COMPAT overturns CCI in stem cell banking case

The Competition Appellate Tribunal (COMPAT), in an order dated 18 December 2015, set aside a penalty order of the Competition Commission of India (CCI) under section 27 of the Competition Act, 2002, against Dr LH Hiranandani Hospital (LHH).

LHH had given Cryobanks the exclusive right for a period of one year to provide stem cell banking services to maternity patients at LHH. Due to this exclusive arrangement, LHH refused to allow one of its patients to obtain stem cell banking services from Lifecell International (Lifecell), with which the patient had entered into an agreement. Although the patient did not file a complaint with the CCI, a third party informant filed a complaint alleging that LHH’s exclusive agreement with Cryobanks was anti-competitive and had forced the patient to avail of maternity services at another hospital.

Relying on the investigative report of the Director General (DG), the CCI passed a majority order stating that LHH was one of the major players in the “stem cell banking services sector”, and the exclusive contract between LHH and Cryobanks was anti-competitive under section 3(1) of the Competition Act as it had the tendency of distorting the market for stem cell banking and deterring new entrants. The CCI majority also concluded that the agreement was a vertical “tie-in” arrangement that violated section 3(4) of the act. One of the members of the CCI passed a dissenting order holding that the agreement did not contravene section 3(4) of the act and there was no appreciable adverse effect on the market for stem cell banking.