Vivek Sharma vs. St. Stephen's Hospital Delhi

Case No. 77(12) of 2015 Page 1 of 30

COMPETITION COMMISSION OF INDIA Case No. 77(12) of 2015 In re:

Vivek Sharma Informant And

St. Stephen’s Hospital, Delhi Opposite Party CORAM Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member PRESENT For St. Stephen’s Hospital, Delhi (Opposite Party) : Ms. Shruti Sharma, Ms. Shreya Sharma, and Mr. Nishant Kandpal, Advocates ORDER

1. Information in Case No. 77 of 2015 was filed under Section 19(1)(a) of the Competition Act, 2002 (the ‘Act’) by Shri Vivek Sharma (the ‘Informant’), against Becton Dickinson India (P) Ltd. and Max Super Specialty Hospital, Patparganj, Delhi (‘Max Patparganj’), alleging contravention of the provisions of Section 3 and Section 4 of the Act.
2. The Informant, inter alia, alleged that Becton Dickinson India (P) Ltd., a manufacturer of disposable syringes, in collusion with Max Patparganj, a procurer of disposable syringes, deliberately printed a higher Maximum Retail Price (‘MRP’) on the

Case No. 77(12) of 2015 Page 2 of 30

disposable syringes of Becton Dickinson India (P) Ltd. being sold at the in-house pharmacy of Max Patparganj, in comparison to the MRP printed on the same product of Becton Dickinson India (P) Ltd. being sold in the open market. 3. Based on such information, and after holding preliminary conference with the parties, the Commission, forming an opinion that there exists a prima facie case of contravention of the provisions of Section 4 of the Act by the 02 (two) alleged parties, passed an order dated 17.11.2015 under the provisions of Section 26(1) of the Act, directing the Director General (‘DG’) to cause an investigation to be made into the matter and submit a report. 4. Accordingly, the DG submitted its investigation report in confidential and public version. The Commission considered the investigation report submitted by the DG and vide order dated 31.10.2017, forwarded an electronic copy of public version of the same to the Informant, Becton Dickinson India (P) Ltd., Max Patparganj and 04 (four) individuals of Max Patparganj who were identified by the DG in the investigation report to be liable in terms of the provisions of Section 48 of the Act, giving them all an opportunity to file their suggestions/ objections, if any, to the investigation report. Further, the Commission directed Becton Dickinson India (P) Ltd. and Max Patparganj to furnish their audited balance sheets and profit and loss account/ turnover details for the last 03 (three) financial years (‘FYs’) i.e., 2014-15, 2015-16 and 2016-17 and the 04 (four) individuals to furnish their income details including Income Tax Returns (‘ITRs’) for the same FYs. Max Patparganj was also directed to furnish its audited revenue/ profit details arising from the business of provision of healthcare services/ facilities for the said FYs. Thereafter, the parties were heard on the investigation report on 26.04.2018. 5. Based on the observations and findings of the DG in the investigation report, and the submissions made by the parties on the same, the Commission, vide order dated 31.08.2018, observed that the allegation of the Informant that Becton Dickinson India (P) Ltd., in collusion with Max Patparganj, has printed a higher MRP on the disposable syringes to be sold in the in-house pharmacy of Max Patparganj in order to cheat the patients, has not been substantiated in the investigation report. It was reported by the DG that Max Patparganj and Becton Dickinson have not entered into any exclusive

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agreement with respect to supply of disposable syringes as Becton Dickinson supplies its blister pack disposable syringes to Max Patparganj through M/s Shobham Surgical Works and its flow wrap syringes through M/s Hindustan Surgicals. Thus, according to DG, Max Patparganj and Becton Dickinson have not contravened any of the provisions of Section 3(3) of the Act. The Commission confirmed the finding of the DG that these 02 (two) entities have not contravened any of the provisions of Section 3(3) of the Act. 6. However, the Commission also noted that the DG has considered the market for ‘provision of healthcare services/ facilities by private super-specialty hospitals within a distance of about 12 kms from Max Super Specialty Hospital, Patparganj’ as the relevant market and found Max Patparganj to be abusing its dominant position in the same. The Commission noted that the DG has observed that Max Patparganj is earning huge profit margins by sale of different syringes and also shifted its procurement/ purchase from flow wrap syringes to blister pack syringes. Further, Max Patparganj was found by the DG to be compelling its in-patients to purchase products only from its in-house pharmacy once they are admitted to the hospital. As such, the DG had concluded that such conduct of Max Patparganj amounts to contravention of the provisions of Section 4(2)(a)(ii) of the Act. 7. In light of the above, the Commission observed from the investigation report that while there is a reference to the conduct of Max Patparganj being akin to ‘aftermarket abuse’; however, the DG has not investigated/ analysed the same in greater detail. Accordingly, the Commission, vide order dated 31.08.2018, in terms of Regulation 20(6) of the erstwhile Competition Commission of India (General) Regulations, 2009 (‘General Regulations, 2009’), directed the DG to cause a supplementary investigation to be made into the matter. 8. Accordingly, the DG submitted the supplementary investigation report – confidential version on 24.12.2021, identifying 12 (twelve) super-specialty hospitals of Delhi including Max Patparganj for the purposes of its investigation, based on 05 (five) parameters, framing 05 (five) issues in the matter and concluding on each of them, as follows:

Case No. 77(12) of 2015 Page 4 of 30

8.1 Issue No. 1: Whether the investigated hospitals are ‘enterprise’ within the meaning of Section 2(h) of the Act? DG’s Finding: Since revenue model of the investigated super-specialty hospitals show that they are involved in carrying out commercial activities i.e., providing medical services to patients in lieu of monetary consideration, they are ‘enterprise’ within the meaning of the Act. 8.2 Issue No. 2: What is the relevant market? DG’s Finding: Barring one hospital i.e., St. Stephen’s Hospital, Delhi, all other 11 (eleven) hospitals do not allow purchase of consumables, medical devices, medicines and medical tests from outside the hospital. Thus, from point of view of providing medical services to their in-patients, these hospitals are self-contained and independent from each other. Therefore, relevant product market was delineated in terms of “market for provision of healthcare services/ facilities for in-patients admitted to the respective private super specialty hospital” and the relevant geographic market was taken as “Delhi”. As such, 12 (twelve) separate relevant markets on these grounds were defined by the DG. 8.3 Issue No. 3: Whether the investigated hospitals are dominant in the delineated relevant market? DG’s Finding: All 12 (twelve) investigated hospitals are independent markets in themselves and no other hospital exercises any influence on control of management or policies of such hospitals; therefore, each investigated hospital is dominant in its respective relevant market. 8.4 Issue No. 4: If the answer to Issue No. 3 is in affirmative, whether the conduct of investigated hospitals is in contravention of the provisions of Section 4 of the Act? DG’s Finding: The conduct of all 12 (twelve) investigated hospitals is found to be in contravention of the provisions of Section 4 of the Act from 2015 to 2018 on the following 05 (five) parameters: