Horizontal or vertical ties not required for violation

The Competition Commission of India (CCI) recently held that an exclusive agreement between Hiranandani Hospital and Cryobank India, for collection and banking of stem cells, was anti-competitive. Hiranandani Hospital was fined ₹38.16 million (US$624,000) and barred from entering into any similar agreements in the future.

The CCI also clarified that the scope section 3(1) of the Competition Act, 2002, is wide and although an agreement might not be anti-competitive for the purposes of section 3(3) horizontal agreements (i.e. identical/similar trade of goods or services) or section 3(4) vertical agreements (different levels of production chain of goods or services), it could still fall foul of section 3(1), which prohibits anti-competitive agreements generally.

Facts of the case

The facts in brief are that a pregnant woman, Mrs Jain, entered into an agreement with Life Cell India to avail of its services for banking of stem cells. Mrs Jain registered with Hiranandani Hospital for delivery of her child and requested that Life Cell be permitted to collect umbilical cord blood within 10 minutes of her delivery. The hospital refused and informed her that instead she could use the services of Cryobank India – a competing stem cell banking service provider – since the hospital had an exclusive agreement with Cryobank under which only Cryobank is permitted to collect umbilical cord blood from its patients.

Mrs Jain ultimately went to another hospital for her delivery. Information was filed before the CCI, alleging violation of sections 3(4) and 4 of the Competition Act relating to anti-competitive vertical agreements and abuse of dominance respectively.

Amit Tambe is a partner at Trilegal and Kunal Chandra is a counsel. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.