2016 (3) TMI 1326 - AT - Law of Competition

Anti-Competitive Activities - closure of proceedings of the case under Section 26(2) of the Competition Act 2002 - discrimination followed by DGHS and ECHS between hospitals on the basis of their accreditation to the National Accreditation Board for Hospitals and healthcare providers (NABH) - appellant - informant has alleged that there is no scientific basis to this discrimination. Whether DGHS and ECHS can be termed as enterprise under Section 2(h) to make them liable under Sections 3 or 4 as the case may be? Whether there has been any discrimination introduced by the fact of accreditation of hospitals to NABH by fixing higher rates for the accredited hospitals and thereby creating a discriminatory environment not based on sound reasons leading to abuse of dominance by Respondent Nos. 1 and 2? Held that - It can be clearly seen that CGHS is not just a facilitative mechanism but it also provides healthcare facilities by itself in the out-patient departments. In cases which require hospitalization or further specialized care references are made to hospitals which are empanelled for the purpose. It is thus amply clear by its own admission that Respondent No. 1 is not just a facilitator for its target group to seek healthcare in empanelled hospitals but itself provides healthcare in its 273 allopathic dispensaries 19 polyclinics 73 labs and 85 Ayush hospitals. This network is further supplemented by private hospitals (648) and diagnostic centres (148). The last two are empanelled following a procedure given out in the Office Memorandum which has fixed differential rates for NABH accredited and non-accredited hospitals. Central Government Health Scheme (CGHS) is a health scheme for serving/retired Central Government employees and their families. Further the DGHS is clearly in the nature of a service provider that does not perform a function which can be termed as inalienable as explained in several cases referred above. It cannot be said to be performing a sovereign function and therefore warranting exclusion from the definition of enterprise. CGHS is clearly an enterprise which provides healthcare services to the target group and in order to do so in view of the constraints on its capacity it laterally complements its resources by empanelling hospitals which include private hospitals as well. Therefore the process of empanelment is essentially an expansion of CGHS activities of providing healthcare to the target group. It is not a facilitation but a clear provision of service. The Commission has taken a simplistic view of the activities of a Government department and has erred in appreciation of the scope of the definition of enterprise. Differential pricing for treatment/facilities provided by accredited and non-accredited hospitals - Held that - Both sides did not dwell on the subject at length. Whether the differential pricing is justified or not or in what manner it creates alleged environment for abuse of dominance are matters of detailed investigation and this Tribunal would refrain from going into the same at this stage. The matter is remitted to the Commission for reconsideration - the Commission would take a prima facie view on whether a case is made out for investigation under Section 26(1) recognizing that DGHS is covered under the definition of enterprise under Section 2(h) of the Act.

Summary

Issues Involved:
1. Whether DGHS and ECHS can be termed as 'enterprise' under Section 2(h) to make them liable under Sections 3 or 4 of the Competition Act, 2002.
2. Whether there has been any discrimination introduced by the fact of accreditation of hospitals to NABH by fixing higher rates for the accredited hospitals, leading to abuse of dominance by Respondent Nos. 1 and 2.

Issue-Wise Detailed Analysis:

1. Whether DGHS and ECHS can be termed as 'enterprise' under Section 2(h) to make them liable under Sections 3 or 4 of the Competition Act, 2002:

The appellant argued that the DGHS and ECHS are abusing their dominance by discriminating between NABH accredited and non-accredited hospitals, thereby thwarting competition. The Commission initially dismissed the case, stating that DGHS and ECHS are not 'enterprises' under Section 2(h) of the Act as they are not engaged in economic and commercial activities but merely regulate and control the healthcare system.

The Tribunal examined the definition of 'enterprise' under Section 2(h) of the Act, which includes any department of the Government engaged in the provision of services of any kind, excluding activities related to sovereign functions. The Tribunal referred to various precedents, including the Bangalore Water Supply and Sewage Board v. A. Rajappa case, which distinguished between sovereign functions and other governmental activities. Sovereign functions are limited to primary, inalienable functions such as defense, administration of justice, and maintenance of law and order.

The Tribunal found that the CGHS and ECHS provide healthcare services directly through their facilities and empanelled private hospitals, thus engaging in the provision of services. This activity does not fall under sovereign functions. Consequently, the Tribunal concluded that DGHS and ECHS qualify as 'enterprises' under Section 2(h) of the Act.

2. Whether there has been any discrimination introduced by the fact of accreditation of hospitals to NABH by fixing higher rates for the accredited hospitals, leading to abuse of dominance by Respondent Nos. 1 and 2:

The appellant alleged that the Office Memorandum issued by the Department of Health and Family Welfare discriminates against non-NABH accredited hospitals by fixing higher rates for NABH accredited hospitals. This practice was claimed to be arbitrary and not based on scientific proof or peer review, thus constituting an unfair trade practice and abuse of dominance.

Respondent Nos. 3 and 4 argued that NABH accreditation is a voluntary program aimed at improving the quality of healthcare services. They contended that the differential pricing is justified as NABH accredited hospitals adhere to higher standards of care. They also stated that ISO is a standard development body and does not have standards for healthcare accreditation, thus there is no conflict between ISO and NABH standards.

The Tribunal noted that the issue of differential pricing and its justification requires detailed investigation. The Tribunal refrained from making a determination on this matter at this stage.

Conclusion:

The Tribunal found that the Commission erred in its interpretation of the definition of 'enterprise' and took a simplistic view of the activities of DGHS and ECHS. The appeal was allowed, and the order of the Commission was set aside. The matter was remitted to the Commission for reconsideration, with instructions to take a prima facie view on whether a case is made out for investigation under Section 26(1) of the Act, recognizing that DGHS is covered under the definition of 'enterprise' under Section 2(h) of the Act.