CCI Finds No Abuse of Dominant Position by Max Multi Specialty Centre, Panchsheel Park: Excessive Pricing Allegations Fail the United Brands Test

Background and Origin of the Dispute

A complaint filed under Section 19(1)(a) of the Competition Act, 2002 set in motion a prolonged investigation that ultimately culminated in the Competition Commission of India (CCI) closing proceedings against Max Multi Specialty Centre, Panchsheel Park, New Delhi. The matter, originally registered as Case No. 77 of 2015 and subsequently redesignated as Case No. 77(5) of 2015, arose from allegations by the Informant, Shri Vivek Sharma, against two entities — Becton Dickinson India (P) Ltd. and Max Super Specialty Hospital, Patparganj, Delhi.

The central grievance was straightforward: disposable syringes manufactured by Becton Dickinson India (P) Ltd. allegedly carried higher Maximum Retail Prices (MRPs) when dispensed through the hospital's in-house pharmacy as compared to identical products available in open retail markets. The Informant contended that this differential pricing was the outcome of deliberate collusion between the manufacturer and the hospital, constituting contraventions of Section 3 and Section 4 of the Competition Act, 2002.

Initial Investigation and Expansion of Scope

Following a preliminary conference with the parties, the CCI formed a prima facie opinion that a case for investigation existed and, vide order dated 17.11.2015 under Section 26(1) of the Act, directed the Director General (DG) to conduct a detailed inquiry and submit a report.

Upon examining the investigation report, the Commission vide order dated 31.08.2018 acknowledged that the collusion allegation had not been substantiated. The DG found that Max Patparganj procured syringes through independent distributors — M/s Shobham Surgical Works for blister pack syringes and M/s Hindustan Surgicals for flow wrap syringes — and that no exclusive agreement existed between the hospital and Becton Dickinson India (P) Ltd. Consequently, no contravention of Section 3(3) of the Act was established, and Becton Dickinson India (P) Ltd. was eventually deleted from the array of Opposite Parties.

However, a separate and more expansive dimension of the case emerged. The Commission noted that the DG had touched upon the concept of aftermarket abuse but had not analysed it with sufficient rigour. Accordingly, the Commission directed a supplementary investigation, specifically focusing on whether private super-specialty hospitals in Delhi were abusing their dominant position by compelling admitted in-patients to procure medicines, consumables, devices, and diagnostic services exclusively from hospital-controlled facilities at allegedly exorbitant prices.

Supplementary Investigation: Twelve Hospitals Examined

The supplementary investigation report, submitted on 24.12.2021, expanded the scope considerably. The DG identified 12 private super-specialty hospitals in Delhi for examination, applying five parameters and framing five distinct issues:

  1. Enterprise Status — Whether the hospitals qualified as "enterprises" under Section 2(h) of the Act. The DG concluded in the affirmative, noting that all hospitals engaged in commercial activity by rendering medical services for monetary consideration.

  2. Relevant Market — The DG delineated 12 separate relevant markets, one for each hospital, defining each as the "market for provision of healthcare services/facilities for in-patients admitted to the respective private super specialty hospital" with Delhi as the geographic boundary.

  3. Dominance — Each hospital was found dominant within its individually defined market, on the reasoning that no other hospital exercised any competitive influence over another.

  4. Contravention under Section 4 — All 12 hospitals were found to have contravened Section 4 of the Act between 2015 and 2018 across five parameters:

    • Room Rents: Charges exceeded rates at nearby 3-star and 4-star hotels and other hospitals.
    • Medical Tests: Prices for 13 routine tests exceeded rates at four standalone diagnostic laboratories including Dr. Lal Path Labs and House of Diagnostics (H.O.D).
    • Medical Devices: Prices for stents, knee implants, hip implants, and imaging services showed an increasing trend; comparisons were made with standalone diagnostic providers.
    • Consumables: Significant margins between procurement and selling prices were noted for 20 specific consumables.
    • Medicines: Similarly, margins between procurement and retail prices for 19 specific medicines indicated supra-normal profits.