CCI Expands the Scope of Investigation to Consider the Pricing Practices in the Aftermarkets Healthcare Products and Services Provided by Super Specialty Hospitals in Delhi

On August 31, 2018, CCI published an order in Vivek Sharma v. Becton Dickinson India (P) Ltd.[1] directing the DG to carry out further investigation and furnish a detailed supplementary investigation report, including on the issues specifically identified by CCI in its order.

By way of background, in 2015, Vivek Sharma (‘Informant’) had filed information against Becton Dickinson India (P) Ltd.(‘BDIL’) and Max Super Specialty Hospital (‘Max’) alleging that Max, in collusion with BDIL, was selling disposable syringes at a price well above the maximum retail price (‘MRP’) and the open market price. This was alleged to be in contravention of Sections 3(1) and 4 of the Act. Having found a prima facie case of contravention of 4 of the Act, CCI directed the DG to carry out a detailed investigation.

Pursuant to reviewing the findings of the DG and submissions of Max and BDIL, CCI disagreed with the DG’s identification of the relevant market as the “provision of healthcare services/ facilities by private super-specialty hospitals within a distance of about 12 kms from Max Super Specialty Hospital, Patparganj”. Instead, CCI directed the DG to consider the concept of ‘aftermarket abuse’ to define the relevant market and directed the DG to identify the relevant market as the “market for healthcare services/ facilities in the after-market for in-patients in super-specialty hospital”. CCI appears to be concerned that, once admitted for treatment, a patient is effectively ‘locked-in’ to the services and products as made available by the hospital. This ‘locked-in’ effect, in turn, increases the ability of hospitals to ‘exercise its dominance over its in patients” by requiring its patients “to purchase aftermarket products from its in-house pharmacy only.” CCI observed that “such conduct may be considered as an aftermarket abuse even if [Max] is found to be not dominant in the primary market for provision of healthcare services in Delhi.” CCI also disagreed with the DG’s identification of the relevant geographical market and directed the DG to consider ‘Delhi’ as the relevant geographic market – as CCI had done at the time of issuing its prima facie order.

CCI further opined that the DG report did not adequately make a case of excessive pricing and directed the DG to carry out further investigation. CCI noted that although the DG had recorded high profit margins in the sale of syringes to conclude an abuse of dominance, it failed to look at the absolute profits from the sale of syringes “and other products in the after markets.” Referring to concerns of “locked-in effects” CCI directed the DG to further investigate other products such as medicines, surgical tools etc. to “establish that the higher profit margins from sale of syringes or any other products cause consumer harm due to lack of competition.” Moreover, it specifically directed the DG to focus on those after-market products that are not required urgently to “examine whether [Max] abuses its dominant position by forcing in-patients to purchase those at higher/unfair prices from its in-house pharmacy though the same are available at discounted rates in the open market.”

[1]Case No. 77 of 2015

Published In:Inter Alia Special Edition Competition Law October 2018 [ English
Date: October 30, 2018