CL : Where OP hospital had entered into an exclusive agreement with stem cell

banking service provider and permitted it on commission to collect umbilical

cord blood of child of expecting mothers admitted in OP hospital for preserving
stem cells of child, such exclusive arrangement would hindered development
and competition in stem cell service industry 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 and
therefore same was an anti competitive agreement in contravention of section
3(1)
CL : Market share of an enterprise is only one of factors that decides whether an
enterprise is dominant or not, but that factor alone cannot be decisive proof of
dominance

■■■

[2014] 44 taxmann.com 177 (CCI)

COMPETITION COMMISSION OF INDIA
Ramakant Kini
v.
Dr. L.H. Hiranandani Hospital
ASHOK CHAWLA, CHAIRPERSON
DR. GEETA GOURI, ANURAG GOEL, JUSTICE S.N. DHINGRA
AND S.L. BUNKER, MEMBER
CASE NO. 39 OF 2012
FEBRUARY 5, 2014

Section 3 of the Competition Act, 2002 - Prohibition of agreements - Anti-competitive

agreements - OP hospital was a frontline provider of comprehensive health care
services in India - One 'J' was expecting her baby for which she was availing maternity
health care services of OP - With a view to preserve umbilical stem cell of her expected
baby, 'J' requested OP to allow her to engage LifeCell India for collection of cord blood
samples of her expected baby at time of delivery - However, OP hospital not only denied
patient to avail services of Life Cell India, but also insisted her to avail umbilical cord
stem cell banking services of Cryobanks, with whom it had an exclusive tie up -
Informant alleged that OP had abused its dominant position by entering into exclusive
tie-up/agreement with Cryobanks which had resulted in denial of market access to all
other competing players of Cryobanks and thereby causing an appreciable adversed
effect on competition in violation of sections 3(4) and 4 - Whether since expecting
mothers were totally dependent on maternity service providers to get access to stem
cell/cord blood from newly born children born in hospital, such exclusive arrangement
between OP hospital & Cryobank hindered development and competition in stem cell
service industry 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 - Held, yes - Whether therefore, such agreement between OP hospital
with Cryobank had adversely affected growth of stem cell banking market and same
was an anti competitive agreement in contravention of section 3(1) - Held, yes [Paras 20
& 26]
Section 4 of the Competition Act, 2002 - Prohibition of abuse of dominant position -
Whether market share of an enterprise is only one of factors that decides whether an
enterprise is dominant or not, but that factor alone cannot be decisive proof of
dominance - Held, yes - Whether in view of facts stated under heading 'Prohibition of
agreements-Anti Competitive agreements' since DG on basis of market share of OP
hospital concluded that OP hospital was dominant in relevant market of super specialty
hospital and further his finding that OP hospital had commercial advantage over its
competitors was not backed by any evidence, it could not be established that OP
hospital was dominant in relevant market - Held, yes [Paras 28 & 29]
FACTS

■ The OP hospital was a frontline provider of Comprehensive health care services in

Mumbai.
■ The patient, one 'J', was expecting her baby for which she was availing the maternity
health care services of the OP.
■ With a view to preserve the stem cell of her expected baby, 'J' entered into an
agreement with M/s LifeCell India Pvt. Ltd. to avail its services for banking of stem
cells.
■ The informant submitted that the OP hospital not only denied the patient to avail
services of Life Cell India, but also directed the latter not to enroll any of its patient
for stem cell banking services as M/s Cryobanks was their cord stem cell Banker
with whom OP had an exclusive tie up agreement.
■ The informant alleged that OP was indulged in anti competitive practices and abused
its dominant position in the market for maternity services in high end multi specialty
hospitals and thereby, causing an appreciable adverse effect on competition in
violation of sections 3(4) and 4.
■ The Commission found that there was sufficient material to form a prima facie
opinion about the violation of section 3 as well as section 4 and directed investigation
by the Director General ('DG') into the matter.
■ The DG concluded that OP hospital, due to its dominance in the relevant market, was
in a position to influence the consumers by imposing unfair conditions on expecting
mothers coming to it for maternity services and that the agreement entered into
between OP hospital and Cryobank was a violation of section 3(4) and it had
appreciable adverse effect on competition.
■ The OP hospital contended that OP hospital and Cryobank were not operating at
different stages or levels of same production chain because the business activities of
OP hospital were not vertically or horizontally related to business activities of
Cryobank and that allegations of anti-competitive agreement under section 3(4) can
be examined only if there was a vertical agreement as envisaged in section 3(4)
between the parties in the same production chain.
HELD (MAJORITY VIEW)

Agreement between OP hospital and Cyrobank was an anti-competitive agreement in contravention of

section 3(1)
■ The Commission considers the argument as misconceived. Section 3(1) prohibits any
agreement in respect of provision of services which causes or is likely to cause
appreciable adverse effect on competition within India. All agreements as described
in section 3(3) and 3(4) alone cannot be the only agreements covered under section
3(1). As already stated, section 3(3) enumerates certain species of agreements having
legal presumption of adverse effect on competition and section 3(4) gives some
examples of another species of agreements where there is no such legal presumption.
The Commission can consider the impact of any agreement which falls within the
four walls of section 3(1) and assess if the agreement has an appreciable adverse
effect on competition. The Commission has therefore to consider whether the
impugned agreement causes or is likely to cause appreciable adverse effect on
competition within India or not and for considering this, the Commission has to keep
in mind the purpose for which the Act was enacted, i.e. inter alia freedom of trade
and consumers' interest must be protected. [Para 15]
■ Although the OP hospital contended that its tie up with Cryobanks was based on
objective assessment of proposals submitted by different stem cell banks, the
documents furnished by OP hospital indicated a different story. A collective reading
of the successive tie-up agreements (between Life Cell and OP hospital from
assessment year 2009-2011 and between Cryobanks and OP hospital from 2011
onwards) shows that commission paid by the stem cell banking company to OP
hospital was the sole and important criteria in selecting the stem cell banking
company. Though Life Cell was paying Rs. 8000 per enrolment for assessment year
2009-10 and Rs. 10,000 per enrolment in assessment year 2010-11, Cryobank offered
Rs. 18000 per enrolment in assessment year 2011-12 and Rs. 20,000 in assessment
year 2012-13. It is also evident from e-mail attached to Annexure 6 of the written
submissions filed by the OP hospital in support of it contention regarding fair and
transparent technical process for selection of stem cell banker. The covering e-mail
dated 30-8-2012, an internal communication of OP hospital, clearly mentions that OP
hospital had an exclusive tie up with Cryobank in 2011-12 pursuant to which they
have received enrolment fees of Rs. 32,04,000 and sponsorship for organising
International Biologic Orthopedic Meet (IBOM) of Rs. 4,90,000. It is also interesting
to note that in assessment year 2011-12 when Cryobanks was first appointed by OP
hospital as an exclusive stem cell banker for its patients, the enrolment fee offered by
Cryobank was the highest among all those who submitted proposals. Therefore, the
contention of OP hospital that they chose Cryobanks on merits of technology is not
true. In assessment year 2012-13, along with enrolment fee, the sponsorship fee was
also considered, which seems to have superseded the fee/commission offered by
other stem cell banking companies. The justification preffered by OP hospital for
choosing Cryobanks on basis of technology used, was neither mentioned in the
summarised proposals of the companies nor in the covering e-mail sent along with
the summary of proposals. Thus, the plea of OP hospital appears to be an
afterthought and the Commission has no hesitation in concluding that the decision of
OP hospital, for choosing Cryobank, was purely actuated by financial considerations
and in utter disregard of the effects of the agreement on competition in the markets
and consumer welfare. [Para 17]
■ 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 Life Cell and Cryobanks are the two major
players, collectively holding around 67 per cent of the market share in stem cell
collection in Mumbai. The exclusive contracts between a hospital and stem cell bank
has a tendency of distorting market mechanism altogether. The development and
competition in stem cell service industry is bound to be hindered because of such
exclusive arrangement between 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-à-vis other competitors or otherwise, exists 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 service like long term
association resulting in tying in of the consumer for 21 years and the nascent stage of
the market, such agreements foreclose the competition in the stem cell banking
market and create entry barriers for competitors depriving the final consumers of not
only the quality or price of services offered but also the choice of which service
provider they would like to contract with. Further, by limiting consumer choice, it
may result in permanent moulding of consumer preferences in the long run, thereby
distorting the market mechanism completely. [Para 20]
■ Such exclusive arrangements do not accrue any benefit to the consumer and are
rather at the cost of consumer. Further, OP hospital has also not been able to show
any justification with regard to its agreement with Cryobank leading to any
improvements in production or distribution of goods or provision of services or
resulting in the promotion of technical, scientific and economic development by
means of production or distribution 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. [Para 21]
■ It must be kept in mind that for the purpose of section 3, the Commission is not
required to identify the relevant market but has to see if the agreement has
anti-competitive effect in any market and this market may be the market of the
product/service of any party entering into the agreement. In the instant case, it is the
market of stem cell banking in which competition was being adversely affected
among stem cell bankers and the free trade was not being allowed and the patients
were being fleeced of not only choice but also money. [Para 25]
■ 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). [Para 26]
Dominance of OP hospital and abuse of dominance - For the purpose of section 4
■ 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 prescribed any
market share threshold for determining dominance of an enterprise in the relevant
market. In the instant case, the Commission has reservations in accepting DG's
findings on dominant position of OP hospital. The DG has relied on the list of
hospitals submitted by OP hospital as being the 'similarly competent hospitals' and
further analysis was based on the data submitted by these hospitals. The DG
observed that OP hospital has got the highest price in grade 5 for normal delivery
and C-section delivery. However, the price structures for some of the hospitals in the
data collected by DG appears comparable to OP hospital i.e. not much difference
could be seen to indicate conclusively that OP hospital was dominant. Further, the
DG's finding that OP hospital had commercial advantage over its competitors was
not backed by any evidence. [Para 28]
■ In view of the foregoing, the Commission is of the opinion that it is not established
that the OP hospital is dominant in the relevant market of 'provision of maternity
services by Super Speciality/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. [Para 29]
As per member, Geeta Gouri (Dissenting view)
■ 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 per cent (assessment year 2011-12). [Para 81]
■ 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 having exclusive tie-up
arrangement with a particular service provider and not allowing others to utilize its
infrastructure, OP has effectively driven out all the existing competitors of
Cryobanks out of the market. [Para 82]
■ Reliance is placed on an internet article, wherein it has been reported that about 500
samples are collected by stem cell banks on a monthly basis and that the market,
witnessing entry of more players since starting of cord cell banking service in 2004,
is growing by about 45-50 per cent. Further, there is no evidence to show that any of
the existing stem cell bank has been driven out of the 'market' that may be relatable
to the agreement signed between the OP and Cryobanks. [Para 83]
■ Citing market share of OP in the relevant market, the DG has submitted that the OP
has foreclosed 62.27 per cent 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, it is view that there is no AAEC and accordingly no case
for section 3(4) violation. [Para 84]
■ The allegation in the case revolves around the dominance of Hiranandani Hospital as
regards maternity services in violation of section 4 or section 3(4). Having examined
the entire aspect on the allegation stemming from the dominance of Hiranandani
Hospital in maternity services, as part of high-end super-speciality hospital. It is
viewed that maternity services do not fall in the category of super-speciality, as
supported from the data of NABH. Further, there is no link between high-end and
super speciality. In this case, non-price factors tend to out-weigh high-end hospitals
for maternity services. Against this background, it is noted that the patient has a
choice as regards the hospital she wishes to seek for maternity service in Mumbai
and the OP offered a choice to her between stand-alone maternity services and
maternity packaged with stem cell banking from Cryobanks. Since the OP is not
dominant in the maternity services market in Mumbai, neither section 3(4) nor
section 4 applies in the present case. [Para 85]
As per member, M.L. Tayal (Dissenting view)
■ In my view the relevant product market in this case cannot be categorised as market
of maternity services in high end multi-speciality hospitals. At the time of emergency
for medical services no person makes a distinction between high end and low end
medical services. Rather, priority is given for the best available medical services.
Patients usually considered better treatment as their priority for treatment not the
luxury. Thus, all hospitals providing maternity healthcare services should be
considered as substitute of each other in this case. Therefore, the relevant product
market in the present case is the market of 'provision of maternity services in the
hospitals/ nursing homes/clinics'. [Para 12]
■ The Relevant geographic market in this case is 'the geographical area of Mumbai'
instead of particular municipal wards of Mumbai as submitted by the Informant. The
reason being that for medical services people usually prefer hospitals which provides
better services, without considering the distance factor. Otherwise also, in normal
circumstances, for maternity services a patient can plan well before availing such
services and thus, can choose from variety of hospitals within the city. Thus, I
consider the relevant market in the present case as the market of 'provision of
maternity services in the hospitals/nursing homes/clinics within the geographical area
of Mumbai'. [Para 13]
■ Considering the revised relevant market as the 'provision of maternity services in the
hospitals/nursing homes/clinics within the geographical area of Mumbai', it is prima
facie, opined that the OP is not in a dominant maternity healthcare service provider in
Mumbai. The reason being that there are a large number of hospitals/clinics/maternity
homes in Mumbai which are providing maternity services which are substitutable for
the services of the OP. Moreover, there are hospitals in Mumbai whose scale of
operation, turnover, resources etc. are larger than those of the OP. [Para 14]
■ In the instant case, the OP is engaged in the provision of maternity services whereas
M/s Cryobanks is engaged in the provision of stem cell banking services. It is
observed that the OP and M/s Cryobanks, prima facie, are not operating at different
stages or level of the production chain because the business/activities of the OP not
 vertically related to the business/activities of M/s Cryobanks. What is understood as
being in different stages of the production process (e.g., a manufacturer and a retailer)
is the existence of a relationship where the product supplied by a manufacturer to the
retailer is then sold by the retailer to its customers after either using that product as an
input in its production process or by providing retailing services. Rather than
competing with each other the products or services supplied by the manufacturer and
the retailer are complementary to each other. Manufacturer needs the retailer to sell
its product while the retailer needs the manufacturer to supply it. In my view, the
above described manufacturer-retailer relationship is not present between the OP and
M/s Cryobanks. The allegations of the existence of an anti-competitive agreement
between two enterprises can only be examined if such an agreement exists between
such entities. Since based on the above analysis, it is viewed that the OP and M/s
Cryobanks are not parties to any vertical arrangement, the OP cannot be in violation
of any of the provisions of section 3(4). [Para 17]
CASE REVIEW

Sundar Nilavar v. Mercy Health (494 F Supp 2d 604) (para 17) distinguished.
CASES REFERRED TO

Sundar Nilavar v. Merey Health 494F. Supp. 2d 604, MCX-SX v. NSEIL Case No. 13 of 2009 (CCI),
PPR Gucci Case IV/M 1534, Wanadoo Interactive [Comp./338.233 dated 16-7-2003], Diageo Case No.
C-2012/12/97, Gordon v. Lewistown Hospital [2003] 272 F Supp. 2d 393, FTC v. Tenet Health Case
[1999] 86 F3d 1045, Sonam Sharma v. Apple Inc., USA [2013] 119 SCL 107/32 taxmann.com 201
(CCI), Van Den Bergh Foods Ltd. v. Commission Case T-65/98, [2003] ECR II – 4653 and Balaklaw v.
Lovell 14 F3d 793 (2d Cir 1994).
Ramji Srinivasan for the Informant. Ms. Pallavi Shroff for the Opposite Party.
ORDER

1. Use of stem cells for curing diseases is a new science. A primary source of stem cells is umbilical
cord of the new born child. Technology has been developed for preserving stem cells for future for
curing diseases and with this development, various stem cell banks have cropped up. This science
attracted young people towards it and many young persons started approaching stem cell banks for
preserving the stem cells of their newly born children. One Mrs. Jain entered into an agreement with M/s
Life Cell India Pvt. Ltd. ('Life Cell') to avail its services for banking of stem cells. It is to be noted that
stem cells blood has to be collected from the umbilical cord within 10 minutes of the birth of a child and
preserved and put into the bank where it is stored at certain sub-zero temperature for next 21 years.
2. Mrs. Jain was registered with Dr. L.H. Hiranandani Hospital ('OP hospital') for maternity related
services and for delivery of her child. As the time of delivery of the child drew near, Mrs. Jain requested
OP hospital to allow Life Cell to collect the stem cells blood soon after her delivery i.e. within 10
minutes. The collection of umbilical cord blood can either be done by the hospital staff or by 'stem cell
bank' staff, who is to collect the same from maternity ward of the hospital. The OP hospital refused to
accede to the request of Mrs. Jain telling her that they would not allow Life Cell to enter its premises to
collect stem cell blood. However, if she wanted to have her child's stem cell collected, she could avail
the services of Cryobanks International India ('Cryobank') - another stem cell banking service provider
in India. OP hospital told her that it had an exclusive agreement with Cryobank and only Cryobank
would be permitted to collect the umbilical cord blood of the child of expecting mothers admitted in OP
hospital for preserving stem cells of the child. Thus, the request of Mrs. Jain for collection of the stem
cells by Life Cell fell on deaf ears. Rather, Life Cell was told not to book any client of OP hospital for
stem cell banking as it would not allow entry of Life Cell into the hospital. It is an admitted fact that at
the time of admission, Mrs. Jain was not informed by OP hospital that it had an arrangement with
Cryobank and it does not allow other stem cell banks to enter the hospital. Because of this refusal by OP
hospital to permit Life Cell to collect stem cells, Mrs. Jain had to shift from OP hospital and get her
delivery done at Seven Hills Multi Super Speciality Hospital.
3. On the basis of above facts, informant approached the Competition Commission of India
('Commission') alleging violation of sections 3(4), 4(2)(a)(i) and 4(2)(c) of the Competition Act, 2002
('the Act') by OP hospital. The informant alleged that OP hospital was in a position to affect competition
in the relevant market due to its dominance in the area.
4. The Commission found that there was sufficient material to form a prima facie opinion about the
violation of section 3 as well as section 4 of the Act and directed investigation by the Director General
('DG') into the matter vide its order dated 19.9.2012.
5. DG during investigation called the parties and collected relevant material from OP hospital and the
informant. Oral and written submissions were made by the parties and DG came to the conclusion that
OP hospital was a dominant player in the relevant market of provision of maternity services by super
speciality hospital in the geographic market of 0-12 km. from the Hiranandani Hospital covering S, L,
N, K/E, T & P/S wards of Municipal Corporation of Greater Mumbai as per section 2(r) of the Act. The
DG also came to conclusion that OP hospital, due to its dominance in the relevant market, was in a
position to influence the consumers by imposing unfair conditions on expecting mothers coming to it for
maternity services. The unfair condition was a result of arrangement between OP hospital and
CryoBank. It also came to conclusion that the agreement entered into between OP hospital and
CryoBank was a violation of section 3(4) and it had appreciable adverse effect on competition.
6. Copy of the report was sent to the parties and their responses were invited. The parties were also
heard by the Commission on all aspects.
7. Before dealing with the issues involved in this case, it is necessary to consider the mandate given to
the Commission under the Act. The preamble of the Act provides that the Commission was established
to 'prevent practices having adverse effect on competition, to promote and sustain competition in the
markets, to protect the interest of consumers and to ensure freedom of trade carried on by other
participants in the markets in India and matters connected therewith'.
8. It is settled law that the preamble informs and has a subtle effect on the interpretation of the
provisions of the Act. The statutory intention did not stop in the Act at the preamble and section 18 of
the Act was enacted to further provide 'it was the duty of the Commission to eliminate practices having
adverse effect on the competition, promote and sustain competition, protect the interest of consumers
and ensure freedom of trade carried on by other participants in the markets in India'.
9. One of the avowed objectives of the Act is to promote consumers' welfare by preventing market
distortions caused by such actions and agreements of the enterprises which militate against the
competition and consumers' interest. The competition law by its very nature envisages that there are
situations where the Commission has a role and has to control behaviour of the enterprises in the market
place in order to achieve consumer welfare. Section 3(1) of the Act provides that the firms should not
enter into an agreement in respect of 'production….. provisions of services which cause or is likely to
cause adverse effect on competition within India'. Section 3(2) provides that an agreement entered into
in contravention of the provision contained in sub section (1) shall be void. Sections 3(3) & 3(4) give
two categories of agreements. Section 3(3) categories are examples of agreements which are considered
violative of section 3(1) and the Commission, under law, has to presume that these agreements have an
appreciable adverse effect on competition. If an enterprise wants the Commission to believe that the
agreement covered under section 3(3) did not have adverse effect on the competition in the markets, the
onus would lie on such enterprise to rebut the presumption created by law under this section.
10. Section 3(4) gives few examples of such agreements which are considered by the statute to be in
contravention of section 3(1), if such agreements cause or are likely to cause appreciable adverse effect
on competition within India. Thus, in case of an agreement of the nature under section 3(4), it has to be
shown that an agreement covered under section 3(4) has or is likely to cause an appreciable adverse
effect on competition in India.
11. While section 3(3) gives an exhaustive categories of agreements presumed to have appreciable
adverse effect on competition and does not leave it to the Commission to include any other category of
agreement under section 3(3), section 3(4) is illustrative of the agreements among enterprises at different
stages or levels of production chain which are considered anti-competitive, if they cause or are likely to
cause appreciable adverse effect on competition in India. Section 3(3) and section 3(4) are expansion of
section 3(1) but are not exhaustive of the scope of section 3(1).There can be various kinds of agreements
among enterprises which may fall under section 3(1) including agreements which are against the
interests of consumers, affect freedom of trade and cause or are likely to cause appreciable adverse
effect on competition in India. Section 3(3) carves out only an area of section 3(1). The scope of section
3(1) is thus vast and has to be considered keeping in view the aims and objects of the Act i.e. freedom of
trade, consumer welfare etc.by ensuring that the markets are not distorted and made anti-competitive by
such agreements of the enterprises which appreciably adversely affect the market or are likely to
adversely affect the market. It is also evident from a reading of section 19(1) and section 33 that both
these sections also talk of violation of section 3(1) and not section 3(3) & 3(4). This makes it abundantly
clear that scope of section 3(1) is independent of provision of section 3(3) & 3(4). Section 3(3) & 3(4)
do not limit the scope of section 3(1). Also, for the purpose of section 3, the Commission is not
supposed to enter into a discussion of market dominance, which exercise is necessarily to be done in
respect of violation of section 4.
12. The Commission has to look into the freedom of trade, consumer welfare aspects and adverse effect
on competition of the agreement entered into between OP hospital and Cryobank. For this, it is
necessary to inquire into why the agreement was entered into and what was the nature of agreement
between Cryobank and OP hospital.
The relevant clause of agreement reads as under:
'Operational Issues:

All Gynecologists 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 Internatinal
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.
 A suitable place/room for the counseling of Dr L.H. Hiranandani Hospital
patients will be provided by Dr L.H. Hiranandani Hospital.
Support fee to be paid in favour of Dr L.H. Hiranandani Hospital.
This Agreement will be with effect from 1st September, 2011.'
** ** **
'Financial terms:

For enrollments generated and completed by Dr. L.H. Hiranandani an

enrollment support fee as per the details given below for all those which are
banked will be paid.
Dr. L.H. Hiranandani will send the invoice once a month for all the collections
done for the month and Life Cell to send the cheque within 7 working days.
In case, after the collection the sample is rejected and is not banked then a
debit note will be raised for refund of the payment made for such a
collection.'
Enrollments Per Month: Rs. 18,000/- (10% tax will be deducted) per
enrollment (including Cord Blood and Cord Tissue).'
13. For the next year, the only change in the terms was that Cryobank was to pay Rs.20000/- per
enrollment to OP hospital
14. It is argued on behalf of OP hospital that section 3 does not cover normal commercial agreements. In
order to cover an agreement under section 3(4), the agreement must be between two undertakings
operating at different stages or levels of production chain in different markets in respect of production,
supply, distribution, storage, sale or price or trade in goods or provision of services. It is submitted that
the agreement between Cryobank and OP hospital was not covered as provision of maternity services by
OP hospital and providing stem cell banking services by Cryobank were altogether two different
markets. OP hospital and Cryobank were not operating at different stages or levels of same production
chain because the business activities of OP hospital were not vertically or horizontally related to
business activities of Cryobank. It is contended that different stages of production means if one party
was a manufacturer, the other was a stockiest or if one was stockist and the other was a retailer, etc. It is
argued that there could be no existence of relationship of this nature where the products/ services
provided by two enterprises were different from each other and both the enterprises entered into a
commercial agreement. It is contended that allegations of anti-competitive agreement under section 3(4)
can be examined only if there was a vertical agreement as envisaged in section 3(4) between the parties
in the same production chain.
15. The Commission considers the argument as misconceived. Section 3(1) prohibits any agreement in
respect of provision of services which causes or is likely to cause appreciable adverse effect on
competition within India. All agreements as described in sections 3(3) and 3(4) of the Act alone cannot
be the only agreements covered under section 3(1) of the Act. As already stated, section 3(3) enumerates
certain species of agreements having legal presumption of adverse effect on competition and section
3(4) gives some examples of another species of agreements where there is no such legal presumption.
The Commission can consider the impact of any agreement which falls within the four walls of section
3(1) and assess if the agreement has an appreciable adverse effect on competition. The Commission has
therefore to consider whether the impugned agreement causes or is likely to cause appreciable adverse
effect on competition within India or not and for considering this, the Commission has to keep in mind
the purpose for which the Act was enacted, i.e. inter alia freedom of trade and consumers' interest must
be protected.
16. The OP hospital contended that the agreement with Cryobank was only for one year and OP hospital
adopted a clear, transparent and documented process for choosing the stem cell bank wherein all
interested umbilical cord stem cell banks were invited to submit proposals for providing umbilical cord
stem cell banking service at OP hospital. During this process, OP hospital considered several factors
which allegedly encouraged competition for the stem cell banking services market. OP hospital quoted a
United States District Court judgment of Sundar Nilavar v. Mercy Health (494 F. Supp. 2d 604)('Sundar
Nilavar case') to support its argument that replacement of once exclusive contractor with another did not
amount to a violation of anti-trust laws.
17. Firstly, it may be noted that the facts of the cited case are altogether different from the facts of the
present case. The US District Court assessed the anti-trust injury in that case caused by the exclusive
contract between the Mercy Hospital Diagnostic Imaging Associates of Ohio (DIA), Inc. for providing
diagnostic radiology services. The Court opined that the evidence established that DIA was chosen to be
an exclusive service provider for radiology services at the conclusion of a competitive process.
Therefore, plaintiff lost the right to practice at Mercy Hospital as a result of a 'reshuffling of
competitors'. These facts cannot be applied to the present case as in the cited case agreement was for
providing services to the hospital, while in the present case the hospital forced a service provider on its
patients. Service provider was not to provide any maternity related service to the hospital. Although the
OP hospital contended that its tie up with Cryobanks was based on objective assessment of proposals
submitted by different stem cell banks, the documents furnished by OP hospital indicated a different
story. A collective reading of the successive tie-up agreements (between Life Cell and OP hospital from
2009-2011 and between Cryobanks and OP hospital from 2011 onwards) shows that commission paid
by the stem cell banking company to OP hospital was the sole and important criteria in selecting the
stem cell banking company. Though Life Cell was paying Rs. 8000/- per enrolment for 2009-10 and Rs.
10,000/- per enrolment in 2010-11, Cryobank offered Rs.18000/- per enrolment in 2011-12 and
Rs.20,000/- in 2012-13. It is also evident from e-mail attached to Annexure 6 of the written submissions
filed by the OP hospital in support of it contention regarding fair and transparent technical process for
selection of stem cell banker. The covering e-mail dated 30.08.2012, an internal communication of OP
hospital, clearly mentions that OP hospital had an exclusive tie up with Cryobank in 2011-12 pursuant to
which they have received enrolment fees of Rs. 32,04,000/- and sponsorship for organising International
Biologic Orthopedic Meet (IBOM) of Rs. 4,90,000/-. It is also interesting to note that in 2011-12 when
Cryobanks was first appointed by OP hospital as an exclusive stem cell banker for its patients, the
enrolment fee offered by Cryobank was the highest among all those who submitted proposals.
Therefore, the contention of OP hospital that they chose Cryobanks on merits of technology is not true.
In 2012-13, along with enrolment fee, the sponsorship fee was also considered, which seems to have
superseded the fee/ commission offered by other stem cell banking companies. The justification
proffered by OP hospital for choosing Cryobanks on basis of technology used, was neither mentioned in
the summarised proposals of the companies nor in the covering e-mail sent along with the summary of
proposals. Thus, the plea of OP hospital appears to be an afterthought and the Commission has no
hesitation in concluding that the decision of OP hospital, for choosing Cryobank, was purely actuated by
financial considerations and in utter disregard of the effects of the agreement on competition in the
markets and consumer welfare.
18. The main advantages of a competitive market considered by the competition authorities world over
is that there is a continuous pressure on producers to use raw material and human capital in a manner
that keeps costs down without compromising with quality i.e. to maintain productive efficiency to
favour customers. The other benefit is dynamic efficiency i.e. to invest in research and development and
to innovate, leading to survival and growth of such companies which keep consumer preference at the
top of agenda. While considering impact of an agreement on competition, the potential of damaging
competition is also to be seen from the angle of consumer welfare.
19. The assessment of anti-competitive effects of the exclusive contract between OP hospital and
Cryobank has also to be done on the basis of factors laid down under section 19(3) of the Act which is
reproduced below.
"Section 19 (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."
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 Life Cell 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 tendency of distorting
market mechanism altogether. The development and competition in stem cell service industry is bound
to be hindered because of such exclusive arrangement between 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 service like long term association resulting in tying in
of the consumer for 21 years and the nascent stage of the market, such agreements foreclose the
competition in the stem cell banking market and create entry barriers for competitors depriving the final
consumers of not only the quality or price of services offered but also the choice of which service
provider they would like to contract with. Further, by limiting consumer choice, it may result in
permanent moulding of consumer preferences in the long run, thereby distorting the market mechanism
completely.
21. Such exclusive arrangements do not accrue any benefit to the consumer and are rather at the cost of
consumer. Further, OP hospital has also not been able to show any justification with regard to its
agreement with Cryobank leading to any improvements in production or distribution of goods or
provision of services or resulting in the promotion of technical, scientific and economic development by
means of production or distribution 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 Gynecology 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. Fetal 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."
23. The collection of umbilical cord blood by staff of the hospital or the staff of any stem cell bank did
not involve any technical process and it was a mere physical process of collection and preservation by
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 Life
Cell for her child's stem cell banking. This, however, is not indicative of patients switching and
migrating to other maternity hospitals without any cost or inconvenience. This aspect has been further
accentuated by the fact that OP hospital did not inform Mrs. Jain and other patients during that time
about its exclusive tie-up for stem cell banking with Cryobank. Thus, the argument of OP hospital that
the patients were free to leave the hospital is a flimsy argument, not worth any weight.
25. It must be kept in mind that for the purpose of section 3, the Commission is not required to identify
the relevant market but has to see if the agreement has anti-competitive effect in any market and this
market may be the market of the product/ service of any party entering into the agreement. In the present
case, it is the market of stem cell banking in which competition was being adversely affected among
stem cell bankers and the free trade was not being allowed and the patients were being fleeced of not
only choice but also money.
26. 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.
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 market. On the other hand, OP hospital has relied
upon a report of economic consultant engaged by it viz. Genesis Economic Consultant Pvt. Ltd. for
assessment of relevant geographic market and this economic consultant has suggested that relevant
geographic 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 prescribed any market share
threshold for determining dominance of an enterprise in the relevant market. In the present case, the
Commission has reservations in accepting DG's findings on dominant position of OP hospital. The DG
has relied on the list of hospitals submitted by OP hospital as being the 'similarly competent hospitals'
and further analysis was based on the data submitted by these hospitals. The DG observed that OP
hospital has got the highest price in grade 5 for normal delivery and C-section delivery. However, the
price structures for some of the hospitals in the data collected by DG appears comparable to OP hospital
i.e. not much difference could be seen to indicate conclusively that OP hospital was dominant. Further,
the DG's finding that OP hospital had commercial advantage over its competitors was not backed by any
evidence.
29. In view of the foregoing, the Commission is of the opinion 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'.
30. It is, however, clarified that notwithstanding the findings of the Commission on the dominance of
the OP hospital in the relevant market due to inadequate data, the impugned agreement entered into by
and between the OP hospital and Cryobank is anti-competitive being in contravention of the provisions
of section 3(1) of the Act as it had caused appreciable adverse effect on competition in the market of
stem cell banking.
ORDER

31. In view of the above discussion, the Commission holds that the impugned agreement was in
contravention of the provisions of section 3(1) of the Act and had adverse effect on competition.
Accordingly, the Commission under section 27 of the Act passes following order:

(a) The agreement of OP hospital with Cryobank for the years 2011-12 &
2012-13 are declared null & void.
(b) The OP hospital shall not enter into a similar agreement with any stem cell
bank in future.
32. While imposing penalty on OP hospital, the Commission has to keep in mind the mitigating and
aggravating factors. In this case, OP hospital is a leading super speciality hospital of Bombay providing
Five Star stay amenities to the patients apart from top class medical services for quite high fee.
33. The counsel for the hospital argued that a lenient view should be taken as the hospital was not
compelling its patient to go for stem cell banking. It was the freedom of patients to avail stem cell
services or not.
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.
35. Accordingly, the Commission notes that there was no mitigating factor except that maternity service
was only a part, though not small, of overall services being provided by OP hospital. Keeping in view
that the hospital was providing services for various other ailments and no similar arrangement in respect
of other services has been reported, the Commission considers that a penalty of 4% of the average
turnover of last 3 years would be appropriate to meet the ends of justice. The turnover of OP hospital is
tabulated below:
Year Turnover (in rupees)
2009-10 768548819.4
2010-11 964481539.6
2011-12 1128842377
Total 2861872736
Average 953957579
36. Resultantly, a penalty of Rs. 3,81,58,303/- (Rupees three crores eighty one lakh fifty eight thousand
and three hundred three only)—calculated at the rate of 4% of the average turnover of OP hospital—is
imposed on the OP hospital.
37. The directions contained in para 31 above must be complied with immediate effect and OP hospital
is also directed to file undertakings to this effect within a period of 30 days from the date of receipt of
this order.
38. The Commission also directs the OP hospital to deposit the penalty amount within 60 days of receipt
of this order.
39. Before parting with this order, the Commission is constrained to observe that despite the hospitals
functioning like an industry, there is an onerous responsibility of the hospitals to behave ethically like
any professional service towards the patients. The Commission considers that such similar arrangements
as brought before the Commission in the present case with different market players fall foul of Act.
Hospitals should refrain from entering into such agreements with stem cell banks which are
anti-competitive being in contravention of the provisions of the Act as such agreements not only affect
the competition adversely but are also against the spirit of health services and affect free trade besides
being anti-consumers.
40. The Secretary is directed to inform the parties accordingly.
ORDER

I have had the opportunity to go through the majority Order that has found contravention of the
provisions of the Act by the OP. As I do not agree with the Order, I shall record my findings in the case.
1. Vide an information dated 10.07.2012, the Informant has approached the Competition Commission of
India (hereinafter "Commission") to highlight certain anti-competitive practices and abuse of dominant
position by Dr L H Hiranandani Hospital (hereinafter "OP" or "Hiranandani Hospital") in violation of
Section 3(4) and Section 4 of the Competition Act (hereinafter "Act"), thereby causing an appreciable
adverse effect on competition (hereinafter "AAEC").
Information
2. As submitted by the Informant, the OP is a frontline provider of comprehensive health care in the
country. With significant investments in the most innovative technology, it is in the same league as the
best hospitals in the world. It is home to some of the leading specialists in contemporary medicine, as
well as a committed nurse workforce with an up-to-date knowledge base. All medical equipments of the
Hospital are sourced from world's best vendors and are pivotal in maintaining cutting-edge technological
excellence.
3. Bereft of details, fact of the case is that one Mrs. Jain, an expecting mother, seeking maternity
services from the OP, entered into an agreement with LifeCell India for umbilical cord stem-cell
banking services. Prior to the delivery, when her husband sought OP's support for getting the stem cell
banking procedure done at the OP's premises, he was informed that the OP has an arrangement with
Cryobanks India according to which no other stem cell banker would be allowed in the OP's premises.
In the event of the informant still being desirous of opting for any other stem cell banking services other
than the one with which the OP had an arrangement, he was told that he should seek maternity services
from elsewhere. Consequently, the patient opted for another high-end multi-specialty hospital for
maternity services.
4. The Informant also submits that the OP not only denied the patient to avail services of LifeCell India,
but also directed the latter not to enroll any of its patients for stem cell banking services as Cryobanks
was their cord stem cell Banker with effect from 01/09/2011.
Allegations
5. As submitted, violations / contraventions brought out in the information relate to a new and emerging
area of medical services, which is currently at the nascent stage of development in India. It is submitted
that the target consumers for stem cell banking services in India would constitute less than 2% of the
total population. It is also submitted that cord blood has to be collected immediately after baby's birth,
preferably within 10 minutes after which it would not be suitable for collection and processing of stem
cells. The collection of cord blood can be done either by customers' obstetrician or the hospital staff. If
the customer desires, collection can also be done by a paramedic of the service provider in assistance
with the hospital. As submitted, business of stem cell banking is not regulated by any statutory authority
in India.
6. It is alleged that the OP has indulged in anti-competitive practices and abused its dominant position in
the market for maternity services in high-end multi-specialty hospitals in the wards S, L, N, K/E of
Mumbai and leveraging its dominant position to gain advantage in a related market for providing
umbilical cord stem cell banking services to high-end multi-specialty hospitals in the wards S, L, N, K/E
of Mumbai, where it is not present itself, thereby, causing an appreciable adverse effect on competition
in violation of sections 3(4) and 4 of the Act.
7. Specifically, the Informant has cited following abusive practices of the OP:

i. Indulgence in practices resulting in denial of market access.

ii. Imposition of unfair condition by way of termination of an existing supply
relationship without objective commercial justification.
iii. Exploitation of consumers.
8. The Informant has also referred to the refusal to deal arising out of the exclusive supply agreement
between OP and Cryobanks and submitted that competitors of Cryobanks are not allowed to approach
prospective consumers who are taking maternity services from the OP. Further, the Informant has
submitted that although the present case is not of tying, facts do not suggest that denying access to
entities other than Cryobanks would lead to improved patient care so as to outweigh any
anti-competitive consequences arising out of the exclusive supply agreement.
Analysis of the Case
9. The case deals with two new concepts; (a) 'super specialty hospital' for maternity services; and (b)
'stem-cell banking services'. As per the allegations, both are linked. Before analyzing the veracity of the
allegation, a background on these two new concepts will help to place the allegations in their appropriate
context.
Market structure and Economics of Health care Industry
10. Emergence of commercial health care services, 'for profit' hospitals as against the conventional
'not-for-profit' hospitals and the expansion of these hospitals raise issues on the form and nature of
market transactions. Hospitals, especially modern private hospitals such as Hiranandani Hospital, are
business firms organized to provide comprehensive medical services, involving various third party
health care service providers. Provision of medical services involves complicated combinations of
physical facilities, advanced technology and specialized human capital. Diversification within a hospital
is on the basis of distinct verticals where each vertical focuses on a single branch of medicine such as
oncology, sports medicine, highlighting the expansion of health care facilities to cover a wide range of
medical treatment and significantly the verticals also include facilities such as imaging and even
insurance.
11. As highlighted in the literature on anti-trust cases in the US and subsequent framework with
conceptual issues,1 market transactions in the health care industry are organized somewhat differently
from the conventional market transactions.
12. From an economic perspective, the modern hospital can be seen as organizing the provision of
medical services, using physician labour as both a supply input and a distribution network for patients in
terms of various verticals. In the new paradigm, a hospital gets transformed as a platform to facilitate
exchange of services between health care specialists and consumers. These services (including
consultant doctors) are provided on commercial terms that are often packaged and offered to consumers
(patients) by the hospital in different combinations; and if required, tailor-made to suit their
requirements. Consequently, majority transactions in the health care industry are multilateral, involving
various health care service providers, patients and hospital itself - managerial and entrepreneurial
functions are shared among firms supplying different types of health care service / products. The benefit
of such packaged services under one roof reduces the transaction cost to all related market participants,
including patients and diversity of package enables patients to exercise their choice.
13. A platform typically intermediates transactions between two distinct groups of consumers who need
each other in some way, but require a medium to facilitate exchange. The platform generates revenues
by charging fees from the consumer who joins the platform for exchange of goods or services. A
two-sided platform provides goods or services simultaneously to these two groups. We can identify
multiple two-sided relationships that are intermediated through a hospital - two of these pertinent to the
case are between obstetrician and maternity patients and the other one is between umbilical cord stem
cell bank and maternity patients. It is important to appreciate the fact that in a platform, pricing
decisions are not on conventional lines as observed in the MCX-SX v. NSEIL;2 rather it is dynamic,
depending on number of users on different side of the platform, number of transactions, frequency of
transactions, contractual arrangement, if any, between platform-owner and platform-users etc.
14. There are other notable features of the health care industries that need to be noted. Firstly,
arrangements and contracts in the health care market give rise to vertical relations. A hospital platform is
organized along different verticals (treatment areas) and transactions between a hospital and health care
in each vertical consists of several layers of contracts which are vertical arrangements, a departure from
earlier expansion in hospital services that were horizontal in their arrangement. The vertical relation in
health care is not necessarily unidirectional or sequential; unlike in a conventional manufacturing sector,
where a vertical relation gets established when output of each successive firm is utilized by a
downstream firm that adds value to it for consumption by the final user.
15. Secondly, in this vertical arrangement, given the nature of relationships between the two-sides of the
platform, there is an element of vertical incompleteness. A hospital acts as a coordinator of transactions
towards a common objective - this alters the nature of transactions and incentives in the healthcare
industry from normal market exchanges. In the health care industry there are five basic classes of
transactors. The patient or consumer of health care services is the first transactor, followed by first-line
providers - the doctors, specialist consultants whom the patients contact directly. The second-line
providers include imaging facilities, scanning, blood bank, stem-cell bank etc. whose output is either
used by patients under the direction of first-line providers or supplied as intermediate products to
first-line or patients. Insurers who assume risk by selling health insurance policies are the next line of
service providers followed lastly by the government which regulates the health care market. These
interactions are vertical in form and breadth, but do not display the standard continuous vertical linkage
to the end consumer as in the manufacturing sector. As a result of the pattern of incomplete integration,
health care market transactions are dominated on one side of the transaction platform. Importantly,
second-line providers (drug companies, equipment manufacturers etc.) exert greater control than other
players in the health care sector and adopt different marketing techniques to promote their product.
16. Unlike standard market economic transactions wherein each side of the transaction seeks to
maximize his benefits by taking independent decision, transactions in the health care industry are often
multilateral and not an outcome of independent decision -patients purchase medicines that are prescribed
by doctors, physicians refer patients to hospitals / diagnostic centers that are not owned / operated by
them, health care equipment manufacturers sell to hospitals who serve patients. In other words, the
ultimate user of service does not generally make the utilization decision. Thus, although each entity in a
health care industry is related to the other, the integration is not complete in as much as there is a lack of
independence while making decision for utilization of a particular service. Maternity and stem cell
banking services constitute one such incomplete integration.
17. Thus, health care industry displays some sort of vertical integration, although different from
conventional vertical relation. Further, this vertical integration is incomplete as objectives of the
transactors partly overlap and partly conflict with power to influence each other's behaviour.
18. In the present case, a hospital acts as a platform to facilitate exchange of services between health
care specialists (for provision of stem cell banking services) and consumers (seekers of stem cell
services), apart from rendering maternity services to its patients. This aspect of multitude relations
between obstetricians and patients and between umbilical cord stem cell bank and patients mediated
through the platform of Hiranandani Hospital at the time of delivery lends these market transactions an
analytical framework of multisided markets, and in this framework the allegations will be examined.
19. As the violations pertain to Sec 4(2)(a)(i) and 4(2)(c) and Sec 3(4), the case revolves around the
dominance of Hiranandani in the provision of maternity services and maternity services with stem-cell
banking facility in wards S,L,N,K/E of Mumbai. The contractual agreement between Hiranandani
Hospital and Cryobanks also raises the issue as to whether Cryobanks, a provider of stem-cell banking
facility, is dominant in that area.
20. To summarize, the Order will examine the following critical issue: (i) Does the consumer have
choices regards: (a) maternity services (b) packages in maternity services? (ii) Even if consumer choice
is restricted, is the conduct of the OP anti-competitive?
Analysis of Section 4 Violation
21. The informant has alleged that the OP, Hiranandani Hospital, has indulged in anti-competitive
practices and abused its dominant position for maternity services in high-end multi-specialty wards S, L,
N, K/E of Mumbai. To assess and evaluate the allegations pertaining to Sec 4(2)(a)(i) and 4(2)(c), it is
necessary to define the relevant market and the dominance of Hiranandani in this market.
Relevant Market
22. What constitutes a relevant market has been provided for under section 2(r) of the Act, according to
which "relevant market" means the market which may be determined by the Commission with reference
to the relevant product market or the relevant geographic market or with reference to both the markets.
23. In terms of Section 2(s), "relevant geographic market" means a market comprising the area in which
the conditions of competition for supply of goods or provision of services or demand of goods or
services are distinctly homogenous and can be distinguished from the conditions prevailing in the
neighbouring areas.
24. Further, as per Section 2(t), "relevant product market" means 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 intended use.
25. The Informant has placed reliance on several cases viz; PPR/Gucci3, Wanadoo Interactive4, to
underscore that there exists a separate product market for luxury products having a low degree of
substitutability with other products falling within other segments of the same sector. In the information
filed, the Informant has identified two distinct relevant markets for the purpose of the present case:

(i) 'Maternity services in high-end multi-specialty hospitals in the words S, L, N,

K/E of Mumbai';
(ii) 'Umbilical cord stem-cell banking services in high-end multi-specialty
hospitals in the wards of S, L, N and K/E of Mumbai'
26. On the other hand, while arriving at the relevant market, DG has submitted that factors such as
economic and social strata of the patient, peer pressure, social perceptions, brand value of the hospital,
complication attached with maternity, other health issues, relation with the doctors etc become critical in
deciding a hospital. Further, DG has ruled out the possibility of including all hospitals / clinics within
one single market. Reliance has also been placed on Commission's Order in Diageo5to highlight
'premiumisation' of certain differentiated products. Considering the fact that the cost of availing
maternity services is considerably lower at other establishments, than what it is at the high-end multi-
specialty hospital, DG has determined the relevant product market as 'provision of maternity services by
Super Specialty Hospitals'.
27. While defining the relevant product market, the DG, in its supplementary report, has cited the
Guidelines of National Accreditation Board for Hospitals & Health care Providers (NABH) on the basis
of which the DG concludes that super-specialty centers are those 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, Paediatrics Cardiology, Hepatology, Cardio-vascular & Thoracic Surgery, Paediatric
Cardio-Thoracic Vascular Surgery, Urology, Neurosurgery, Paediatric Surgery, Plastic &
Reconstructive Surgery, Surgical Gastroenterology, Surgical Oncology, Gynaecological Oncology,
Endocrine Surgery, Vascular Surgery, Hepato-Pancreato-Biliary Surgery.
28. On the issue of relevant geographic market, DG has used catchment area analysis on a sample data
of 252 patients who have availed both maternity services and stem cell banking services at Hiranandani
Hospital to conclude that 82% of the patients of OP reside within a distance of 0-12 km. DG has also
found that about 71% of the patients who availed both services at Hiranandani Hospital come from S, L,
N, K/E wards of Greater Mumbai. Using these results, DG has determined the relevant geographic
market as the 'area 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'.
29. To sum up, according to the DG, the relevant market is „provision of maternity services by Super
Specialty 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'.
30. The OP has contested both the relevant product market as well as the relevant geographic
determined by the DG on the grounds that the latter has made conceptual or / and methodological error
leading to erroneous determination of the relevant market. Citing Gordon v. Lewistown Hospital6and
FTC v. Tenet Health care7, the OP has submitted that health care decisions are based on factors other
than price and that lower price hospitals do exert competitive pressure on higher-priced hospitals. It is
submitted that DG has: (a) failed to identify as to what constitutes super-specialty hospitals; (b) made
subjective statements while stating that all hospitals / clinics cannot be included within a single market;
and (c) pre-supposed that super-specialty hospitals are a separate class of hospitals without an
assessment of whether they are considered inter-changeable / substitutable for other medical
establishments by a consumer. The OP has objected to the relevant product market definition proposed
by the DG, and has submitted that the DG has only examined what he believes are "Super Specialty
Hospitals" without an assessment of whether they are considered inter-changeable / substitutable for
other medical establishments by a consumer. It is also submitted that Super Specialty Hospitals are not a
separate class of health care establishments and that 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 the OP. On price based competition,
the OP has submitted a list of 87 hospitals / maternity centers which, according to it, compete with the
OP in maternity services. According to the OP, the correct product market definition is 'market for
maternity services at hospitals, specialist maternity hospitals / clinics, nursing homes, birthing centers
etc.'
31. The OP has also disputed DG's definition of the relevant geographic market on the grounds that he
has relied on wrong data set and has erred in identifying OP's catchment area. Moreover, according to
the OP the DG failed to identify competitive constraint in and outside its catchment area and also failed
to consider whether a chain of substitution exists for all hospitals within the Municipal Corporation of
Greater Mumbai. Taking recourse to the Economist's Report, the OP has proposed that the relevant
geographic market based on catchment area of OP should include 16-20 km on travel distance basis or
roughly 12 km on a straight line basis and therefore, the relevant market should include all super
specialty hospitals in Mumbai.
32. Having gone through the submissions made by the parties as also the DG Report, I am of the view
that for determining the boundary of relevant market in the present case, both dimensions - product and
as well as geography play an important role and competitive constraints ought to be evaluated
accordingly.
Relevant Product Market
33. The standard approach to defining the relevant market is the Hypothetical Monopolist Test or SSNIP
(small but significant and non-transitory increase in price) Test. I am of the view that use of SSNIP test
in case of differentiated products, as in the present case, that has both price as well as non-price
dimensions may be inappropriate to the extent that SSNIP would capture only price-related aspects.
34. For defining the relevant market, it is important to identify those substitute products / services which
provide an effective constraint on the competitive behaviour of the products or services being offered in
the market by the parties under investigation. It is sometimes argued that two products cannot be
reasonably substitutable if they have substantially different prices. Price differences have therefore been
used to distinguish between products which may be 'functionally substitutable', but are not 'substitutable'
from competition assessment perspective. Therefore, defining relevant market solely on the basis of
differences in price will be flawed if price differences reflect quality differences (actual or perceived).
When such quality differences appear, defining relevant market merely on the basis of absolute price
levels will ignore the possibility of consumers making a trade-off between price and quality.
35. While accepting that the present case centers on maternity services (having both price and non-price
consideration), what is being disputed is whether there is a need to categorize these service providers to
analyze state of competition. In this regard, it is important to note the role of medical insurance policies.
In the absence of health policies, a patient would certainly weigh the cost of maternity services while
revealing her preference for a particular hospital. To that extent, theoretically, some sort of segmentation
could be possible on price consideration alone. However, if there are serious non-price considerations
such as the choice of the gynecologist, family traditions, peer pressures etc. then it is likely that a lower
priced medical establishment may well constrain a high-end competitor in maternity services. On the
other hand, a person having a health policy would consider non-price factors to be the determining
factor as her expenses is taken care of in designated hospitals - in this case all such empanelled hospitals
could be deemed competitors but may just fall short of comprising the relevant market.
36. The DG has overlooked these nuances of the health care industry, especially in the maternity
services segment, which generally is not considered an intensive medical condition. Although not stated
upfront, even if we were to assume super-specialty hospitals to be synonymous with high-end hospitals,
no reasons has been given to exclude single-specialty hospital / neighborhood maternity centers that
provide maternity services at comparable rates. Secondly, the dividing line in terms of price range has
not been investigated upon; to that extent high-end hospitals for 'upwardly mobile' customers remains
subjective.
37. In the present case, there is a trade-off between price and quality as the hospitals offer a variety of
rooms with different prices based on the category of the room with different facilities. Thus, every
individual hospital also has a price range. Any kind of price segmentation is arbitrary. The price range of
one health care establishment that provides maternity services might overlap the price range of others.
The rates of highest priced room at a nursing home might be comparable with the lowest priced room at
a super-specialty hospital. In other words, there is a continuous price spectrum for maternity services
across different types of health care establishments, such that no one price bracket or type of medical
establishments can be viewed in isolation.
38. On the other hand, if super-specialty hospitals are those that include various verticals (as in NABH
classification, referred to by DG and brought earlier in the Order), then it would be wrong to consider
only the private high-end establishments; various government run, charitable / trust hospitals etc. might
as well get included in the relevant market definition. It is to be noted that NABH classifies the hospitals
into super-specialty and specialty on the basis of professional qualification of doctors rather than on the
basis of different verticals as cited by the DG. To that extent, a super-specialty or a specialty medical
establishment could be single or multi-disciplinary. Most importantly, perusal of NABH guidelines
highlights the fact that maternity service is not included in the list of verticals that are considered
'super-specialty'.
39. While a hospital that provides an array of services across different verticals as discussed above, it
may be true that each vertical may not be a super-specialty on NABH guidelines. Often the assessment
as a super-specialty hospital is done as a marketing tool to promote / build their brand equity in the
market.
40. It is noted that DG has relied upon the Diageo case (M&A Case) (supra)to highlight high-end
products being a part of a separate anti-trust relevant market. On this aspect, it is opined that Diageo
case (supra) is premised on premiumisation of a product. As discussed above, facts of the case do not
enable the present case to be placed in the same league as that of Diageo mainly on account of two
reasons: (i) maternity services are not considered as 'specialty treatment' i.e. patients generally prefer a
hospital that gives best value in terms of services for their money since treatment is given priority over
'luxury' in health care; and (ii) specialty cannot be equated with 'high-end' - reference is made to NABH
guidelines that differentiates a super-specialty / specialty / other health establishments on the basis of
requirement of doctor of particular qualification. Thus, in health care, specialty and high-end may not go
together.
41. It may also be pointed that definition of relevant market in merger cases need not be on the same
lines as a case pertaining to abuse of dominance as economics of merger is different from economics of
abuse of dominant position (AoD). Unlike in a merger case wherein competition authorities, ex-ante,
predict the outcome of a proposed merger for any change possible in competitive environment; in
analyzing AoD case, dominance is investigated on the basis of market leadership in an oligopolistic
market and thereafter the alleged abusive conduct of OP is evaluated ex-post. Further, assessment of
entry conditions is essential to judge the ability of the firm to harm the consumer8. Not the least, the
focus of AoD analysis is more on a particular relevant market, unlike the M&A analysis where overall
competition in different markets is evaluated.
42. In view of the above and the fact that there exists a continuum of price in maternity services, the
relevant product market ought to be "Market for maternity services."
Relevant Geographic Market
43. In respect of maternity services, it is important to draw a distinction between a planned delivery and
an emergency delivery. In the absence of supporting data, I strongly believe that majority of delivery
cases are planned. So, travel distance or time is likely to be a factor in deciding a particular hospital, but
it would certainly not be the only determining factor that patients consider before choosing a hospital for
availing maternity services.
44. On the relevant geographic market, the DG has used the catchment area analysis to fix the
boundaries of geographic market. The catchment area of a firm is defined as an area in which its
maximum (usually 80%, as taken in some matured jurisdiction) customers would be located. To define
the boundary of the relevant geographic market, it is important to analyze the extent of competition in
the catchment area. On mapping customer sample data of all such maternity patients who also availed
stem cell banking services from Cryobanks at the OP's premises, the DG has concluded that nearly 82%
of the OP's patients come from within 12 km of the OP's location. As against this, the OP has submitted
analysis of all its 3602 maternity patients' data to suggest that nearly 76% of its maternity patients come
from a distance up to 15 kms and further 83% patients come from a distance up to 20 km. Further, the
OP has also cited para 4.45 on pp 25 of the DG Report that says nearly 76% of maternity patients are
coming from a distance between 0-15 km.
45. In my opinion, while the DG has used an appropriate tool to define the relevant geographic market,
he has used an incorrect sample for analysis. Since the product under consideration is the provision of
maternity services (the relevant product market identified by the DG himself), the sample data set should
reflect only such patients that have availed maternity services and not such patients who have availed
both maternity and stem cell banking services at Hiranandani Hospital. To that extent the sample
characteristic does not correctly represent the population characteristic and hence the sample is biased.
Further, it has not been established whether the sample is statistically significant. Most importantly,
selecting and analyzing the data of only such patients that have availed both maternity and stem cell
banking services makes the DG's analysis a 'census' analysis as opposed to a 'sample' analysis of
maternity patients that could possibly include those who availed stem cell banking service. On account
of the aforementioned, the result of analysis is doubtful.
46. In my opinion, the DG has chosen a method for doing a sample analysis which is inappropriate.
While choosing a sample of 252 patients, the DG has inadvertently conducted unrelated 'census' analysis
of only such patients who have availed the package service (maternity and stem cell banking) as against
a purported sample analysis of all maternity patients, including those who availed stem cell banking
services. Given the fact that there were 3602 maternity patients enrolled by the OP, an appropriate
technique would have been to conduct a 'census' analysis of all such patients as the relevant product has
been identified as maternity services, if he preferred to do a census.
47. It is also important to note that the catchment area analysis would give erroneous results when
competitor firms are located in such a manner that the catchment area of two firms overlaps each other
i.e. contestability / substitutability would be more if the overlap of catchment area is greater. The OP has
submitted that the DG has not considered the fact that defining a rigid catchment area may lead to the
exclusion of certain health care establishments that may lie just outside the area but do offer sufficient
competition to the establishment being considered and to that extent, applying a precise distance
measure is likely to lead to incorrect results. It is also submitted that the DG has not considered
competitive constraint offered by Lilavati Hospital and Hinduja Hospital that are located at 12.2 Km and
12.4 Km, respectively from the OP. In its response to the DG report, the OP has submitted that there is a
significant overlap between its catchment area and that of 8 super-specialty hospitals in Mumbai and has
accordingly proposed that the relevant geographic market is much broader than as defined by the DG.
48. Having noted the arguments of OP and submissions of DG on catchment area and analysis of data
set to define the boundary of geographic market, I am of the opinion that the relevant geographic market
for the present case would certainly be broader than suggested by the DG. Defining particular wards of
Mumbai as the relevant geographic market would shrink the market on the assumption that consumers in
these wards do not consider availing maternity services from a health care establishment located outside
of these named wards. Also, given that the product market has been defined as market for maternity
services, it is believed that a metropolitan city such as Mumbai, with more than 1,60,000 live births
every year would have maternity centers spread all around the city so as to cater to each locality of the
city. Further, since there is no data on the catchment area of all such centers that provide maternity
services, in my view, the relevant geographic market in the present case is the City of Mumbai.
49. In view of the foregoing, the relevant market would be 'Market for maternity services in the city of
Mumbai.'
Is OP dominant in the relevant market?
50. The first step for determining dominance is to find the stable / long run market share of the firm
under investigation in the relevant market. For doing that, we need to estimate the size of the relevant
market.
51. It is noted that the DG has calculated market share of the OP as about 62% within his definition of
relevant market. On the other hand, the OP has contested the very definition of the DG's relevant market
and accordingly submitted that it is not a dominant enterprise in maternity service market.
52. Since, relevant market has been defined in a different manner, I now attempt to estimate the market
share of OP in the revised relevant market. In the present case, it has been submitted that 3602 maternity
patients have enrolled for maternity services at OP during 2009-12. For assessing total market size,
reliance is placed on an internet article9, according to which there were at least 1,61,500 live births in
Mumbai in the year 2009. From these two figures, the market share of the OP in the relevant market is
calculated to be less than 1%.
53. Furthermore, since there is an upper limit on the number of patients that can be enrolled at any
hospital (as number of beds are fixed and cannot be increased in a short span of time to accommodate
more patients); I am of the view that there is no further need to analyze other Section 19(4) conditions
for dominance. Accordingly, the OP is not a considered dominant enterprise in the relevant market.
Issue: If the OP was dominant in the relevant market, has it abused its dominance in the relevant
market?
54. Having concluded that OP is not dominant in the relevant market, it would be futile to enquire OP's
alleged abusive conduct under the provisions of Competition Act, 2002.
Analysis of Section 3 Violation
55. The Informant has alleged that consumers of the OP are exploited because: (i) OP has an exclusive
supply agreement 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
Inc. USA10to 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 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".
59. Further, Section 3(4) of the Act highlights anti-competitive agreements between vertically related
enterprise as "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 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 Life Cell 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 banks, the stem cell banks do require the services of the hospital to the extent that stem cell of the
umbilical cord has to be collected within 10 minutes of delivery of a baby if the baby is delivered in a
hospital. However, it is important to note that collection of stem cell from the umbilical cord can be
done at home by a paramedic staff if delivery happens at home. It 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 in patient 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 Harrigan11:
stages, breadth, degree and form. The "degree" of vertical integration is the production of total input or
output of required resources transferred to a later in-house production stage. In this case, hospital
services are used only at the time of the collection of the sample and later the banking services are
provided independently by the umbilical cord stem cell bank.
63. Further, as stated above, a patient demands maternity services and collection and banking of the
umbilical cord stem cells, there are two outputs for final consumption. When the baby is delivered, a
sample of umbilical cord stem cells is collected within 10 minutes from the placenta. Both the outputs
are produced sequentially, at the same production stage and in a short time gap. This shows that the
hospital is in a vertical relationship not only with obstetricians and other specialists for the provision of
maternity 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's case12 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 the tied product. The product
that the buyer wants to purchase is called the tying product.'
'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.'"
66. Referring to Van Den Bergh Foods Ltd. v. Commission13,DG has submitted 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 any
agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise
dealing in any goods other than those of the seller or any other person.
69. The OP has quoted Balaklaw v. Lovell14to highlight that "…it is the nature of competition that at
some point there are winners and losers, and the losers are excluded…" It is evident from above that the
tenet of exclusive supply agreement, generally observed between manufacturers and suppliers or
between manufacturers and dealers, is that a seller restricts a trader (re-seller) from dealing with his
competitor seller in order to stifle competition. While exclusive contracts can benefit competition in the
market by ensuring supply sources or sales outlets, 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 pertaining to refusal to deal will operate only if (a) parties
have an agreement between them; and (b) parties to the agreement (buyer or seller) are restricted or
likely to be restricted from selling or purchasing goods. In the present case, OP being the seller of
hospital space to Cryobanks, parties to agreement are: OP and Cryobanks. It has been alleged that on
account of the agreement between OP and Cryobanks, other stem cell banks have been refused to deal
by the OP.
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 anti-competitive. 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.15
75. If we adopt a per se approach, the agreement between Hiranandani Hospital and Cryobanks for the
provision of umbilical stem cell banking services to the maternity patients restricts other stem cell banks
to provide its services to the patients at the Hiranandani Hospital. The agreement also limits the choice
of those patients who want to avail maternity services and umbilical cord stem cell banking services at
Hiranandani Hospital, but desire to obtain cord stem cell banking services from a different umbilical
cord stem cell bank.
76. In the present case, following are to be noted: (i) Impugned agreement of OP with Cryobanks was
initially for one year only; (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 of reason approach has to be adopted in the analysis of this restraint. It needs to be established,
whether such an agreement has an appreciable adverse effect on competition, with regard to all or any of
the factors stated in section 19(3) of the Act.
80. As per section 19(3) of the Competition Act, 2002, 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.
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 having exclusive tie-up arrangement with a particular service provider
and not allowing others to utilize its infrastructure, OP has effectively driven out all the existing
competitors of Cryobanks out of the market.
83. Reliance is placed on an internet article,16 wherein it has been reported that about 500 samples are
collected by stem cell banks on a monthly basis and that the market, witnessing entry of more players
since starting of cord cell banking service in 2004, is growing by about 45-50%. Further, there is no
evidence to show that any of the existing stem 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.
Conclusion
85. The allegation in the case revolves around the dominance of Hiranandani Hospital as regards
maternity services in violation of Sec 4 or Sec 3(4). Having examined the entire aspect on the allegation
stemming from the dominance of Hiranandani Hospital in maternity services, as part of high-end
super-specialty hospital, I am of the considered view that maternity services do not fall in the category
of super-specialty, as supported from the data of NABH. Further, there is no link between high-end and
super-specialty. In this case, non-price factors tend to out-weigh high-end hospitals for maternity
services. Against this background, I note that the patient has a choice as regards the hospital she wishes
to seek for maternity service in Mumbai and the OP offered a choice to her between stand-alone
maternity services and maternity packaged with stem cell banking from Cryobanks. Since the OP is not
dominant in the maternity services market in Mumbai, neither Section 3(4) nor Section 4 applies in the
present case.
ORDER

No case of violation either of Section 3(4) or of Section 4 is established against the OP. Secretary,
Competition Commission of India is directed to convey the same to the parties in accordance with
provisions of the Act.
ORDER UNDER SECTION 26(2) OF THE COMPETITION ACT, 2002

1. The present information has been filed before the Commission on 10th July, 2012 by Mr. Ramakant
Kini (hereinafter referred to as "the Informant") under Section 19 (1) (a) of the Competition Act, 2002
(hereinafter referred to as "the Act"). The information relates to the alleged abuse of dominant position
by M/s Dr. L H Hiranandani Hospital, Mumbai (hereinafter referred to as the "Opposite Party" or "OP")
and its anti-competitive agreement with M/s Cryobanks, a stem cell banking company in India.
2. As per the information the OP is an enterprise and is engaged in the provision of health care services
in Mumbai and is known as one of best high end multi-speciality hospital in the country. A patient, Mrs.
Manu Jain was expecting her baby for which she was availing the maternity health care services of the
OP. With a view to preserve the stem cell of her expected baby Mrs. Manu Jain had entered into an
agreement with M/s LifeCell India Pvt. Ltd., a leading umbilical cord stem cell banking company in
India, for availing its umbilical cord stem cell banking services.
3. After signing the agreement with M/s LifeCell India Pvt. Ltd. for collection, processing and
preservation of umbilical cord stem cell of her expected baby, Mrs. Jain requested the OP to allow her to
engage M/s LifeCell India Pvt. Ltd. for collection of cord blood samples of her expected baby at the
time of delivery because the cord blood sample has to be collected from the umbilical cord immediately
after the birth of a baby, ideally within 10 minutes of delivery. Since the cord blood sample has to be
collected immediately after the delivery it has to be collected either by the concerned hospital staff
present at the time of delivery or by a para-medical staff of the concerned stem cell banking company
present at the time of delivery. In the later case the hospital must allow the para-medical staff of the
concerned stem cell banking company to be present at the time of delivery.
4. But, as per the Informant, the OP refused to allow Mrs. Jain to engage M/s LifeCell India Pvt. Ltd. for
the collection of cord blood samples from the hospital at the time of delivery. Moreover, the OP unduly
pressurised Mrs. Manu Jain to terminate the existing agreement with M/s Lifecell India Pvt. Ltd for
umbilical cord stem cell banking services and insisted her to avail the umbilical cord stem cell banking
services of M/s Cryobanks, another leading umbilical cord stem cell banking company in India and a
competitor of the OP, with whom it has an exclusive tie-up.
5. The Informant has submitted that the OP not only denied Mrs. Jain to engage M/s LifeCell India Pvt.
Ltd. for collection of cord blood samples of her expected child at the time of delivery from the hospital
but also directed M/s LifeCell India Pvt. Ltd. not to enrol any of its patients for providing stem cell
banking services as M/s Cryobanks is its 'cord blood banker' with effect from 01.09.2011. The Informant
has alleged that it was because of the persuasion of the OP, that M/s LifeCell India Pvt. Ltd. has
declined to provide Mrs. Jain with the stem cell banking services.
6. As per the Informant, the exclusive tie-up between the OP and M/s Cryobanks for stem cell banking
services has been revealed from an email sent by Dr. Shashikant Pawar, Senior Manager (Operations) of
the OP to the husband of Ms. Manu Jain wherein, Dr. Pawar has admitted that there exists an exclusive
tie-up between the OP and M/s Cryobanks for cord blood sample collection. Further, Dr. Pawar has also
admitted that the OP does not allow any other company to collect cord blood samples.
7. The Informant has submitted that pursuant to the OP's refusal to deal with M/s LifeCell India Pvt.
Ltd., Mrs. Jain had to either sign up for the stem cell banking services of M/s Cryobanks or chose
another hospital for giving birth to her child. Mrs. Jain refused to succumb to the undue pressure
exercised by the OP and opted for another high end multi-speciality hospital providing maternity
services.
8. The Informant has alleged the existence of two relevant product markets in this case: (i) the primary
market - the market of maternity services in high end multi-specialty hospitals. The reason for
delineating the relevant product market as the high end multi-specialty hospitals is that the patients
interested in the services of a high end multi-specialty hospital would not consider another mid-level
multi-speciality hospital or government hospital in the areas as substitutes. If the Opposite Party
increases the price of its maternity services in a small but significant manner, the patient would not shift
to other mid-level hospitals in the area; (ii) the secondary market - the market for the provision of
umbilical cord stem cell banking services.
9. As per the informant the relevant geographic market in this case is the geographical area of S, L, N,
K, E municipal wards of Mumbai which consists of the locality of Bhandup, Jogeshwari, Powai,
Ghatkopar, Vikhroli, and Andheri East of Mumbai. The informant has chosen S, L, N, E, K municipal
wards of Mumbai as relevant geographic market because of high density of population and congestion in
Mumbai which constrains the patients from travelling long distance to avail the medical facilities from
the hospitals located in other places of Mumbai.
10. The informant has submitted that the OP is in a dominant position in the relevant market of
provision of maternity services in high end multi-specialty hospitals in S, L, N, K, E municipal wards of
Mumbai. It is so because the OP is a leading hospital in the said area of Mumbai with a formidable 240
bed facility. It enjoys commercial advantages over its competitors and the size and resources of the OP
are much larger compared to its competitors.
11. The Informant has alleged that being a dominant enterprise in the relevant market the OP has abused
its dominant position:

i. Under Section 4(2) (a) (i) of the Act, by imposing unfair condition on the
patients of maternity services to avail the stem cell banking services of M/s
Cryobanks and preventing its patients of maternity services to avail the
services of other stem cell banking companies.
ii. Under Section 4(2) (c) of the Act, by entering into an exclusive
tie-up/agreement with M/s Cryobanks which result into denial of market
access to the competitors of M/s Cryobanks.
iii. Under Section 3 (4) of the Act, by entering into exclusive tie-up/agreement
with M/s Cryobanks which has resulted in the denial of market access to all
other competing players of M/s Cryobanks.
12. In my view the relevant product market in this case cannot be categorised as market of maternity
services in high end multi-specialty hospitals. At the time of emergency for medical services no person
makes a distinction between high end and low end medical services. Rather, priority is given for the best
available medical services. Patients usually considered better treatment as their priority for treatment not
the luxury. Thus, all hospitals providing maternity healthcare services should be considered as substitute
of each other in this case. Therefore, in my view the relevant product market in the present case is the
market of "provision of maternity services in the hospitals/nursing homes/clinics".
13. The Relevant geographic market in this case is "the geographical area of Mumbai" instead of
particular municipal wards of Mumbai as submitted by the Informant. The reason being that for medical
services people usually prefer hospitals which provides better services, without considering the distance
factor. Otherwise also, in normal circumstances, for maternity services a patient can plan well before
availing such services and thus, can choose from variety of hospitals within the city. Thus, I consider the
relevant market in the present case as the market of "provision of maternity services in the
hospitals/nursing homes/clinics within the geographical area of Mumbai".
14. Considering the revised relevant market as the "provision of maternity services in the
hospitals/nursing homes/clinics within the geographical area of Mumbai", I am of the, prima facie,
opinion that the OP is not in a dominant maternity healthcare service provider in Mumbai. The reason
being that there are a large number of hospitals/clinics/maternity homes in Mumbai which are providing
maternity services which are substitutable for the services of the OP. Moreover, there are hospitals in
Mumbai whose scale of operation, turnover, resources etc. are larger than those of the OP.
15. The allegations of abuse of dominance by an enterprise can only be examined if the enterprise is in a
dominant position in the relevant market. In the instant case considering the aforesaid revised relevant
market, I hold the view that the OP, prima facie, does not appear to be in a dominant position in the
relevant market. So, the question of abuse of dominant position by the OP in the relevant market does
not arise. Thus, on the basis of above analysis, I am of the view that the OP has not violated any of the
provisions of Section 4 of the Act.
16. The Informant has also alleged that the exclusive tie-up between the OP and M/s Cryobanks for the
services of stem cell banking is anti-competitive under Section 3(4) of the Act. It is noted from the
provisions of Section 3(4) of the Act that for the applicability of the said section, there should be an
agreement between two undertakings operating at different stages or level of production chain in
different markets in respect to production, supply, distribution, storage, sale or price of, or trade in goods
or provision of services.
17. In the instant case, the OP is engaged in the provision of maternity services whereas M/s Cryobanks
is engaged in the provision of stem cell banking services. It is observed that the OP and M/s Cryobanks,
prima facie, are not operating at different stages or level of the production chain because the
business/activities of the OP not vertically related to the business/activities of M/s Cryobanks. What is
understood as being in different stages of the production process (e.g., a manufacturer and a retailer) is
the existence of a relationship where the product supplied by a manufacturer to the retailer is then sold
by the retailer to its customers after either using that product as an input in its production process or by
providing retailing services. Rather than competing with each other the products or services supplied by
the manufacturer and the retailer are complementary to each other. Manufacturer needs the retailer to
sell its product while the retailer needs the manufacturer to supply it. In my view, the above described
manufacturer-retailer relationship is not present between the OP and M/s Cryobanks. The allegations of
the existence of an anti-competitive agreement between two enterprises can only be examined if such an
agreement exists between such entities. Since based on the above analysis. I am of the view that the OP
and M/s Cryobanks are not parties to any vertical arrangement; the OP cannot be in violation of any of
the provisions of Section 3(4) of the Act.
18. In view of the foregoing, I hold that prima facie no case is made out for making a reference under
section 26 (1) of the Act to the Director General (DG) for conducting investigation into the matter under
the provisions of Section 3(4) and Section 4 of the Act.
RITESH

1. Clement, J. (1988). Vertical Integration and Diversification of Acute Care Hospitals: Conceptual
Definitions. Hospital & Health Services Administration, 33(1):99-110; Evans, R. (1983).
Incomplete Vertical Integration in the Health care Industry: Pseudomarkets and Pseudopolicies.
Annals of the American Academy of Political and Social Science, Vol. 468, Health Care Policy in
America, pp. 60-87.

2. Dissent Order in Case No. 13/2009, Competition Commission of India.

3. Case IV/M. 1534.

4. Comp/38.233 dated 16-7-2003.

5. Case No C-2012/12/97.

6. [2003] 272 F Supp 2d 393.

7. [1999] 186 F3d 1045.

8. Federico Etro, Ioannis Kokkoris: WP Series, Dept of Economics, University of Milan.

9. 25% Mumbai women have caesarean births', Chittaranjan Tembhekar, (November 6, 2009),
accessed from
//http://articles.timesofindia.indiatimes.com/2009-11-06/mumbai/28063040_1_undp-report-private-
hospitals-caesarean), accessed on January 31. 2014.

10. [2013] 119 SCL 107/32 taxmann.com 201 (CCI).

11. Harrigan, R. (1985). Vertical Integration and Corporate Strategy. Academy of Management
Journal, Vol. 28, pp. 397-425.

12. (supra).

13. Case T-65/98, (2003) ECR II - 4653.

14. 14 F3d 793 (2d Cir 1994).

15. The Supreme Court decided to hear NYNEX v. Discon after the Second Circuit issued a remarkable
decision that suggested that a simple agreement by one firm to use the services of another firm
could amount to a "boycott" of the second firm's competitors, and thus could be condemned per se.
The plaintiff in the antitrust case, Discon, was in the business of removing obsolete telephone
equipment. NYNEX owned New York Telephone, a leading local telephone company in New York
and parts of Connecticut. NYNEX at one time used Discon's removal services, but switched all of
its business to a rival removal service, AT&T Technologies. The Court recognized that the Second
Circuit's broad application of the per se rule would discourage firms from changing suppliers even
where the competitive process suffered no harm. In reversing the Second Circuit decision, the
Court made clear that an agreement by a single buyer to purchase goods and services from a single
 supplier could not be condemned per se even if the buyer could not prove a legitimate business
justification for its choice. Thus, after Discon, the law governing refusals to deal once again
requires a plaintiff challenging a single buyer's selection of suppliers to prove harm, not only to a
single competitor, but to the competitive process as a whole.

16. 'Stem cell banks rake in the moolah with a promise to secure future's (sic.) health for the new born',
Mohini Mishra (April 7, 2013), accessed from
(http://articles.economictimes.indiatimes.com/2013-04-07/news/38346234_1_stem-cells-mayur-ab
haya-cord-blood) accessed on January 31, 2014.