The Delhi High Court has deferred the plea filed by the six Delhi based Max group hospitals challenging CCI proceedings against them for allegedly charging excessive/unfair prices by abusing their dominant position. Further hearing on the matter has now been fixed for October 14.
Meanwhile, the HC has also permitted the six hospitals to amend their petition so as to cover CCI’s January 2022 order within the scope of their challenge.
It maybe recalled that CCI had, in the last two orders (flowing from the January 2022 order), declined the request of Max hospitals to access confidential documents of other hospitals. The latter two orders were the basis of the challenge by the hospital chain.
Two grounds for challenge
Basically, Max hospitals had two grounds for challenging CCI proceedings — they were not given sufficient time to reply to the investigation report, and secondly they wanted access to confidential documents of other hospitals.
A single Bench of Justice Yashwant Varma allowed Max group to amend its petition so that the challenge could cover the CCI’s January 2022 order. This order had specified that each of the 12 hospitals concerned should be treated as separate cases, and therefore the pricing information of each hospital cannot be shared with the others.
The Director-General (investigations) had, in December 2021, submitted investigative reports on each of the 12 super-speciality hospitals of the chains that operated in NCR, and concluded that they had abused their dominant positions by charging “unfair and excessive prices” for rooms, medical tests, medical devices, medicines and consumables.
After the DG reports against 12 hospitals was submitted, notices were issued to them by CCI, calling for their response on the investigation reports. However, before the matter could be taken up by CCI for final hearing, Max hospitals approached Delhi High Court challenging the CCI probe alleging they had not been provided the confidential documents and not given sufficient time to respond to the investigation report.
Could impose heavy penalty
In this case, the CCI can potentially impose a penalty of up to 10 percent of the average turnover for the past three preceding financial years of an enterprise that has violated competition laws.
The six hospitals that had approached the Delhi High Court are Max Super Speciality Hospital (in Patparganj, Saket, and Shalimar Bagh); Dr BL Kapur–Max Super Speciality Hospital, Pusa Road; Max Multispeciality Centre in Panchsheel Park and Max Multi Speciality Centre in Pitampura.
They had moved the Court days before the competition watchdog was to take up final hearings on the Director General’s investigation report against 12 hospitals. Of the 12 hospitals that faced CCI scrutiny, six belonged to Max and two to Fortis. The other hospitals included Apollo Hospitals, Sir Ganga Ram Hospital and Batra Hospital.
In 2015, an information was filed against Max Hospital (Patparganj) alleging charging of excessive/ unfair prices by abusing its dominant position. Thereupon, CCI ordered a probe and the investigation arm of CCI (Office of the Director General) submitted a report in 2017 finding Max Hospital abusing its dominant position by charging excessive prices with respect to syringes.
Broadened scope of investigation CCI, in 2018, decided to broaden the scope of investigation, with a view to prevent anti-competitive practices in the tertiary healthcare sector. Upon investigation, CCI noted that huge profit margins were being earned via sale of products to in-patients.
Thereupon, CCI decided to widen the scope of investigation to cover the practices of super specialty hospitals across Delhi regarding healthcare products and services.
It was ordered that the investigation focus on products sold by super specialty hospitals to their in-patients which are not required on an urgent basis for any medical procedure/intervention or which do not involve any high degree of quality issue from the medical procedure point of view. These were items for which patients had no time and scope to exercise their rational choice to purchase from the open market where they may be available at lower rates.