2015 (12) TMI 1776 - AT - Law of Competition

Anti-Competitive Activity - cord blood banking - umbilical cord stem cell banking services - It is the case of the appellant that Cryo-Save based in Bangalore and Babycell based in Lonavala were prepared to pay higher amount per case it chose Cryobanks because of better technology - Smt. Manju Jain entered into an agreement with LifeCell to obtain its umbilical cord stem cell banking services - appellant having an arrangement with Cryobanks and LifeCell cannot be permitted to provide its services to the hospital whee Smt. Manju Jain visited - alleged abuse of dominant position - contravention of Section 3(1) of Competition Act 2002. Whether the finding recorded by the majority of the Commission that the appellant is guilty of acting in violation of Section 3(1) of the Act is legally sustainable? Whether the penalty of 3, 81, 58, 303/- imposed by the Commission by taking into consideration total turnover of the appellant for last three financial years is legally justified? Held that - A plain reading of Section 3 makes it clear that sub-section (1) thereof can be invoked only if the agreement in respect of production supply distribution storage acquisition or control of goods or provision of services causes or is likely to cause an appreciable adverse effect on competition within India. Sub-section (2) of Section 3 is declaratory in nature. It provides that any agreement entered into in contravention of the provisions of Section 3(1) shall be void. Sub-section (3) contains a presumption of an appreciable adverse effect on competition if the agreement has any of the effects/consequences enumerated in clauses (a) to (d). Sub-section (4) lays down that 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 provisions of services including those specified in clauses (a) to (e) 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. While recording a finding that the appellant is guilty of violation of Section 3 the Jt. DG and the Commission completely overlooked that the agreement entered into between the appellant and Cryobanks did not in any manner restrict the choice of the service provider in the relevant market i.e. market for stem cell banking. By virtue of the agreement the appellant could provide stem cell banking services to the patients who wanted to avail such services only through Cryobanks but the latter was free to enrol any patient(s) for such services to be availed in any other hospitals maternity homes etc. - The Jt. DG and the Commission confused the basic issue by presuming that the stem cell banking service was an integral part of the maternity services provided by the appellant hospital and this confusion has resulted in miscarriage of justice in as much as the appellant has been found to be guilty of violating Section 3(1) of the Act without any evidence that the refusal of the appellant to allow LifeCell to provide stem cell banking services to Smt. Manju Jain had appreciable adverse effect on competition. Section 3 speaks of anti-competitive agreement and Section 4 deals with abuse of dominant position. A finding that the particular agreement is anti-competitive or any enterprise or group of enterprises are guilty of abuse of dominant position can be recorded only with reference to the particular goods product or service. An enterprise may be engaged in manufacture production supply distribution etc. of multiple products. Another enterprise like the appellant may be engaged in providing multi-dimensional services. Such enterprise may be found guilty either of entering into anticompetitive agreement with reference to particular product/goods or services or may be held guilty of abuse of dominant position in respect of such product/goods or services but the finding of violation of Sections 3 and/or 4 of the Act recorded by the competent authority i.e. the Commission cannot be made applicable to agreements entered into between the enterprise and another person in respect of other products goods or services qua there is no allegation of anti-competitive agreements or abuse of dominant position and the turnover of other products and services cannot be clubbed with the one qua which a finding of violation of the provisions of the Act is recorded. The appellant has been providing multiple healthcare services maternity service being one of them and stem cell banking which is being provided by a third party (Cryobanks) can at best be considered as a small part of the maternity services provided to those who are desirous of availing such services. Therefore even if the finding of the majority of the Commission that the agreement entered into between the appellant and Cryobanks is violative of Section 3(1) of the Act is to be upheld the turnover of the appellant with reference to stem cell banking services only could be taken into consideration for the purpose of imposing penalty and not the turnover with reference to other services or income derived from other sources. Appeal allowed.

Summary

Issues Involved:
1. Alleged abuse of dominant position.
2. Anti-competitive agreement.
3. Relevant market definition.
4. Imposition of penalty.

Detailed Analysis:

1. Alleged Abuse of Dominant Position:
The appellant, a public charitable hospital, entered into agreements with stem cell banks (LifeCell and Cryobanks) granting exclusive rights to collect stem cells from maternity patients. Respondent No. 2 filed information alleging that the appellant abused its dominant position by refusing to allow LifeCell to provide stem cell banking services to a patient, forcing her to switch hospitals. The Commission's majority found that the appellant's agreement with Cryobanks was anti-competitive and imposed a penalty. However, the dissenting member and the Tribunal found no evidence of dominance or abuse, noting that the appellant's market share and influence were insufficient to establish dominance.

2. Anti-competitive Agreement:
The Commission's majority held that the exclusive agreement between the appellant and Cryobanks hindered competition in the stem cell banking market, limiting consumer choice and creating entry barriers. The dissenting member and the Tribunal disagreed, stating that the agreement did not restrict Cryobanks from enrolling patients from other hospitals and that there was no evidence of market foreclosure or appreciable adverse effect on competition. The Tribunal emphasized that the agreement did not restrict the choice of service providers in the relevant market.

3. Relevant Market Definition:
The Commission's majority defined the relevant market as "provision of maternity services by Super Speciality Hospitals within a distance of 0-12 km from the appellant hospital." The dissenting member and the Tribunal criticized this definition, arguing that the relevant market should be the stem cell banking market, not maternity services. They noted that the appellant's agreements with stem cell banks did not affect the broader market for maternity services.

4. Imposition of Penalty:
The Commission imposed a penalty based on the appellant's total turnover, including all services, not just maternity services. The Tribunal found this approach legally impermissible, citing its previous decision in M/s. Excel Corp Care Limited, which held that penalties should be based on the relevant turnover related to the specific violation. The Tribunal also noted that the appellant had not renewed the exclusive agreement and had undertaken not to enter into similar agreements in the future.

Conclusion:
The Tribunal set aside the majority order of the Commission, dismissing the information filed by Respondent No. 2. It held that the finding of anti-competitive conduct was based on conjecture and lacked concrete evidence. The Tribunal emphasized the need for careful consideration of the relevant market and the specific nature of the alleged anti-competitive agreement. The penalty imposed was also deemed unjustified due to the improper calculation of turnover and the absence of significant harm or market foreclosure.