1. Competition Appellate Tribunal Set Aside the majority Order of the
Competition Commission of India against Hiranandani Hospital
“It is the duty of the court to make decisions proportionate to
the issues involved.”1
The above words hold significance when seen in the light of the recent judgement of the
CompetitionAppellateTribunal (‘COMPAT/ tribunal’) passed on December, 18th
2015 in the case of
Dr. L.H. HiranandaniHospitalv.Competition Commission of India & another. The tribunal overruled
the decision passed by the majority members of the Competition Commission of India
(‘CCI/Commission’),highlightingthe factorsoverlookedbythe Commission while imposing penalty.
Brief Background
Mrs. Jain (not an informant) was registered with Dr. L.H. Hiranandani Hospital (‘hospital’) for
maternity related services and for delivery of her child. Mrs. Jain requested the hospital to allow
LifeCell to collect the stem cells blood soon after her delivery i.e. within 10 minutes. The hospital
refusedtoaccede to the requestof Mrs. Jain,on the groundthat ithad an exclusive agreement with
Cryobanks International India (‘Cryobank’) -another stem cell banking service provider in India.
Because of thisrefusal byhospital topermitLifeCell tocollect stem cells, Mrs. Jain had to shift from
hospital and get her delivery done at Seven Hills Multi Super Speciality Hospital.
One Mr. Ramakant Kini (informant,notacquaintedwithMrs. Jain) approached the Commission
alleging the hospital for violating the provisions of competition act under section 3(4) of the
CompetitionAct,2002 (‘the Act’) forhavingexclusiveagreementwithCryobankandunder section 4
(2)(a)(i) and 4(2)(c) of the Act for abusing its dominant position. The commission after forming the
prima facie opinion, directed its investigation arm, DG-CCI to investigate into the matter.
The commission videitsmajority orderdatedFebruary,5th
2014 holdsthatthe impugnedagreement
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 penalised the hospital with
Rs. 3,81,58,303/- (Rupeesthree croreseightyone lakhfiftyeightthousandand three hundred three
only)— calculated at the rate of 4% of the average turnover of hospital.
Appeal Before the tribunal
The tribunal has been vested with powers to hear and dispose off appeals (under section 53A)
against any direction issued or decision made or order passed by the Commission. The appeals
preferredare tobe heardanddealtwithas perthe procedure established under section 53-B of the
Act.
The tribunal vide its recent order dated December, 18th
2015 while allowing the appeal of the
hospital has set aside the majority order of the Commission dated February, 5th
2014. The issues
arose for consideration before the tribunal were: 1. whether the findings of the majority of the
1 The above wordare quotedinthe case of Saunders v Williams

2. Commissionthatthe hospital isguiltyof violatingsection3(1) of the Act islegallysustainable?and 2.
Whether the penalty imposed is justified?
The verdict
Locus of the informant:
The tribunal notedthat the DG-CCIand the majorityof the Commission had completely overlooked
the aspect, that the informant in the instant matter is the third party, having no relation and
connection with Mrs. Jain, and was never acquainted by Mrs. Jain to initiate the matter before the
commission.Itwasfurther noted by the tribunal that the Commission and DG-CCI also erred in not
examining Mrs. Jain, but proceeded in the investigation based on pure conjunctures and
imaginations, assuming that the agreement between the hospital and Cryobank had adversely
affected the growth of stem cell banking market and the same had the effect of foreclosing
competition in the stem cell banking market and create entry-barriers for competitors.
Was the said agreement Anti-competitive?
The tribunal observed that the both, the DG-CCI and the majority of the Commission were under a
mistakenimpressionthatthe relevantmarketwasof the market of maternity services ignoring that
the whole dispute centred round the provision of stem cell banking services, which were being
providedbythe 13 entitiesindifferentpartsof the country andtwo additional service providers had
come into existence during the pendency of the information.
The tribunal notedthe defectsin the proceedings conducted by the DG-CCI and the majority of the
Commission,infindingthe hospital guiltyof violating section 3(1) of the Act. The tribunal observed
that the choice of the service providerinthe relevantmarketi.e.marketfor stem cell banking is not
restrictedvide the allegedagreement. The hospital could provide stem cell banking services to the
patientswhowantedto avail such services only through Cryobanks but the latter was free to enrol
any patient(s) forsuchservicestobe availedinanyother hospitals,maternityhomesetc.That apart,
there were 13 other players in the market of stem cell banking and the patients were free to avail
services of anyof these service providersaccordingtotheir convenience and financial capacity. The
DG-CCI and the Commission confused the basic issue by presuming that the stem cell banking
service wasan integral part of the maternityservicesprovidedbythe hospital andthis confusionhas
resulted in miscarriage of justice. The Commission erred, that the refusal of the hospital to allow
LifeCell to provide stem cell banking services to Mrs. Jain had appreciable adverse effect on
competition. The tribunalcontemplatedthe twoearliercasesdecidedbythe Commission todrawits
conclusion.Inthe SubhashYadav’scase2
the tribunal observedthatthe Competition Act is primarily
concernedwithensuringandmaintainingfreeandfaircompetitionin Indian market, and Consumer
protection act 1986 is the separate act looking after individual consumer grievances against unfair
trade practices and beneficiaries in goods/ services. The tribunal also relied on the Sonam Sharma
case3
and the minority (dissenting) order of Dr. Geeta Gouri to conclude that the hospital had not
violated the section 3 since there was no vertical relation between the hospital and Cryobanks in
conventional sense. The 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. In this
2 SubhashYadavv. Force Motor Ltd.&Ors. available at http://www.cci.gov.in/sites/default/files/322012_0.pdf
3 SonamSharma v. Apple & Anr

3. case,hospital servicesare usedonlyatthe time of the collectionof the sample andlaterthe banking
servicesare providedindependently by the umbilical cord stem cell bank. It was opined that there
was noforeclosure as the conditions of exclusive supply agreement do not appear to hold true for
the reasonthat the hospital does not stop Cryobanks from enrolling patients from other hospitals.
Relevant Turnover:
The tribunal wasof the viewthatthe penaltyimposedbythe majorityof the Commission is liable to
be set aside.The interpretationof the term‘turnover’asmade bythe Commission is contrary to the
viewexpressedbythe tribunal initsdecisionin Excel Corp Care Limited vs. Competition Commission
of India and M/s.United PhosphorousLimited vs Competition Commission of India4
.The tribunal is of
the view that ‘relevant turnover’ should be considered by the commission in the cases where the
enterprise is a multi-product company. The tribunal further noted that it is not in dispute that the
hospital is a multi-speciality hospital and its total annual turnover is the income derived from the
services provided in different specialities and not maternity services alone. Unfortunately, the
Commission clubbed the revenue generated from all the services provided by the hospital and
accordingly imposed penalty. It is interestingly noted by the tribunal that an enterprise may be
engaged in providing multi-dimensional services, such enterprise may be found guilty either of
enteringintoanticompetitive agreement with reference to particular product/goods or services or
may be heldguiltyof abuse of dominant position in respect of such product/goods or services, but
the findingof violationof Sections3and/or4 of the Act recordedbythe competentauthorityi.e.the
Commission cannot be made applicable to agreements entered into between the enterprise and
another person in respect of other products, goods or services qua there is no allegation of anti-
competitive agreements or abuse of dominant position and the turnover of other products and
servicescannotbe clubbedwiththe one quawhicha findingof violationof the provisionsof the Act.
Comments
The verdict of the COMPAT in the instant matter assumes importance as this is the case of its first
type in which private healthcare sector delivering in multi-services of healthcare facilities to the
people at large, was being evaluated under the Competition Act. While arriving at a conclusion
aboutthe ‘relevant-turnover’andthe methodof calculation,itwouldbe opentothe authorities like
CCI to rely on the proportion of turnover derived from the goods in respect of which the
infringementwascommittedislikelytogive afairindicationof the scale of the infringement on the
relevant market.
4 Appeal no. 79 of2012 before the Hon’ble COMPAT available at:
http://compat.nic.in/upload/PDFs/octordersApp2013/29_10_13.pdf