individuals. The CCI directed UBL and CIPL to pay penalties of approx. Rs 750 crore and Rs 120 crore respectively, besides passing a cease-and-desist order.

Leave a comment

Filed under Uncategorized

Combination Regulations

COMBINATIONS IN COMPETITION LAW

The preamble to the Competition Act, 2002 states that its an Act, to provide, keeping in view the economic development of the country, for the establishment to prevent practices having adverse effect on the competition to promote and sustain competition in markets, to protect the interests of the consumers and to ensure freedom of trade carried on by other participants in markets in India.

Basically Competition Commission of India (CCI) regulates anti competitive agreements under section 3, abuse of dominance under section 4 and combinations under section 5 & 6. Here in this project we will look at combinations regulations under section 5 & 6 of the Competition Act, 2002 (“the Act”).

Basically combination control means two big companies or enterprises in terms of asset size or turnover do not come together and become another big giant thereby thwarting competition in the market. What the Act stipulates is that in such large mergers, the party or parties have to file an application with the CCI and take their approval. That in simplistic terms is what combinations regulations entails in the competition law in India. Now for the nitty gritty…..

SECTION 5

Section 5 only defines what a combination is. What has to be done if the combination comes within the purview of section 5 is to be seen in section 6 about which we will write later.

The preamble in section 5 says, “acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises or persons and enterprises…”. Now all these terms are defined in the definition section of the Act, which is section 2.

“Enterprise” means a person or a department of the government involved in commercial activities. “Person” means anybody from an individual to a firm, company, HUF, AOP, Corporation, co-operative society, body corporate incorporated outside India etc. Person is an inclusive definition. So in a nutshell, preamble to section 5 gives wide scope to the intention of the legislature in covering as much instances of combinations as possible.

Now there are 3 limbs to what does fall under the definition of combinations in section 5 – one is acquisition by one company by another company or entity, second is acquisition of control over the second company where the first company already has some shares or voting rights in a company which is in the same line of business, and the third is mergers or amalgamations between two or more companies. We shall see each in detail.

The first limb is any acquisition where the acquirer and the acquiree (the enterprise whose control, shares, assets are acquired or being acquired ) have

  • Assets of the value of more than Rs.1000 crore or turnover of more than Rs.3000 crores, in India, or
  • If taken in India or outside India, then, assets of the value of more than 500 million US dollars or turnover of more than 1500 million US dollar, including assets of Rs.500 crores in India or turnover of more than Rs.1500 crores in India.

In both the above cases, the criteria is either assets or turnover and in India or combination of India and abroad. This is in respect of individual companies. The definition also looks at group companies.

The group to which the company which is acquired would belong after its acquisition, whether by way of control, shares, assets or voting rights and such group has or would have

  • Assets of the value of more than Rs.4000 crore or turnover of more than Rs.12000 crores, in India, or
  • If taken in India or outside India, then, assets of the value of more than 2 billion US dollars or turnover of more than 6 billion US dollars, including assets of Rs.500 crores in India or turnover of more than Rs.1500 crores in India.

That covers the first limb of the combination definition under section 5 of the Act. Now we come to the second limb of the said definition which covers companies or persons already having direct or indirect control over a company in the same line of business. 

Here it refers to acquiring of control by a person over an enterprise when such person already has a control (direct or indirect) over another enterprise which is engaged in similar or identical or substitute products or services as the company being sought to be acquired. If the enterprise which is being acquired and the enterprise which is sought to be acquired has,

  • Assets of the value of more than Rs.1000 crore or turnover of more than Rs.3000 crores, in India, or
  • If taken in India or outside India, then, assets of the value of more than 500 million US dollars or turnover of more than 1500 million US dollar, including assets of Rs.500 crores in India or turnover of more than Rs.1500 crores in India.

If taken as a group concept, then the above criteria would apply i.e.

  • Assets of the value of more than Rs.4000 crore or turnover of more than Rs.12000 crores, in India, or
  • If taken in India or outside India, then, assets of the value of more than 2 billion US dollars or turnover of more than 6 billion US dollars, including assets of Rs.500 crores in India or turnover of more than Rs.1500 crores in India.

In such cases if it falls above the threshold mentioned above, then it becomes a combination subject to regulation by the CCI.

The third limb of section 5 refers to mergers or amalgamations between two or more entities. In such if the enterprise remaining after the merger or the enterprise created as a result of the amalgamation would have

  • Assets of the value of more than Rs.1000 crore or turnover of more than Rs.3000 crores, in India, or
  • If taken in India or outside India, then, assets of the value of more than 500 million US dollars or turnover of more than 1500 million US dollar, including assets of Rs.500 crores in India or turnover of more than Rs.1500 crores in India.

For a group concept, the same limits as above apply i.e.

  • Assets of the value of more than Rs.4000 crore or turnover of more than Rs.12000 crores, in India, or
  • If taken in India or outside India, then, assets of the value of more than 2 billion US dollars or turnover of more than 6 billion US dollars, including assets of Rs.500 crores in India or turnover of more than Rs.1500 crores in India.

That’s the threshold part, wherein any combinations above the threshold stipulated above would fall under the purview of the CCI and the entity or entities would have to make necessary applications to the CCI.

Definitions of control, group and value of assets are given in the explanation to section 5 so it would  be useful to go through the same whilst determining the threshold levels under this section.

Control means controlling the affairs & management of one enterprise either singly or jointly by another enterprise or group or one or more groups controls the second group.

Group means one or more enterprise controls 26% or more of the voting rights in the other enterprise or has power to appoint more than 50% of the board of directors or controls the management or affairs of the other enterprise. Whereas control is an inclusive definition, group is not but still the definition of group leaves open for interpretation. It is not in the mould of a holding subsidiary relationship or associate company relationship as specified in the Companies Act, 2013.

Value of assets is nothing but book value of assets as reduced by depreciation. Latest audited figures have to be considered and the value of assets shall include intangible intellectual property rights as well.

REGULATION OF COMBINATIONS:

Regulation 6(1) starts with a bang. It says no person or enterprise shall enter into a combination which causes or is likely to cause appreciably adverse effect on competition (AAEC) within the relevant market in India and such a combination shall be void.

Its like a diktat, like a command, no you cannot do it. Period.

So the onus clearly lies on the parties concerned to be aware of the compliances to be carried out under the Act. The key word here in the clause above is “the relevant market”.

Section 6(2) specifies that any person or enterprise who proposes to enter into a combination shall give notice to the CCI within 30 days of the Board meeting approving the proposal of  merger or acquisition OR within 30 days of entering into an agreement for acquisition or control which results in combinations.

No combination will have an effect until 210 days has been passed from the date on which notice has been sent to the CCI or until the CCI has passed an order, whichever is earlier. Once the CCI receives the notice as above, then they are bound to deal with it as per the provisions of sections 29, 30 & 31 of the Act, which deals with the procedural part of the investigation of the Combinations and the Orders to be issued thereat.

In case a combination which supposedly comes within the purview of these regulations are not notified then the CCI has suo moto powers to inquire into it, within one year of the taking into effect of combination. The CCI has also the power to impose a fine for failure to give notice to the CCI and the fine can extend upto 1% of the total turnover or assets of the combination, whichever is higher.

If the CCI does not pass an order within 210 days as stated above, then the combination shall have been deemed to have been approved.

The provisions of section 6 will not apply to a share subscription, financing facility, or acquisition by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any loan covenant or agreement. For eg. Any loan terms provide for conversion of the loan into equity upon non payment of the instalments by the borrower, then in such a situation, the provision of section 6 will not apply and these agencies i.e. banks etc. need not make any application to the CCI in this regard.

But there is a duty cast upon such public financial institution, bank etc. to intimate the CCI within 7 days from the date of acquisition in a specified form, the details of the acquisition, details of control, the circumstances which arose for acquisition of that control, consequences of a default in loan covenants as per the loan agreement etc.

PROCEDURE FOR INVESTIGATION OF COMBINATION:

The CCI is required to form a prima facie opinion as to whether the combination is likely to cause or has caused appreciable adverse effect on the competition within the relevant market in India within 30 days of the receipt of the notice u/s 6(2). Where the CCI arrives at the prima facie opinion as such, then it has to issue show cause notice to the parties to the combination asking them to respond within 30 days of the receipt of notice as to why an investigation in respect of such combination should not be conducted.

After the parties have responded to the show cause notice as above, CCI will then ask the DG (Director General) to submit his report within the time prescribed by the CCI.

Once the CCI makes a prima facie opinion that the combination is likely to result in an appreciably adverse effect on the competition, then it shall, within 7 days of the receipt of the response from the party or from the date on which DG files his report, whichever is later, ask the parties to the combination to publish the details of the combination in a newspaper in order to bring it to the notice and knowledge of the public and persons affected or likely to be affected by such combination. The parties have to make the publication within 10 working days of the direction by the CCI.

The said newspaper publication is also required to invite any member of the public or the persons affected or likely to be affected by the combination to file their written objections within 15 working days from the date of publication of the notice in the newspapers.

The CCI may further ask for additional information or other information from the parties to the combination within 15 working days from the above date i.e. the last date for written objections by the member of the public etc. And the parties to the combination are required to furnish within 15 working days from CCI request, all the additional information or other information sought for.

After all the information is received within the timelines stipulated above, the CCI shall proceed to decide the case in accordance with the provisions outlined in section 31 of the Act, within 45 working days of the last of the deadlines above. Everywhere it is working days, except 210 days which is actual number of days, not working days.

Section 29 is when the CCI suo moto comes to a prima facie opinion regarding the appreciably adverse effect on competition of any combination and section 30 is when the parties give a notice u/s 6(2) to the CCI. Even when the parties given notice as required u/s 6(2), the same procedure as outlined in section 29 shall apply.

Section 31 is where the orders of CCI comes in. Where the CCI is of the opinion that any combination is not or not likely to have any appreciably adverse effect on competition, then it may allow the combination by passing an order to that effect. Alternatively, if it feels otherwise, then it may not allow the combination.

CCI can also propose modification to the combination if it feels that suitable modification to the combination can bring the combination within the ambit of a permissible combination. If the parties accept such modification, then they are bound to carry out such modifications as proposed by the CCI within the period stipulated by the CCI.

Where the parties do not accept the modification proposal of the CCI, then within 30 days of the proposal by the CCI, they can submit their own amendment to the modification. And if the CCI agrees with the amendment proposed by the parties, then CCI shall approve the combination.

Where the CCI does not accept the amendment to the modification proposed by the parties, the CCI shall give a further period of 30 days to the parties to accept the modification proposed by it.

If the parties fail to carry out the modification or fail to accept the modification the combination can be said to have appreciably adverse effect on the competition to be dealt with in accordance with the provisions of the Act. The CCI can then order that acquisition or acquisition of control or merger or amalgamation shall not be given effect to. That means the combination cannot take place. Parties will have to revert to the positions they held before the acquisition or acquisition of control or merger or amalgamation took place.

CCI also has powers to impose a penalty on the parties besides not allowing the combination.

Needless to say that 210 days is sacrosanct, if the CCI does not pass any order by that date, then it is deemed that the combination is approved.

EXEMPTIONS:

Schedule I to the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations 2011 lays down certain exemptions from making applications u/s 6(2) of the Act. Some of the exemptions are briefly highlighted below

  1. An acquisition of shares or voting rights solely as investment or in the ordinary course of business holding upto 24.99% of the shares or voting rights – the acquirer is treated like an ordinary shareholder like others and it also does not get a Board seat
  2. An acquirer is already holding 50% or more of the shares or voting rights and is acquiring more, but the ownership is not reverting from joint control to sole control;
  3. An acquisition not directly related to the business activity or solely as an investment and not leading to control of the enterprise;
  4. Acquisition of stock in trade, raw materials, stores and spares, tools, receivables or other current assets in the ordinary course of business.
  5. Acquisition pursuant to a bonus issue or a rights issue or buy-back etc. not leading to acquisition of control.

And so on.

APPRECIABLY ADVERSE EFFECT ON COMPETITION

Appreciable Adverse Effect on the Competition in the relevant market in India is the criteria for determining whether a combination needs to be allowed or not. For that the factors that CCI should consider has been enumerated in section 20(4) of the Act, which is as follows:

  • Actual and potential level of competition through imports into the market;
  • Extent of barriers to entry into the market;
  • Level of combination in the market;
  • Degree of counter vailing power in the market;
  • Likelihood of significant increase in prices or profit margins;
  • Extent of effective competition likely to be sustained in the market;
  • Extent to which substitutes are available or likely to be available in the market;
  • Market share in the relevant market, individually and as a group;
  • Likelihood of removal of an effective and strong competitor in the market;
  • Nature and extent of vertical integration in the market;
  • Possibility of a failing business;
  • Nature & extent of innovation in the market;
  • Relative advantage of economic development if the combination is allowed;
  • Whether the benefits of combination outweigh the adverse impact of the combination.

RELEVANT MARKET

Section 19(5) and (6) defines what is a relevant market, it can be further segregated into relevant geographical market and relevant product market.

Relevant Geographical Market would cover all or any of the following factors

  • Regulatory trade barriers;
  • Local specification requirements;
  • National procurement policies;
  • Adequate distribution facilities;
  • Transport costs;
  • Language;
  • Consumer preferences;
  • Need for secure or regular supplies or rapid after sales services;

Relevant product market would cover all or any of the following factors

  • Physical characteristics or end use of goods;
  • Price of goods or service
  • Consumer preferences;
  • Exclusion of in house production;
  • Existence of specialised producers;
  • Classification of industrial products;

GREEN CHANNEL ROUTE

CCI has brought in an amendment to the Combination Regulations on 13th August, 2019 and provided for automatic approvals for certain combinations under the Act. Combinations qualifying for the Green Channel are deemed to be approved upon receipt of the Form no. I at the CCI. Parties have to assess on their own as to whether they fall under the criteria specified for Green Channel route. The qualifying criteria is provided in the Schedule III of the Combination Regulations and are as follows:

  • Horizontal overlaps i.e. they must not be already producing any similar, identical or substitutable products or services, or
  • Vertical overlaps i.e. they must not be engaged in activities at different levels or stage of production chain, or
  • Complementary overlaps i.e. products or services when combined and used together enhances the value of the combined goods/ services.
  • Overlaps have to be checked between the parties to the combination and their respective group entities and also with entities in which they directly or indirectly hold shares or exercise control

Directly or indirectly hold shares or control means direct or indirect shareholding of 10% or more or a right which is not available to any ordinary shareholder or right or ability to nominate a director in another enterprise.

The Form I has to be accompanied by a self declaration in Schedule IV. There is a fee of Rs.20,000/- to be paid along with this application.

Green channel precludes the 210 waiting period for parties to the combination or ex-ante examination of the combination to determine whether they may cause appreciable adverse effect on the competition. Parties can implement the transaction immediately without waiting for the approval from the CCI.

CCI of course has the power to scrutinize the transaction subsequently and if it finds that the transaction does not fall within the green channel route, it can revoke the automatic green channel approval ab initio. Parties may also be liable for proceedings u/s 43-a and 44 of the Act, which deals with penalties and fines.

One example of the Green channel is the notice filed recently by Synergy Metals Investments Holdings Limited (acquirer) and JSW Cement Limited is the acquiree. The acquisition is a minor stake in the target company. Parties have declared that there is no horizontal, vertical or complementary overlaps in their transaction. Details of this transaction can be found here. i.e. https://www.cci.gov.in/sites/default/files/notice_order_summary_doc/C-2021-07-850.pdf

FEW CASES

  1. Zomato has filed a summary notice u/s 13(1A) of the Combination Regulations for acquisition of minority stake in Grofers and another company u/s 5(a) of the Act. The parties have averred that the relevant product & geographic market be left open in view of the acquisition of minority stake in Grofers. The activities of the parties overlaps in the board relevant market (groceries, household items etc. ) and narrow relevant market (B2B) and online relevant market. This application is under review.
  2. Heineken International B.V.’s acquisition of further equity shares in United Breweries Limited – application made u/s 5(a) of the Act was approved by the CCI.
  3. Re-organisation of companies under the Motherson Sumi Group was approved via the Green channel route. There were no overlaps between the entities and the transaction was eligible for the green channel approval.
  4. Byju’s proposed acquisition of Aakash Educational Services was notified u/s 5(a) and (c ) of the Act, The combination was approved on the ground that the proposed transaction would not lead to change in competitive landscape or appreciable adverse effect on competition irrespective of the manner in which relevant markets are defined. The relevant market for the purpose was defined as “provision of non formal education in India.

All these cases are sourced from the CCI website.

APPEALS

All appeals from the CCI orders lie with the National Company Law Tribunal. Earlier, there was a Competition Appellate Tribunal (COMPAT) but that has been disbanded with a view to re-organisation of the Tribunal structure in India.

CONCLUSION

Competition Act, 2002 though it was passed in Parliament was notified only in 2009 and is a much needed and welcome change to the outdated MRTP Act, which had outlived its utility. The Act is well defined and well drafted with clear cut lines of procedure to be followed. There is not much bureaucracy involved in the CCI with layers and layers of officers involved in decision making. The Act is also advanced in the sense that it gives powers to the CCI to revise the thresholds every two years based on the fluctuations in Wholesale Price Index or in exchange rates of rupee or foreign currencies. So in that sense the Act is dovetailed into the economic development of the country. Also considerable relaxation is given recently in the form of Green Channel route. The CCI website itself is quite a helpful one with DIY, FAQs, form filing guidelines, etc. CCI has introduced a system of e-filing through its portal “efilingcci.gov.in” wherein the forms can be filed electronically.

Leave a comment

Filed under Uncategorized

filings at CCI – covid relaxation

Competition Commission of India notice dated 28th April, 2021 giving leeway for submission of hard copies of documents filed electronically upto 31st March, 2021 – the hard copies can be submitted upto 30th June, 2021.

Leave a comment

Filed under competition laws

CCI order on Hyundai – Rs.420 crores penalty

The Competition Commission of India (‘the Commission’), in its order dated 27.7.15 has found 3 Car Companies, namely, Hyundai Motor India Ltd. (Hyundai), Mahindra Reva Electric Car Company (P) Ltd. (Reva) and Premier Ltd. (Premier) to be in contravention of the provisions of the Competition Act, 2002 (‘the Act’). The instant order is in continuation of Commission’s main order in the same case dated 25.08.2014 vide which the Commission had inter alia imposed penalties on fourteen out of the seventeen car companies under Section 27 of the Act.

The order against Hyundai has remained pending pursuant to the writ petition filed by it in the Madras High Court challenging the jurisdiction of the Commission. In regards, Reva and Premier, the order remained pending because of the applications filed by them requesting for striking out of their names from the array of parties. Accordingly, the Commission decided to pass a separate order against these three car companies after affording them reasonable opportunity to make their submissions in respect of the findings of the Director General (DG) in its investigation.

After taking into account the findings of the DG and the detailed submissions by these three car companies, the Commission found their conduct to be in violation of the provisions of section 3(4) of the Act with respect to their agreements with local Original Equipment Suppliers (OESs) and agreements with authorized dealers whereby they imposed absolute restrictive covenants and completely foreclosed the aftermarket for supply of spare parts and other diagnostic tools. Further the Commission found that the said car companies, who were found to be dominant in the aftermarkets for their respective brands, abused their dominant position under section 4 of the Act. The car companies were found to be indulging in practices resulting in denial of market access to independent repairers as the latter were debilitated to provide services in the aftermarket for repair and maintenance of cars for want of genuine spare parts. Further, these car companies were also found to be using their dominant position in the market for spare parts and diagnostic tools to protect their market for repair services, thereby distorting fair competition.

The Commission has prescribed the same corrective measures to Hyundai, Reva and Premier as were prescribed in the main order dated 25.08.2014 to infuse competition in the after sales market in the automobile sector. To reiterate, the order directed the car companies to cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act. The car companies were also directed to adopt appropriate policies which shall allow them to put in place an effective system to make the spare parts and diagnostic tools easily available in the open market to customers and independent repairers. Further, the Commission directed the car companies to not to put any restrictions or impediments on the operation of independent repairers/garages.

The Commission imposed a penalty calculated at the rate of 2% of its average turnover on Hyundai amounting to Rs. 420.2605 crores (Rupees Four Hundred and Twenty Crores, Twenty Six Lakhs and Five Thousand only) which is to be deposited within 60 days of receipt of the order. Considering the mitigating factors that worked in favour of Reva and Premier, the two car companies were absolved from paying monetary penalty.

Detailed order can be seen at Commission’s website http://www.cci.gov.in

Leave a comment

Filed under Uncategorized

CCI order on Hiranandani Hospital – abuse of dominance position

The Competition commission of India has passed a path breaking order against Dr. Hiranandani Hospital in the case relating to abuse of dominant position under section 27 of the competition act, 2002. The facts of the case are that a lady was registered with Dr. Hiranandani Super Speciality Hospital for delivery of her second child and at the same time she had made arrangements with Life Cell India Private Limited for banking of her stem cells. The Hospital had made an exclusive arrangement with Cryobanks International India and therefore refused to entertain the lady’s plea to allow Life Cell representatives to visit the hospital in order to collect the stem cells. 

1) The hospital was found to be a dominant player in the relevant market of provision of maternity services.

2) Due to its dominance in the relevant market, the hospital was able to influence the consumers by imposing unfair conditions

3) The agreement between the Hospital and Cryo Banks was in violation of section 3(4) of the Competition Act, 2002 being an anti competitive agreement which had an appreciable adverse effect on competition.

The CCI passed an order, gist of which is as follows:

(a) The agreement of hospital with Cryobank for the years 2011-12 & 2012-13 are
declared null & void.
(b) The hospital shall not enter into a similar agreement with any stem cell bank in
future.

This para 34 of the order clinches the issue completely

34. The plea advanced by the counsel is misconceived in as much as it is not the case of OP hospital that the patients were free to avail the services of any stem cell bank. The OP hospital’s only argument is that if a patient was not willing to take services of Cryobank, the patient was free to leave the hospital and avail maternity services of another hospital. In fact, this is not a mitigating factor rather it is another aggravating factor. The hospital knew the difficulty of a patient in leaving the hospital where the patient had all along been taking services of maternity consultant and had developed a bond with the consultant. In fact, most of such patients are afraid of going to another consultant and resign to the fate.

Order was passed for Rs.3.82 crores penalty. Since there are not many stem cell banks in India, I believe this is the first of its kind order of CCI in that category. 

Copy of the CCI order can be found here http://www.cci.gov.in/May2011/OrderOfCommission/27/392012.pdf

 

Leave a comment

Filed under Uncategorized