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Petitioner Appellant Memo Antitrust 2014
Petitioner Appellant Memo Antitrust 2014
Most Respectfully Submitted to the Hon’ble Judges of the Supreme Court of Bohemia at
Riverdale
TABLE OF CONTENTS
TABLE OF C O N T E N T S ..............................................................................................................i
LIST OF A B B R E V I A T I O N S ....................................................................................................iii
INDEX OF A U T H O R I T I E S ......................................................................................................iv
S T AT E M E N T OF J U R I S D I C T I O N .......................................................................................viii
S T AT E M E N T OF F A C T S ...........................................................................................................x
SUMMARY OF A R G U M E N T S ...............................................................................................xiii
W R I T T E N S U B M I S S I O N S ........................................................................................................1
I. WHETHER THE ORDER OF THE RIVERDALE HIGH COURT DECLARING THE DIRECTOR
GENERAL’S REPORT AND THE ENSUING COMPETITION COMMISSION OF BOHEMIA’S (CCB)
ORDER VOID IS CORRECT IN LAW?.................................................................................................1
1.1. THAT THE DG IN REPORTING A VIOLATION OF SECTION 4 OF THE ACT HAS ACTED
1.2. THAT NOT REPORTING THE VIOLATION OF SECTION 4 OF THE ACT WOULD HAVE
LEGAL PRINCIPLES......................................................................................................................3
II. WHETHER THE AGREEMENT BETWEEN THE MRI MANUFACTURERS AND THE SERVICE
2.1. THAT THE AGREEMENT CONTAINS AN EXCLUSIVE SUPPLY CLAUSE WHICH IS LIKELY
2.3. THAT THE RECOMMENDED MINIMUM RESALE PRICE OPERATES TO THE CONSUMER’S
DETRIMENT..................................................................................................................................9
2.5. THAT THE CUMULATIVE EFFECT OF THE AGREEMENTS ENTERED INTO BY HCF,
TAKSHI AND PARRY CAUSES A SUBSTANTIAL ADVERSE EFFECT ON COMPETITION..............12
2.6. THAT THE COMPAT’S DECISION HOLDING THAT THE AGREEMENT WAS NOT ANTI-
III. WHETHER THE MANUFACTURERS HAVE ABUSED THEIR DOMINANT POSITION UNDER
PRODUCT....................................................................................................................................16
3.2. THAT THE MANUFACTURERS WERE THE DOMINANT ENTERPRISES IN THE AFTER-
MARKET......................................................................................................................................17
3.3. THAT THE MANUFACTURERS ABUSED THEIR DOMINANCE UNDER SECTION (4) OF THE
ACT. 20
3.4. THAT MANUFACTURERS’ MAY NOT TAKE THE DEFENSE OF EFFICIENCY GAIN...........23
4.5. THAT THE MEMBER HOSPITALS MAY NOT TAKE THE PLEA OF PRESSURE..................28
P R AY E R ......................................................................................................................................xvi
LIST OF A B B R E V I AT I O N S
Abbreviation Description
DG Director – General
EC European Commission
INDEX OF AUTHORITIES
Cases
Alkali Manufacturer’s Association of India RTP Enquiry No. 26/1984, Order dated 29-5-1985...9
All India Tyre Dealers Federation v. Tyre Manufacturers, decided on 30.10.2012, RTPE No. 20
Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 427 U.S. 585 (1985)....................................21
Brundaban Chandra Dhir Narendra v. The State Of Orissa, AIR 1953 Ori 121............................4
Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744...........2
Continental Can Company Inc. v. Commission of the European Communities, [1973] ECR 21519
Eastman Kodak Company v. Image Technical Services, Inc., 504 U.S. 451 (1992).....................22
Exclusive Motors Pvt. Ltd. v. Automobili Lamborghini SPA, [2014] 121 CLA 230 (CAT)..........11
Explosive Manufacturers Welfare Association v. Coal India Limited & its Officers, 2012 Comp
LR 525 (CCI)................................................................................................................................6
FICCI - Multiplex Association of India v. United Producers/ Distributors Forum, Case No. 01 of
Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968)................................28
Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007)................................10
M/s Cine Prekshakula Viniyoga Darula Sangh v. Hindustan Coca Cola Beverages Pvt. Ltd.,
RTPE 16/2009............................................................................................................................13
M/s Peeveear Medical Agencies, Kerala v. All India Organization of Chemists and Druggists
M/s Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists and Ors.
Metro SB- Groβmarkte GmbH & CoKG v. Commission, (No 2) [1986] ECR 3021.....................13
Northwest Wholesale Stationers, Inc. v. Pacific Stationary & Printing Co., 472 U.S. 284, 293-
295 (1985)..................................................................................................................................27
Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists Association,
Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors., 2014 Comp LR 001 (CCI).....6, 15,
17, 19
Sunshine Pictures Private Limited & Eros International Media Limited v. Central Circuit Cine
Association, Indore & Ors. Case No. 52 of 2010 & Case No. 56 of 2010.................................25
Varca Druggist & Chemist & Ors. v. Chemists and Druggists Association, Goa, MRTP C-
127/2009/DGIR4/28...................................................................................................................26
Treatises
Commission Regulation (EC) 2790/1999 on the Application of Article 81(3) of the Treaty to
Report on the Application of the Competition Rules in the European Union, XXVth Report on
Treaty on the Functioning of the European Union Art. 83, 2008 O.J. C 115/47.........16, 20, 22, 23
Other Authorities
40(2009).....................................................................................................................................14
HENRY CAMPBELL BLACK: BLACKS' LAW DICTIONERY’, 6TH ED., CENTENNIAL L ED. (1891-1991).
....................................................................................................................................................19
Report of High Level Committee on Competition Law & Policy, SVS Raghavan Committee
(2000).........................................................................................................................................24
S TAT E M E N T OF JURISDICTION
THE PETITIONER HAS APPROACHED THIS HON’BLE COURT UNDER ARTICLE 136 OF THE
CONSTITUTION OF BOHEMIA.
(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special
leave to appeal from any judgment, decree, determination, sentence or order in any cause or
Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or
made by any court or tribunal constituted by or under any law relating to the Armed
Forces.”
THE APPELLANTS HAVE APPROACHED THIS HON’BLE COURT UNDER SECTION 53T OF THE
The Central Government or any State Government or the Commission or any statutory authority
or any local authority or any enterprise or any person aggrieved by any decision or order of the
Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of
Provided that the Supreme Court may, if it is satisfied that the applicant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed after the expiry
I SS U E S FOR C O N S I D E R AT I O N
I. WHETHER THE ORDER OF THE RIVERDALE HIGH COURT DECLARING THE DIRECTOR
II. WHETHER THE AGREEMENT BETWEEN THE MRI MANUFACTURERS AND THE SERVICE
III. WHETHER THE MANUFACTURERS HAVE ABUSED THEIR DOMINANT POSITION UNDER
S TAT E M E N T OF FACTS
magnetic resonance imaging (MRI) machines. These machines are purchased by hospitals,
high specialty clinics and diagnostic clinics. HCF is a key market player for the manufacture
and supply of MRI machines, with other notable competitors being Takshi Inc. and Parry
Ltd.
2. HCF, Takshi and Parry together account for approximately 50% of the global market share,
and approximately 70% of the Bohemian market share. HCF, as a general rule, required the
MRI machines manufactured by it to be repaired only using genuine parts. Also, such
installation of the spare parts and other components was to be carried out by Authorized
Service Providers (ASP) expressly authorized by HCF. In the event of violation of these
terms, the consumers (i.e., the hospitals and super speciality clinics) would stand in breach
of the warranty provided by HCF (otherwise for a period of three years). A similar practice
3. HCF had entered into agreements with selective suppliers on the basis of their technical
expertise, financial strength and affiliation from standardizing agencies and thus, the
consumers were required to procure the spare parts of the MRI machines through these ASP
only.
4. In December, 2012, Bohemia Medical Association (BMA) passed a resolution that instructed
the hospitals to avail the services on authorised service providers employed by HCF, Takshi
5. Mr. Amandeep Sodhi, the sole proprietor of Fantasy Medicare Service Limited, based in
Riverdale, had been providing hospitals with medical supplies, equipment and spare parts
for close to 45 years. However, since early 2013, Mr. Sodhi had seen a gradual decline in his
business with the emergence of the ASPs which had been steadily garnering the market
6. Mr. Sodhi, contacted HCF to become an ASP but refused as he became aware of the terms
and conditions of the agreement. Alternately, he was allowed by HCF to enter into
agreement for the supply of spare parts at a price 1.5 times higher than the others.
7. Aggrieved, Mr. Sodhi filed an application under Section 19(1) (a) of the Competition Act
before the CCB against HCF, Takshi and Parry alleging that the agreements entered into
between HCF, Takshi and Parry and their respective ASPs amounted to an exclusive supply
8. The CCB ordered the office of the Director-General (DG) to investigate, the alleged
violation. The DG, in his report, found HCF, Takshi and Parry to be in violation of section
3(4) of the Competition Act. In addition to this, he also found them to be in violation of
section 4 due to their dominant position in the market being abused for the supply of spare
parts of their respective MRI Machines. The Competition Commission Board (CCB) upheld
these findings. As a result, Takshi and Parry appealed the order to the Competition Appellate
Tribunal (COMPAT) (Appeal No. 1/2014), while HCF challenged the jurisdiction of the DG
to expand the scope of its investigation to a violation of Section 4 before the Riverdale High
Court.
9. The Riverdale High Court ruling in favour of the petitioner ordered that the DG’s
investigation and the resulting final order of the CCB was void as the DG did not have any
10. Meanwhile, in April 2013, Ms. Debjoy Bhattacharya, a retired Major with the Bohemian
National Navy was at the Athena Specialty Hospital in Riverdale for getting an MRI done.
However, she was informed that her medical insurance, did not include MRI diagnostics,
and hence, as a result, Ms. Bhattacharya was forced to pay for the high cost herself. She also
discovered that other hospitals were charging similar rates for their MRI diagnostic services,
11. Aggrieved, she filed an application alleging that the hospitals were involved in price-fixing
arrangement with the BMA. The DG Report found the BMA to be in violation of Section 3
of the Competition Act for entering into anti-competitive practices in the nature of a cartel,
through price-fixing by virtue of agreeing upon negotiated prices among HCF, Takshi and
12. The BMA and the hospitals appealed before the COMPAT (Appeal No. 2/2014). The
COMPAT found that the two sets of appeals to be inter-connected and decided to hear the
13. The CCB filed a Special Leave Petition before the Supreme Court of Bohemia
challenging the order of COMPAT. Meanwhile, Mr. Sodhi and Ms. Bhattacharya also
S U M M A RY OF ARGUMENTS
CORRECT IN LAW?
It is humbly submitted that as per the Competition Act, 2002 the Director General is empowered
to assist the Competition Commission in investigating into any contravention of the provisions of
said Act or any rules or regulations made thereunder. In the instant case, it is contended that the
DG did not investigate into a new fact in order to conclude that there was a violation of Section
4. Further, not reporting the violation of Section 4 would have amounted to non-application of
mind and the DG would have failed in the bona fide exercise of his power. Moreover, it is
submitted that the DG has complete autonomy in the investigative process. Therefore, in
reporting a violation of Section 4 along with a violation of Section 3(4) of the Act, the DG has
acted within the scope of his authority. It is submitted before this Hon’ble Court that the order of
the High Court declaring the DG’s investigation and the ensuing final order of the CCB as void is
not justifiable.
It is humbly submitted that the agreement between the MRI manufacturers and the service
may be proved through establishing that the agreements causes or are likely to cause an
appreciable adverse effect on competition. It is submitted that the adverse effect is caused due to
the presence of exclusive supply, exclusive distribution and minimum resale price maintenance
clauses in the agreement. Further, the combination of these restraints as well as the cumulative
effect of multiple such agreements present in the market intensifies the adverse effect. Further, it
is humbly submitted that the markets to be considered while assessing the adverse effect are the
manufacturing market and the aftermarket for spare parts and service. The adverse effects that
have occurred or are likely to occur are in the form of creation of barriers to new entrants in the
market, driving out of existing competitors and foreclosure of competition by hindering entry
into the market. These effects are considered adverse under Section19 (3) of the Act. Therefore,
It is humbly contended that in order to inquire into the issues of abuse of dominance, the relevant
market, dominance in the relevant market and abuse of said dominance must be established. The
relevant market in the present matter is the market for genuine spare parts and services provided
by the authorized service providers. Dominance is exercised under Section 4(a) as the
manufacturers’ are able to operate independently of prevailing market forces. In the instant case,
the manufacturers’ impose discriminatory pricing and facilitate denial of market access.
Moreover, they use their dominance in the relevant market of spare parts to protect their position
in the relevant market of service provision. Hence, it is submitted that the manufacturers’ have
It is humbly submitted that cartel like conduct amounts to a violation of Section 3(3) read with
Section 3(1) of the Act. In the present matter, the association has entered into an agreement
reflective of the collective intent of its’ constituent members. It is contended that the agreement
was to determine the price of goods in the relevant market. The determination of the purchase
price of goods and/or services is violative of Section 3(3) (a) of the Act. Further, it is contended
that cartel like agreements are per se illegal and hence, it must be held that the BMA acted as a
2002?
It is submitted that the manufacturers’ engaged in concerted action to indirectly determine the
purchase price of spare parts in the relevant aftermarket. The Act prescribes a wide definition to
price fixing agreements are per se illegal and hence, the manufacturers’ must be held to have
W R I T T E N S U BM I SS I O N S
I. WHETHER THE ORDER OF THE RIVERDALE HIGH COURT DECLARING THE DIRECTOR
It is humbly submitted that as per Section 26(1) of the Competition Act, 2002, 1 the Competition
Commission has the power to direct the Director General2 to investigate into any matter where
the it finds a prima facie infringement of the sections of the Act. In the instant case, the CCB
passed a prima facie order under Section 26(1) of the Act, directing the DG to investigate into a
violation of Section 3(4) of the Act. The DG, along with a violation of Section 3(4) also reported
a violation of Section 4 of the Act. It is contended that the High Court’s order declaring the
investigation and the subsequent CCB order void 3, is incorrect in law. In reporting a violation of
Section 4 along with a violation of Section 3(4) of the Act, the DG has acted within the scope of
his authority.
This contention is sought to be substantiated on two grounds, (a) the DG in reporting a violation
of Section 4 of the Act has acted within the scope of his authority and (b) he has fulfilled his
2 Hereinafter DG.
3 Proposition ¶ 10.
I.1. THAT THE DG IN REPORTING A VIOLATION OF SECTION 4 OF THE ACT HAS ACTED
I.1.1. It is humbly submitted that reporting a new violation based on the evidence collected
while investigating on the direction of the Commission is not in violation the Act. In the
case of Grasim Industries v. Competition Commission of India,4 it was held that, if the
prima facie contravention of Section 3 of the Act .and the DG, while investigating the
said information, reports contravention of Section 3 as well as Section 4 of the Act, such
a report will not be contrary to the provisions of the Act. This is so because the
Commission had considered the information that was investigated by the DG, before it
formed an opinion in terms of Section 26(1) of the Act. Further, the requirement of a
prima facie case has been held to be a tentative view5 or as a case supported by minimum
level of evidence.6 It is contended that since the Commission has formed an opinion as to
the existence of a prima facie case for a violation of only one section, the scope of
investigation reveals another or a different violation emerging from the same set of facts,
I.1.2. It is humbly contended that an investigation of the material facts of the information is
likely to result in the discovery of a Section 4 violation. These material facts include
5 Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744.
information in regards to the market share of the manufacturers, 7 the high degree of
vertical integration8 both of which are indicative of a dominant position as per Section
19(4) of the Act, Further, information with regards to discriminatory pricing has also been
Section 4(2) (a) of the Act. Therefore, the DG has acted within the scope of his authority
I.2. THAT NOT REPORTING THE VIOLATION OF SECTION 4 OF THE ACT WOULD HAVE
I.2.1. It is humbly submitted that in reporting a contravention of Section 4, the DG fulfilled, (a)
his statutory duty to report all contraventions of the Act and (b) his duty to apply his mind
I.2.2. It is humbly submitted that as per Section 41(1) of the Act, the DG is empowered to assist
the Commission in investigating into any contravention of the provisions of said Act or
any rules or regulations made thereunder. Further Section 26(1) of the Act provides that
DG shall investigate into a matter on the direction of the Commission. It is contended that
the present action of the DG does not amount to a suo-moto exercise of his power. While
the Act prevents the DG from taking cognizance of a matter that has not been presented
before the Commission, it grants the DG complete autonomy in the exercise of his
7 Proposition ¶ 3.
8 Proposition ¶ 4.
9 Proposition ¶ 8.
I.2.3. It has been held that where the authority concerned has not applied its mind to essential
matters, the power conferred on the authority cannot be said to have been exercised
honestly and in a bona fide manner. 11It is submitted that the DG in reporting a violation
of Section 4 has applied his mind, thereby exercising his duty in a bona fide manner.
Where discretion has been conferred on an authority, it is expected to exercise the same
by applying its mind to the facts and circumstances of the case in hand, otherwise its
action or decision will be bad, and the authority is deemed to have failed to exercise its
discretion.12 Therefore it is evident that had the DG not reported the violation of Section 4
merely because it was not explicitly mentioned in the Commission’s direction, it would
the Act. Thus, the order of the High Court must be set aside.
II. WHETHER THE AGREEMENT BETWEEN THE MRI MANUFACTURERS AND THE SERVICE
It is humbly submitted that Section 3(1) of the Act provides that any agreement which causes or
is likely to cause appreciable adverse effect on competition 13 shall be void. Section 3(4) of the
10All India Tyre Dealers Federation v. Tyre Manufacturers, decided on 30.10.2012, RTPE No.
20 of 2008, Competition Commission of India.
11 Brundaban Chandra Dhir Narendra v. The State Of Orissa, AIR 1953 Ori 121.
13 Hereinafter AAEC.
Act provides that any agreement amongst persons or enterprises at different levels of the
production chain including agreements in the nature of (a) exclusive supply (b) exclusive
distribution and (c) resale price maintenance14 shall be in contravention of Section 3(1) of the Act
if they cause or are likely to cause AAEC. This AAEC is in the form of those provided under
Section 19(3) of the Act i.e. creation of barriers to new entrants in the market, driving existing
competitors out of the market, foreclosure of competition by hindering entry into the market. In
the instant case, the agreement in question contains clauses stating that (a) the service providers
can deal in MRI machines made by competitors only after obtaining prior written approval from
the manufacturer whose service provider they are, (b) a geographical area of responsibility where
the designated service provider would be the sole service provider, and (c) a minimum
recommended resale price that would be set and revised by the manufacturers. It is contended
that these clauses cause and are likely to cause AAEC as mentioned in Section 19(3) of the Act.
It is further contended that apart from being individually anti-competitive, a combination of these
restraints in a single agreement as well as the cumulative effect of multiple such agreements in
the market is likely to intensify the AAEC. Moreover, it is humbly contended that while
assessing such AAEC, the markets to be considered is the aftermarket for spare parts and service.
II.1. THAT THE AGREEMENT CONTAINS AN EXCLUSIVE SUPPLY CLAUSE WHICH IS LIKELY TO
14 Hereinafter RPM.
II.1.1. It is humbly submitted that the clause stipulating that the authorized service providers 15
exclusive supply agreement likely to cause AAEC in the after-market. The explanation to
Section 3(4) (b) of the Act defines an exclusive supply agreement as any agreement
restricting in any manner the purchaser in the course of his trade from acquiring or
otherwise dealing in any goods other than those of the seller or any other person. It has
been held that the above definition is inclusive in nature and that a wide meaning has to
be given to its provisions.17 The word restriction as mentioned in the explanation has been
Therefore, the clause in the instant case amounts to an exclusive supply agreement.
II.1.2. It is submitted that where car manufacturers imposed a requirement of seeking permission
from the original equipment manufacturer (OEM) before a dealer can deal in the cars of
other OEMs, it was held that the requirement was anti-competitive. The Court reasoned
that the requirement created a major entry barrier for the dealers to enter into business of
other brands of cars and this prevented them from hedging risks of continuing with a
single OEM.19 The same problem is encountered in the present case. Due to the inherent
nature of the market, the ASPs are to a very large extent dependent on the manufacturer
15 Hereinafter ASP.
16 Proposition ¶ 4, clause v.
17Explosive Manufacturers Welfare Association v. Coal India Limited & its Officers, 2012
Comp LR 525 (CCI).
19 Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors., 2014 Comp LR 001 (CCI).
for the welfare of their business. The ASPs can only sell as many spare parts and service
restrictions on the autonomy of an ASP has made being an ASP undesirable. 20 Further,
due to the breach of warranty stipulation, being an Independent Service Provider has also
become undesirable. Therefore, entry barriers have been created for a possible new
II.2. THAT THE EXCLUSIVE DISTRIBUTION CLAUSE IN THE AGREEMENT IS LIKELY TO HAVE
II.2.1. It is submitted that the clause stipulating that the service provider shall be given a
geographical area of responsibility where the designated service provider would be the
II.2.2. As per the explanation to Section 3(4)(c) of the Act, an exclusive distribution agreement
has been defined to include any agreement to limit, restrict or withhold the output or
supply of any goods or allocate any area or market for the disposal or sale of the goods.
In the instant case, the agreement appoints designated service provider who would be the
sole service provider in that geographic area. Therefore, the clause in question amounts
II.2.3. It is submitted that agreements that have granted absolute territorial protection to
service provider in a particular geographic area, intra-brand competition for spare parts
machine he becomes locked in due to the high switching cost of the machine. 24Further the
condition of breach of warranty in case of the use of an ISP ensures that competition does
II.2.4. Moreover, agreements are said to have an adverse effect on competition where in addition
are foreclosed.25 In this scenario, a factor that would discourage new entrants from
22Societe
Technique Minire v. Maschinebau Ulm, [1996] ECR 235; Consten & Grundig v.
Commission, 1966 ECR 299.
23Commission Regulation (EC) 2790/1999 on the Application of Article 81(3) of the Treaty to
Categories of Vertical agreements and Concerted Practices, [1999] OJ L 336/21.
25Report on the Application of the Competition Rules in the European Union, XXVth Report on
Competition Policy (1996), p.135.
26 Hereinafter ISP.
27
discouragement is considered as an entry-barrier. By hindering ISPs’ entry into the
distribution agreement operates to the detriment of the consumer and causes AAEC in the
aftermarket.
II.3. THAT THE RECOMMENDED MINIMUM RESALE PRICE OPERATES TO THE CONSUMER’S
DETRIMENT
II.3.1. It is submitted that the clause stipulating that the service provider should comply with the
recommended minimum price of the spare parts, as set and revised by the manufacturer
and while the service provider is free to sell at prices below the recommended minimum
price, doing so would make the service provider ineligible for the discount amounts to
minimum RPM.28 Further, such RPM operates to the detriment of the consumer.
II.3.2. It is submitted that in the case of Alkali Manufacturer’s Association of India,29 the court
held that although the price stipulated was supposed to be recommendatory - the signal it
sent out was different. The fact that it was said to be recommendatory was held to be
fictional. The European Commission has elucidated that direct or indirect price fixing can
be made more effective when combined with measures which may reduce the buyer's
29Alkali Manufacturer’s Association of India RTP Enquiry No. 26/1984, Order dated 29-5-
1985.
incentive to lower the resale price.30 The same indirect means and the same "supportive"
measures can be used to make recommended prices work as RPM. 31 In the instant case,
many such supportive measures can be noticed. The MRI manufactures ‘suggest’ a
minimum resale price and in the event that the ASPs fail to adhere to it, they become
ineligible to the 15 % discount that they are otherwise granted. 32 Furthermore, they are
granted an exclusive territory wherein they are the sole service provider. Therefore, as a
regular profit motivated entity, the distributor does not have any reason to sell at a price
that is less than the minimum recommended price. Thus, even though the clause terms
II.3.3. It is submitted that the minimum resale price in this case has resulted in double
marginalization of the consumer. Double marginalization results from the fact that each
enterprise takes its pricing decision independently, without taking into consideration the
33
impact of its decision on its partner in the vertical structure. As a result, the price is
likely to be too high.34 In the present case, the rate negotiated between the ASPs and the
31 Id.
34 Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).
hospitals charge their patients.36 It is reasonably inferable that this high rate is due to the
independent determination of prices along the vertical chain. Further, since the
recommended price is capable of being revised, the consumers have no way of making a
II.3.4. Moreover, it is humbly contended that while determining if a particular agreement causes
or has the potential to cause an adverse effect on competition, a wide interpretation to the
principle of competition law that consumers of the products purchased or sold under the
vertical agreement must at least be compensated for the negative effects of the agreement,
which implies that the efficiency gains must fully offset the likely negative impact on
prices, output and other relevant factors caused by the agreement. 38 In the instant case, it
is submitted that no substantial benefits are being derived from the agreement that is
likely to offset the high pricing that has emerged as a consequence of the same
agreement.
35Hereinafter BMA.
36Proposition ¶ 11.
37Exclusive Motors Pvt. Ltd. v. Automobili Lamborghini SPA, [2014] 121 CLA 230 (CAT).
II.4.1. It is humbly submitted that bundling of vertical restraints might be the reflection of a
problems along with another that restricts competition, there would not be any
compensatory effect and an improvement from the view of competition would not be
noticed.39 When multiple vertical restraints exist, a combined assessment may lead to the
conclusion that their collective existence enhances the anti-competitive effect of each
individual restraint.40 In the instant case, the anti-competitive effect of the agreement has
multiplied due to the many anti-competitive clauses. Entry barriers have been created
making foreclosure of market likely. The exclusive supply clause creates barriers to new
entrants in the aftermarket. The exclusive distribution agreement has made entry into the
aftermarket undesirable and has made foreclosure of the same likely. Further, the
combination of territory allocation along with RPM has caused the elimination of price
II.5. THAT THE CUMULATIVE EFFECT OF THE AGREEMENTS ENTERED INTO BY HCF, TAKSHI
II.5.1. It is submitted that access to the relevant market or competition therein is significantly
practiced by competing suppliers or buyers. The three major MRI manufacturers have
entered into similar agreements with their service providers.42 Therefore, the AAEC in in
II.5.2. It is submitted that parallel networks of vertical agreements are to be regarded as similar
if they contain restraints producing similar effects on the market. 43 It has been accepted
that it was decided that selective distribution may restrict competition where the existence
44
of a number of such systems leaves no room for other forms of distribution. The
II.5.3. It is submitted that Mr. Sodhi has seen a decline in his business with the emergence of the
ASPs that have been steadily gaining increased market share. 46 He is a second-generation
sole proprietor of Fantasy Medicare Service Limited, a Riverdale based company that has
been providing hospitals with medical supplies, equipment and spare parts for close to 45
years.47 Further, this decline is not due to inefficiencies exhibited by the ISPs. They
42Proposition ¶ 4.
44Metro SB-Groβmarkte GmbH & CoKG v. Commission, (No 2) [1986] ECR 3021;
Groupements d’achat Edouward Leclerc v. Commission, [1996] ECR-II 1851.
46Proposition ¶7
provide the same services that the ASPs provide. 48 Therefore, it is a reasonable inference
to draw that the agreement is the reason for existing competitors being driven out.
acceptable.49 The market in the instant case is not sufficiently competitive to offset the
anti-competitive effects of vertical restraints. With the propagation of the idea that ASPs
are more reliable50 along with the condition of termination of warranty in case of the
usage of an ISP51, the aftermarket has ceased to be competitive. In a market where most
suppliers are operating similar restraints, consumers will have no choice or influence on
II.6. THAT THE COMPAT’S DECISION HOLDING THAT THE AGREEMENT WAS NOT ANTI-
II.6.1. The COMPAT held that the agreement was not anti- competitive stating that its terms and
47Id.
49M/s Cine Prekshakula Viniyoga Darula Sangh v. Hindustan Coca Cola Beverages Pvt. Ltd.,
RTPE 16/2009.
50Proposition ¶ 6.
51Proposition ¶ 3.
and longer intervals between services.53 It is respectfully submitted that the COMPAT has
failed to weigh the adverse effects of the agreement with any possible benefit that may
II.6.2. It is submitted that Fantasy Medicare along with other ISPs offer annual maintenance
contracts and 24 hour customer care to hospitals. These advantages provided are not
exclusive to the ASPs. Further, as is clear from the factual matrix, the ISPs are reluctant
to become ASPs due to the stringent nature of the agreement. 54Therefore, it means that
although they meet the qualitative criteria that the manufacturers lay out, they are
prevented from competing in the market merely because they want to follow a different
distribution system.
II.6.3. It is humbly submitted that the negative factors under Section 19 of the Act, reasonably
outweigh the possible economic advantages that can be contended by the MRI
manufacturers. The ‘rule of reason’ analysis has to actually prove that challenged practice
harms competition in the relevant market.55 Under the rule of reason analysis, the true test
of legality is whether the restraint imposed is such that it merely regulates or promotes
held that has in instances where an agreement, irrespective of the fact that it may contain
53Proposition ¶ 14.
competition in the market, the factors listed in section 19(3)(a)-(c) should be prioritized
over the factors listed in section 19(3)(d)-(f). 57 Thus, the agreement in the present matter
is anti-competitive.
III. WHETHER THE MANUFACTURERS HAVE ABUSED THEIR DOMINANT POSITION UNDER
In the instant case, it has been alleged that the manufacturers’ abused their dominant position
under Section 4 of the Act in the relevant market of spare parts for MRI machines.
responsibility of not to allow its conduct to impair competition. 58 In disregard of the same, the
contended that the manufacturers’ imposed discriminatory pricing under Section 4(2) (a) of the
Act, denied market access under Section 4(2) (c) of the Act and, engaged exploitation of
dominance in one market to protect another relevant market under Section 4(2) (e) of the Act.
In order to inquire into the issues of dominance and abuse under the provisions of the Act, it is
necessary to, (a) determine the relevant market as prescribed under Section 2(r) of the Act, (b)
assess dominance in the relevant market with regards to the factors laid down in Section 19(4) of
the Act, and (c) establish abuse of dominance under Section 4 of the Act.
PRODUCT.
58 Treaty on the Functioning of the European Union Art. 102, 2008 O.J. C 115/47 [hereinafter
TFEU].
III.1.1. It is submitted that Section 2(r) of the Act states that a relevant market may be defined
with reference to the relevant product market. Section 2(t) of the Act defines a relevant
product market as a market comprising all those products or services which are regarded
III.1.2. The relevant market in the instant case is determined by the choices made available to the
MRI machine owners. It is submitted that the service and spare parts for a particular
brand of MRI machines is not interchangeable with other manufacturers' service and
parts.59 Hence, the relevant market for the equipment owners’ is (i) the ASPs, and (ii)
III.1.3. Further, in order to determine whether the relevant market can be an aftermarket of a
primary product, it has to be determined whether a consumer can switch from the use of a
primary product when prices in the aftermarket go up, without incurring substantial
shifting cost.60 In the instant case shifting costs to the extent of ₨. 10 lakhs is incurred to
buy a new MRI machine whereas annual service and repair maintenance amounts to Rs.
20,000.61 Hence, it can be reasonably inferred that the cost of initial investment to the
estimated annual service cost is substantially high. It is contended that the customer is
price increase in the service and maintenance of the MRI machines is limited.
III.1.4. Therefore, there are two separate relevant markets that have been identified in the present
matter; (a) the ‘primary market’ comprising the manufacturing and sale of MRI
machines; and (b) the ‘aftermarket’ comprising the spare parts and after sale repair and
complementary or secondary products and services which are purchased after another
III.2. THAT THE MANUFACTURERS WERE THE DOMINANT ENTERPRISES IN THE AFTER-
MARKET.
III.2.1. It is humbly submitted that Section 4(a) of the Act defines ‘dominant position’ as, (a) “a
position of strength, enjoyed by an enterprise, in the relevant market, enabling it to,” (b)
III.2.2. It is humbly submitted that Section 19(4) of the Act prescribes factors that must be
considered while enquiring into whether an enterprise enjoys a dominant position. For
63
our purposes, dominance shall be assessed on the basis of (a) market share, (b) entry
III.2.3. It is submitted that a highly important factor to determine dominance is the existence of
very high market shares.66 As a rule of thumb, market shares greater than 70-80% is taken
62 Supra note 19.
as a clear indicator of dominance in the relevant market. 67 In the present market each
manufacturer owns a 100% of the market share for the spare parts of its machines. Hence,
III.2.4. It has been held in the United Brands68 case that product differentiation acts as a barrier to
pricing, style etc. that the intended buyers of a product perceive to be different from
others and therefore desirable.69 Hence, due to advertising and brand loyalty,
III.2.5. In the present case there exists a general perception that the service provided by the ASPs
is a 'safer bet'.70 However, there is no real difference between the packages being offered
by the ASPs and ISPs with both offering annual discounts and 24 hour customer service. 71
III.2.6. The Act prescribes that dominance may be assessed on the basis of size and resources of
an enterprise. It has been held that the size of an enterprise and access it has to resources
by virtue of its international links are a determinant of dominance.72 In the instant matter,
69‘HENRY CAMPBELL BLACK: BLACKS’ LAW DICTIONARY, 6TH ED., CENTENNIAL ED. (1891-
1991).
70 Proposition ¶ 6.
71 Id.
72Continental Can Company Inc. v. Commission of the European Communities, [1973] ECR
215.
the three manufacturers’ are in the MRI machine manufacturing industry and possess
70% of the Bohemian market share and 50% of the global market share. 73 Their
III.2.7. In the present matter, due to the lack of substitutability each manufacturer owns a 100 %
of the market share of the spare parts aftermarket for their brand of MRI machines. 74
III.3. THAT THE MANUFACTURERS ABUSED THEIR DOMINANCE UNDER SECTION (4) OF THE
ACT.
III.3.1. It is submitted that the Act prescribes that any conduct of a dominant enterprise falling
within the contours of Section 4 will amount to the abuse of its position. It is contended
that the manufacturers’ abused their position of dominance under, (i) Section 4(2) (a), (ii)
Section 4(2) (c), and (iii) Section 4(2) (e) of the Act.
III.3.2. It is submitted that the Section 4(2) (a) (ii) of the Act prohibits the imposition of
discriminatory pricing in the sale of goods. Discriminatory pricing is said to occur when a
73 Proposition ¶ 3.
III.3.3. In the present matter, the manufacturers’ offer their spare parts to the ISPs at 1.5 times the
price they offer the ASPs.76 The ISPs incur financial injury due to the discriminatory
pricing policy of the manufacturers. Further, the pricing being discriminatory in favour of
the ASPs creates conditions that constrain the competitive ability of the independents. 77
Hence, it is submitted that the manufacturers have abused their dominant position under
III.3.4. It is humbly contended that the manufacturers’ practices amounted to a denial of market
access under 4(2) (c) of the Act. It is submitted that exclusionary abuses are “behaviours
by dominant firms which are likely to have a foreclosure effect on the market,”78 that is,
behaviours which are likely to completely or partially deny access to a market to actual or
potential competitors and which ultimately harm consumers.’ 79 In the instant case
foreclosure is apparent in the declining market shares of the ISPs coupled with the
increasing market share of the ASPs. 80 Hence, it is contended that the manufacturers’
engaged in the exclusionary abuses of (i) denial of essential facilities, (ii) high levels of
76 Proposition ¶ 8.
79 Id.
80 Proposition ¶ 7.
III.3.5. Firstly, when a manufacturer limits the access of ISPs to essential facilities required to
effectively compete with ASPs in the aftermarket it amounts to denial of market access.
The essential facilities doctrine states that when an enterprise with dominance in the
relevant market (i) controls a product that is necessary for accessing the market, which is
(ii) not easily reproducible at a reasonable cost in the short term, (iii) not interchangeable
with other products/services, the enterprise may not without justification refuse to share it
III.3.6. It is submitted that, (i) the supply of genuine spare parts is controlled by the dominant
enterprise in the relevant product market, (ii) the ISPs lack a realistic ability to reproduce
the facility, i.e. genuine spare parts of the manufacturers’ MRI machines, (iii) each
manufacturers’ spare parts is unique and has no substitute in the relevant market. 82
Further, the costs imposed on the ISPs’ are discriminatory in nature. Hence, distortion of
competition arises from the fact that the financial advantage granted by the enterprise in a
dominant position is not based on any economic consideration justifying it, but tends to
prevent the customers of that dominant enterprise from obtaining their supplies from
competitors.83 Therefore, the ISPs are being denied facilities essential to access the
market.
III.3.7. Secondly, in the instant case, the manufacturers achieved a high level of vertical
integration by nature of the agreements entered into with the ASPs. Courts have held that
not to impair genuine competition in the relevant market it is submitted that the conduct
III.3.8. Thirdly, the manufacturers imposed a blanket condition that warranties would be
cancelled if the hospitals avail the services of any ISP.86 The warranty clause discourages
consumers from availing the services of an ISP. Hence, the manufacturers limit the
choices available to the customers with respect to the aftermarket b. 87 It is submitted that
consumer choice has been recognized as the ultimate goal of antitrust. Hence, the
III.3.9. Therefore, the Court may hold that the manufacturers abused their position of dominance
III.3.10. It is submitted that Section 4(2) (e) states that an enterprise has abused its
dominance when it uses its dominant position in one relevant market to protect another
relevant market. In the present matter the manufacturers’ exploited their dominance in the
relevant market of spare parts by entering into agreements requiring that the ASPs install
the spare parts. Given the special responsibility88 of dominant enterprises not to engage in
activities that would not lead to AAEC if not for their position of strength it is submitted
86 Proposition ¶ 3; Proposition ¶ 5.
87 Eastman Kodak Company v. Image Technical Services, Inc., 504 U.S. 451 (1992).
that the Court should hold that conduct of the manufacturers is in violation of Section
4(2) (e).
III.4. THAT THE MANUFACTURERS’ MAY NOT TAKE THE DEFENSE OF EFFICIENCY GAIN.
III.4.1. It has been held that for a firm to adopt efficiency as a defence the efficiency gain must
submitted that (a) the restriction must be shown as being indispensable and (b) sufficient
III.4.2. In the present matter the maintenance of quality standards may be achieved by less
compatible spare parts or limiting the breach of warranty to the extent that there has been
self-regulating group may be tempted to adopt rules that exclude their competitors. 90 It is
contended that the manufacturers’ may not take unilateral actions to address such
indispensable.
III.4.3. It is submitted that the ASP and ISP provided for the same packages. However, the ISP
provided for the same at a lower price, hence negating any scope for sufficient gain that a
consumer might receive. Moreover, the manufacturers’ limit the machine owners choice.
91
The right to choice is considered a fundamental of a competitive market. It is submitted
that a deprivation of the same amounts to abusive conduct. 92 Hence, it can be shown that
no sufficient gains were being passed onto the consumer by demanding that they avail the
services of the ASP. Therefore, the manufacturers’ may not take the defense that their
In the present matter BMA, an association comprising 90% of the hospitals in Bohemia resolved
that only services provided by ASPs shall be availed. 93 Further, it negotiated rates with the
manufacturers’ allowing for discounts. Even though it allowed for hospitals to secure discounts
on the already negotiated rate, it passed a resolution encouraging the hospitals to recover the
negotiated rates. It is humbly contended that the BMA acts as a platform for cartelization of
member hospitals by virtue of having negotiated prices with the manufacturers’ and due to the
anticompetitive nature of their agreement to exclusively avail of the ASPs. It is submitted that
Section 2(c) read with Sections 3(1) and 3(3) of the Act provides for prohibition of cartels.
Section 2(c) of the Act defines a cartel as including, “an association of producers, sellers,
91 Report of High Level Committee on Competition Law & Policy, SVS Raghavan Committee
(2000).
92 Id.
93 Proposition ¶ 5.
distributors, traders or service providers who, by agreement amongst themselves, limit control or
attempt to control the production, distribution, sale or price of, or trade in goods or provision of
services.” Section 3(3) of the Act identifies horizontal agreements, including cartel agreements.
It is submitted that the existence of cartel like conduct is sufficient to attract Section 3 (3) of the
Act.94
IV.1.1. It is submitted that the CCI has held that a trade association is an association of
enterprises and that their agreements and practices fall within Section 3(3) of the Act. 95 In
order to establish a finding of infringement under section 3(1) read with 3(3) of the Act,
have held that the decisions of the association are an agreement on a horizontal level of
the nature provided in section 3(3) of the Act. 96 Direct evidence of the decisions of an
association has been found in rules, regulations, guidelines etc.. 97 In the present matter,
94 FICCI - Multiplex Association of India v. United Producers/ Distributors Forum, Case No. 01
of 2009, Decided On: 25.05.2011.
96Sunshine Pictures Private Limited & Eros International Media Limited v. Central Circuit
Cine Association, Indore & Ors. Case No. 52 of 2010 & Case No. 56 of 2010.
97Varca Druggist & Chemist & Ors. v. Chemists and Druggists Association, Goa, MRTP C-
127/2009/DGIR4/28.
the resolution passed is reflective of the collective intent of the BMA 98 and constitutes an
agreement.
IV.2.1. It is submitted that Courts have held that an association becomes a cartel if the members
of the association take joint decisions in respect of maintaining prices or decisions not to
give discounts to consumers.99 That is, if members can afford to give additional discounts
IV.2.2. In the present matter members of the association decided to recover the negotiated rates
irrespective of whether they availed the discount.101 Moreover, price fixing is in violation
of Section 3(3) (a). In the present matter there was a uniform price rise in the provision of
services across Bohemia post the resolution. 102 In light of the above assessment it is
submitted that the BMA was operating as a platform for cartel agreements.
IV.3.1. It is submitted that Section 3(4) (d) prescribes “refusal to deal” as, (i) any agreement
which restricts, or is likely to restrict, by any method (ii) the persons or classes of persons
98 Proposition ¶ 5.
99M/s Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists and
Ors. 2013 CompLR 223 (CCI).
100 Id.
from whom goods are bought. In the present matter, the BMA passed a resolution to
exclusively avail the services of the ASPs’. The resolution is reflective of the collective
intent of the BMA to ‘act in concert.’103 This agreement restricts the persons, that is the
service providers, from whom repair and maintenance services are bought.
IV.3.2. It is contended that a boycott is a type of concerted refusal to deal 104, and hence, the rules
for establishing one may be applied in the present matter. The case of Northwest
Wholesale Stationers105 explains that such an agreement is illegal when, (i) the agreement
is among competitors; (ii) the boycott cuts off access to a market necessary to compete;
(iii) the boycotting enterprise possesses a dominant position; and (iv) the boycott is not
IV.3.3. In the instant case, (i) the BMA is an association of competing hospitals that passed a
resolution, (ii) the resolution cuts off the ISPs’ access to a majority of the hospitals
offering MRI machine repair and maintenance services, (iii) the BMA comprises 90% of
the hospitals in the country and exercises countervailing buying power 106, (iv) the
agreement is not justifiable as it was entered into in pursuance of an agreement that does
104 Hartford Ins. Co. v. California, 509 U.S. 764, 800-804 (1993).
105Northwest Wholesale Stationers, Inc. v. Pacific Stationary & Printing Co., 472 U.S. 284,
293-295 (1985).
IV.3.4. Therefore, it is submitted that the resolution to exclusively avail the services of the ASPs’
IV.4.1. It is submitted that the defense of passing on to avoid loss due to an illegal overcharge is
available to the hospitals only if it can be shown that the rise in prices was a consequence
of the overcharge.107 In the instant matter, the BMA and the hospitals exercised sufficient
countervailing buying power for them to negotiate greater discounts with the ASPs. This
is indicated by the fact that (i) the BMA is the largest trade association for hospitals 108 in
Bohemia comprising all major hospitals and clinics109 and (ii) the policy of market
allocation110 for the ASP limits the number of hospitals they provide service to. In order to
ensure buyer loyalty in the post warranty period the ASPs will be required to offer
IV.4.2. Therefore, it is contended that the BMA and the hospitals may not take the defense of
passing on as they were in a position to bring down the rates that they paid for services.
IV.5. THAT THE MEMBER HOSPITALS MAY NOT TAKE THE PLEA OF PRESSURE.
IV.5.1. It is contended that no individual enterprise can take a plea of pressure for violation of
law. The pressure of an association cannot be a ground for exonerating the individual
107 Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968).
109Proposition ¶5.
enterprise.111 Hence, the hospitals cannot claim that they faced the risk of expulsion from
the association.112
consumer’s economic interests. The Preamble and subsequent provisions of the Act 113
expressly provide for protection of consumer interests. The resolution of the BMA was an
effort to protect the profit margin of its members. However, the association has no
business to regulate profit margins.114 If associations act in order to grab higher profit
margins, the ultimate suffering shall lie with the consumers.115 In the present matter there
was a uniform price rise in the provision of MRI services by the members of the BMA. It
is submitted that substantial increases in the cost of health care places considerable stress
on a consumers economic interests, hence, the BMA must be held to be a cartel under
Section 2(c) and its practices in violation of Section 3(3) (a) of the Act.
111 M/sPeeveear Medical Agencies, Kerala v. All India Organization of Chemists and Druggists
and Ors., Case No. 30 of 2011.
114Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists
Association, 2013 CompLR 223(CCI).
115Id.
P R AY E R
I. HOLD THAT THE DIRECTOR GENERAL DID NOT EXCEED THE SCOPE OF HIS
II. HOLD THAT THE AGREEMENT BETWEEN THE MANUFACTURERS AND AUTHORISED
III. HOLD THAT THE MRI MANUFACTURERS HAVE ABUSED THEIR DOMINANT
POSITION.
IV. HOLD THAT THE MANUFACTURERS AND BOHEMIAN MEDICAL ASSOCIATION ARE
GUILTY OF CARTELIZATION.