CCI slaps Rs3.81-crore penalty on Mumbai's Hiranandani Hospital

Fair trade watchdog Competition Commission of India (CCI) has imposed a penalty of Rs3.81 crore on Dr L H Hiranandani Hospital, Mumbai for violating the provisions of the Competition Act by an exclusive partnership with a stem cell bank.

The penalty comes on a petition filed by Ramakant Kini alleging that the hospital had abused its dominant position in the area of stem cell banks and that it did not allow the stem cell of his child to be collected by any other service provider except Cryobanks India, with whom the hospital has an exclusive agreement.

The petitioner (informant) had alleged that one Mrs Jain, an expecting mother, seeking maternity services from Hiranandani Hospital, entered into an agreement with LifeCell India for umbilical cord stem-cell  banking services.

Prior to the delivery, when her husband sought the hospital's support for getting the stem cell banking procedure done at the hospital premises, he was informed that the hospital has an arrangement with Cryobanks India, according to which no other stem cell banker would be allowed in the hospital premises.

In the event of the informant still being desirous of opting for any other stem cell banking services other than the one with which the hospital had an arrangement, he was told that he should seek maternity services elsewhere. Consequently, the patient opted for another high-end multi-specialty hospital for maternity services.

The Informant also submitted that Hiranandani Hospital not only barred the patient from availing the services of LifeCell India, but also directed the latter not to enroll any of its patients for stem cell banking services as Cryobanks was their cord stem cell banker with effect from 1 September 2011.

Following detailed investigation by DG-CCI, the CCI has arrived at the conclusion that exclusive arrangements between two undertakings do not accrue any benefit to the consumer and are rather at the cost of the consumer. Such an agreement has anti-competitive effect in any market, it added.

CCI also considered it as an abuse of dominance by Hiranandani Hospital and the conditions put up on its patients that in case one had to avail stem cell banking system, they will only have to avail services of Cryobank, as abusive and violative of Section 4 of the Competition Act.

In its order of 5 February the Competition Commission said the Hiranandani Hospital's agreement with Cryobank for the years 2011-12 and 2012-13 are null and void and that the hospital should not enter into a similar agreement with any stem cell bank in future.

CCI said its directions have to be complied with immediate effect. The commission also imposed a penalty of Rs3,81,58,303, calculated at the rate of 4 per cent of the average turnover of the hospital. The penalty is to be deposited within 60 days of receipt of the order.

Citing exclusive tie-in arrangement between the hospital and Cryobanks the DG-investigations of the CCI observed that other competitors in the market of stem cell banking services are not allowed to cater to the maternity patients of Hiranandani Hospital. It also submitted that by having exclusive tie-up arrangement with a particular service provider and not allowing others to utilise its infrastructure, Hiranandani Hospital has effectively driven out all the existing competitors of Cryobanks out of the market.

The CCI also relied on an internet article, wherein it has been reported that about 500 samples are collected by stem cell banks on a monthly basis and that the market, witnessing entry of more players since starting of cord cell banking service in 2004, is growing by about 45-50 per cent.