CCI Dismisses Allegations Against Ministry of Health and Central Medical Services Authority for Contravention of Section 4

On December 26, 2018, CCI dismissed allegations of contravention of Sections 3 and 4 of the CA02 filed by Cupid Limited against the Ministry of Health and Family Welfare (‘MHFW’) and Central Medical Services Authority (‘CMSA’). [1]

The information was filed against the alleged abusive conduct of CMSA involving a long-term agreement (‘LTA’) which contained one-sided, unfair and arbitrary terms and conditions regarding the supply of condoms, including (i) rigid timelines for delivery of the product; (ii) imposition of damages for delay in supply; (iii) submission of security deposit before signing of the LTA; (iv) unilateral discretion of CMSA to increase/decrease the production quantity; and (v) the inability to sub-contract manufacturing of the product. The informant alleged that CMSA forced it to sign the agreement without giving it any opportunity to negotiate. The informant also alleged violation of Section 3(4) by complaining against CMSA’s packaging specification requirements which ensured that the product could not be sold to any other customer other than CMSA.

On a perusal of the allegations and the Government of India’s contraceptive policies, CCI noted that MHFW undertakes policy functions on behalf of the Government of India and hence, cannot be considered an ‘enterprise’ that can be held liable under Section 4 of the CA02. With respect to CMSA, CCI noted that it undertakes commercial functions and is therefore, an enterprise under Section 4 of the CA02. Noting its own prior decisions on abuse of buyer power[2], CCI noted that the relevant market has to be delineated by applying ‘demand side substitutability’ inversely i.e. by assessing the availability of substitutes for suppliers and their ability to switch to alternative sales opportunities. Therefore, CCI decided the relevant market to be ‘market for male condoms in India’.

CCI held that the market shares of CMSA identified by the informant did not reveal a true picture and hence failed to establish dominance of CMSA. CCI further held that having social objectives, CMSA did not have any incentive to influence the relevant market particularly when it procures 75% of its requirements from a single company. With regard to the allegation under Section 3(4), CCI held that the printing requirements of CMSA do not restrict the informant from dealing with other customers. Therefore, CCI dismissed the complaints.

[1] Case Number 45 of 2018.
[2] Case Number 70 of 2014. Case Number 16 of 2013 and Case Number 80 of 2015.

Published In:Inter Alia Special Edition Competition Law February 2019 [ English
Date: February 1, 2019