CCI Closes Case Against Max Smart Super Specialty Hospital: No Abuse of Dominant Position Established in Private Hospital Pricing Matter
Background and Origin of the Dispute
A complaint was lodged before the Competition Commission of India (CCI) by Shri Vivek Sharma (the Informant) under Section 19(1)(a) of the Competition Act, 2002, originally targeting Becton Dickinson India (P) Ltd. — a manufacturer of disposable syringes — and Max Super Specialty Hospital, Patparganj, Delhi. The allegation was that the syringe manufacturer, acting in concert with the hospital, had deliberately caused a higher Maximum Retail Price (MRP) to be printed on syringes sold through the hospital's in-house pharmacy, compared to the MRP on identical products available in the open market. The Informant contended that this arrangement amounted to a violation of Section 3 and Section 4 of the Competition Act, 2002.
Following the filing of the information and a preliminary conference with the concerned parties, the CCI, forming a prima facie view of a possible contravention of Section 4 of the Act, issued an order dated 17.11.2015 under Section 26(1) of the Competition Act, 2002, directing the Director General (DG) to undertake a formal investigation and submit its findings.
DG's Initial Investigation and Findings on Collusion
The DG submitted its investigation report in both confidential and public versions. After examining the matter, the Commission, vide its order dated 31.10.2017, circulated the public version to all concerned parties and directed the Opposite Parties to furnish audited balance sheets, profit and loss accounts, and income details including Income Tax Returns (ITRs) for Financial Years 2014-15, 2015-16, and 2016-17.
Following hearings held on 26.04.2018, the Commission, vide order dated 31.08.2018, confirmed the DG's finding that the allegation of collusion between Becton Dickinson India (P) Ltd. and Max Patparganj in printing an inflated MRP was not substantiated. The DG had found that no exclusive supply arrangement existed between the two entities — Becton Dickinson supplied blister pack syringes through M/s Shobham Surgical Works and flow wrap syringes through M/s Hindustan Surgicals. The Commission accordingly confirmed that there was no contravention of Section 3(3) of the Competition Act, 2002 by either entity.
Expansion of Investigation: Aftermarket Abuse in Private Hospitals
Notwithstanding the above, the Commission identified a broader concern emerging from the investigation — whether Max Patparganj was earning disproportionate profit margins by compelling admitted in-patients to purchase medicines, consumables, medical devices, and diagnostic services exclusively through its in-house facilities. While the DG had alluded to conduct "akin to aftermarket abuse," the Commission observed that this aspect had not been examined with sufficient depth or analytical rigor.
Accordingly, the Commission directed the DG to conduct a supplementary investigation, expanding the scope to cover:
- A revisited relevant market definition, incorporating the concept of aftermarket abuse for in-patients in super-specialty hospitals across Delhi
- A comprehensive examination of all aftermarket healthcare products and services supplied by super-specialty hospitals to their in-patients
- Specific focus on products not urgently required for medical procedures, where patients could rationally exercise choice in procuring from the open market at potentially lower prices
Supplementary Investigation: Twelve Hospitals Examined
The DG submitted its supplementary investigation report (confidential version) on 24.12.2021, identifying 12 super-specialty hospitals in Delhi for investigation. The DG framed five issues and returned the following findings:
Issue 1: Enterprise Status under Section 2(h)
Since the investigated hospitals engaged in the commercial activity of providing medical services against monetary consideration, they were held to qualify as 'enterprises' within the meaning of Section 2(h) of the Competition Act, 2002.
Issue 2: Relevant Market Definition
Barring St. Stephen's Hospital, Delhi, all other 11 hospitals did not permit in-patients to procure consumables, medical devices, medicines, or diagnostic tests from outside the hospital premises. The DG concluded that each hospital was self-contained for the purpose of providing in-patient medical services and delineated 12 separate relevant markets as follows:
Relevant Product Market: "Market for provision of healthcare services/facilities for in-patients admitted to the respective private super specialty hospital"
Relevant Geographic Market: Delhi
Issue 3: Dominance
Given that each of the 12 hospitals constituted an independent market with no external hospital exercising influence over their management or policies, the DG held all 12 hospitals to be dominant in their respective relevant markets.
Issue 4: Abusive Conduct under Section 4
The DG concluded that all 12 hospitals contravened Section 4 of the Competition Act, 2002 during the period 2015 to 2018, based on the following five parameters:
Room Rent
All 12 hospitals were found to have charged room rents exceeding those of nearby 3-star and 4-star hotels as well as other neighbouring hospitals.
Medical Tests
The DG compared prices of 13 routine diagnostic tests charged by the hospitals against four diagnostic laboratories — Dr. Lal Path Labs, Goyal MRI, Focus Imaging, and House of Diagnostics (H.O.D.) — and found that each hospital had, at some point during 2015–2018, charged more than the diagnostic labs for one or more tests.