TEAM CODE: 34

BEFORE THE SUPREME COURT OF BOHEMIA AT RIVERDALE

Special Leave Petition filed under Article 136 of the Constitution of Bohemia
& Appeals filed under 53T of the Competition Act, 2002
MEMORIAL FILED ON BEHALF OF THE APPELLANTS/PETITIONER

SLP(C) No. 101/2015

Competition Commission of Bohemia

Petitioner
V.

HCF Medi Machines AG

Respondent No. 1

Takshi Inc.

Respondent No. 2

Parry Limited

Respondent No. 3
CLUBBED WITH
Appeal No. 1/2015

Mr. Amandeep Sondhi

Petitioner
V.

HCF Medi Machines AG

Respondent No. 1

Takshi Inc.

Respondent No. 2

Parry Limited

Respondent No. 3
CLUBBED WITH
Appeal No. 2/2015

Ms. Debjoy Bhattacharya

Petitioner
V.

Bohemian Medical Association

Respondent

Most Respectfully Submitted to the Honble Judges of the Supreme Court of Bohemia at
Riverdale
COUNSEL APPEARING ON BEHALF OF APPELLANTS/PETITIONER

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

TABLE

OF

CONTENTS-

-Page 1 -

TABLE
TABLE
LIST

OF

OF

INDEX

OF

CONTENTS

C O N T E N T S ..............................................................................................................i

A B B R E V I A T I O N S ....................................................................................................iii

OF

A U T H O R I T I E S ......................................................................................................iv

S T AT E M E N T

OF

ISSUES

C O N S I D E R A T I O N ............................................................................................ix

FOR

S T AT E M E N T
SUMMARY

OF

OF

J U R I S D I C T I O N .......................................................................................viii

F A C T S ...........................................................................................................x

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

GENERALS

THE ORDER OF THE

RIVERDALE HIGH COURT

REPORT AND THE ENSUING

DECLARING THE

COMPETITION COMMISSION

OF

DIRECTOR

BOHEMIAS (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

WITHIN THE SCOPE OF HIS AUTHORITY.....................................................................................2

1.2.

THAT

NOT REPORTING THE VIOLATION OF

SECTION 4

OF THE

ACT

WOULD HAVE

RESULTED IN THE VIOLATION OF DUTY ESTABLISHED BY STATUTE AS WELL AS ESTABLISHED

LEGAL PRINCIPLES......................................................................................................................3

II. WHETHER

THE AGREEMENT BETWEEN THE

MRI

MANUFACTURERS AND THE SERVICE

PROVIDERS IS ANTICOMPETITIVE IN NATURE?..............................................................................4

2.1.

THAT THE

AGREEMENT CONTAINS AN EXCLUSIVE SUPPLY CLAUSE WHICH IS LIKELY

TO HAVE AN ADVERSE EFFECT ON COMPETITION......................................................................5

2.2.

THAT

THE EXCLUSIVE DISTRIBUTION CLAUSE IN THE AGREEMENT IS LIKELY TO

HAVE ADVERSE EFFECT ON COMPETITION.................................................................................7

2.3.

THAT THE RECOMMENDED MINIMUM RESALE PRICE OPERATES TO THE CONSUMERS

DETRIMENT..................................................................................................................................9

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

TABLE

OF

2.4.

CONTENTS-

THAT

-Page 2 -

THE COMBINATION OF VERTICAL RESTRAINTS IN THE AGREEMENT IS LIKELY

TO HAVE AN ADVERSE EFFECT ON COMPETITION....................................................................11

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

COMPATS

DECISION HOLDING THAT THE AGREEMENT WAS NOT ANTI-

COMPETITIVE SHOWS AN INCORRECT APPLICATION OF LAW.................................................14

III.

WHETHER

SECTION

3.1.

THE MANUFACTURERS HAVE ABUSED THEIR DOMINANT POSITION UNDER

4 OF THE ACT?...............................................................................................................15
THAT

THE RELEVANT MARKET EXTENDS TO THE AFTERMARKET OF A PRIMARY

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

IV.

WHETHER THE BMA ACTED AS A PLATFORM FOR CARTELIZATION?............................24

4.1.

THAT THERE IS AN AGREEMENT BETWEEN MEMBERS OF THE ASSOCIATION............25

4.2.

THAT THE BMA OPERATED AS A PRICE FIXING CARTEL.............................................26

4.3.

THAT THE BMAS RESOLUTION AMOUNTED TO A REFUSAL TO DEAL........................26

4.4.

THAT THE DEFENSE OF PASSING ON CANNOT BE TAKEN..............................................28

4.5.

THAT THE MEMBER HOSPITALS MAY NOT TAKE THE PLEA OF PRESSURE..................28

P R AY E R ......................................................................................................................................xvi

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

LIST

OF

A B B R E V I ATI O N S -

-Page 3 -

LIST

OF

A B B R E V I AT I O N S

Abbreviation

Description

AAEC

Appreciable Adverse Effects on Competition

BMA

Bohemia Medical Association

CCB

Competition Commission of Bohemia

CCI

Competition Commission of India

COMPAT

Competition Appellate Tribunal

DG

Director General

EC

European Commission

ICN

International Competition Network

MRTP

Monopolies and Restrictive Trade Practices

RPM

Resale Price Maintenance

SLP

Special Leave Petition

TFEU

Treaty on the Functioning of the European Union

THE ACT

The Competition Act, 2002

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

INDEX

OF

AU T H O R I T IE S -

-Page 4

INDEX

OF

AUTHORITIES

Cases
Alkali Manufacturers 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
of 2008, Competition Commission of India.................................................................................4
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
Consten & Grundig v. Commission, 1966 ECR 299.......................................................................8
Continental Can Company Inc. v. Commission of the European Communities, [1973] ECR 21519
Copperwel Corpn. v. Independence Tube Corporation, 467 US 752 (1984)................................15
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
2009, Decided On: 25.05.2011...................................................................................................25
Gotiram v. Sonabai, AIR 1970 Bom 73..........................................................................................6
Grasim Industries Limited v. CCI, 2014 (206) DLT 42...................................................................2
Groupements dachat Edouward Leclerc v. Commission, [1996] ECR-II 1851...........................13
Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968)................................28
Hartford Ins. Co. v. California, 509 U.S. 764, 800-804 (1993)....................................................27
Hilti v. Commission, Case T-30/89, [1991] ECR II-01439............................................................18
-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

INDEX

OF

AU T H O R I T IE S -

-Page 5

Hoffmann-La Roche v. Commission, [1979] ECR 461..................................................................18

In Re: Shri P.V. Basheer Ahamed, Case No. 32 of 2013................................................................25
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
and Ors., Case No. 30 of 2011...................................................................................................29
M/s Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists and Ors.
2013 CompLR 223 (CCI)...........................................................................................................26
Metro SB- Gromarkte GmbH & CoKG v. Commission, (No 2) [1986] ECR 3021.....................13
Michelin v. Commission, [1983] ECR 3461..................................................................................22
National Society of Professional Engineers v. United States, 435 US 679 (1978).......................15
Northwest Wholesale Stationers, Inc. v. Pacific Stationary & Printing Co., 472 U.S. 284, 293295 (1985)..................................................................................................................................27
NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities,
[1983] ECR 3461........................................................................................................................23
Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists Association,
2013 CompLR 223(CCI)............................................................................................................29
Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors., 2014 Comp LR 001 (CCI).....6, 15,
17, 19
Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212..................................................................4
Societe Technique Minire v. Maschinebau Ulm, [1996] ECR 235..................................................8

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

INDEX

OF

AU T H O R I T IE S -

-Page 6

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
United Brands v. Commission, (1978) ECR 207...........................................................................18
United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948)..................................................22
Varca Druggist & Chemist & Ors. v. Chemists and Druggists Association, Goa, MRTP C127/2009/DGIR4/28...................................................................................................................26
Treatises
Commission Notice: GUIDELINES ON VERTICAL RESTRAINTS (2010) 125...............................9
Commission 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.......................8
Communication from the Commission: NOTICE GUIDELINES ON THE APPLICATION OF ARTICLE
81(3) OF THE TREATY, OJ C 101, 27.4.2004.............................................................................11
European Commission, Block Exemption Regulation, Resolution No. 2790/1999 105,...........12
European Commission, Competition discussion paper on the application of Article 82 of the
Treaty to exclusionary abuses (2005).........................................................................................20
Europeann Commission, Online Glossary.......................................................................................9
Green Paper on Vertical Restraints in EC Competition Policy, 59.............................................10
Report on the Application of the Competition Rules in the European Union, XXVth Report on
Competition Policy (1996), p.135................................................................................................8
Treaty on the Functioning of the European Union Art. 83, 2008 O.J. C 115/47.........16, 20, 22, 23
Other Authorities

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

INDEX

OF

AU T H O R I T IE S -

-Page 7

ABA SECTION OF ANTITRUST LAW, HANDBOOK ON THE ANTITRUST ASPECTS OF

STANDARDS SETTING 8 (2004)............................................................................................24
EUGENE BUTTIGIEG, COMPETITION LAW:SAFEGUARDING

THE

CONSUMER INTEREST, VOL.

40(2009).....................................................................................................................................14
HENRY CAMPBELL BLACK: BLACKS' LAW DICTIONERY, 6TH ED., CENTENNIAL L ED. (1891-1991).
....................................................................................................................................................19
P. RAMANATHA AIYAR, ADVANCED LAW LEXICON (5TH Edn, 2005)...............................................2
Report of High Level Committee on Competition Law & Policy, SVS Raghavan Committee
(2000).........................................................................................................................................24

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S TATE M E N T

OF

JURISDICTION-

S TAT E M E N T
THE PETITIONER

-Page 8

OF

JURISDICTION

HAS APPROACHED THIS HONBLE COURT UNDER ARTICLE

136

OF THE

CONSTITUTION OF BOHEMIA.
136: Special leave to appeal by the Supreme Court

(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
matter passed or made by any court or tribunal in the territory of India.
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

HONBLE COURT

UNDER

SECTION 53T

OF THE

COMPETITION ACT, 2002.

53T: Appeal to Supreme Court.
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
communication of the decision or order of the Appellate Tribunal to them;

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S TATE M E N T

OF

JURISDICTION-

-Page 9

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
of the said period of sixty days.

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

I S S U E S F O R C O N S I D E R ATI O N -

-Page 10

I SS U E S

I.

FOR

C O N S I D E R AT I O N

WHETHER THE ORDER OF THE RIVERDALE HIGH COURT DECLARING THE DIRECTOR
GENERALS REPORT AND THE ENSUING COMPETITION COMMISSION OF BOHEMIAS

(CCB) ORDER VOID IS CORRECT IN LAW?

II.

WHETHER THE AGREEMENT BETWEEN THE MRI MANUFACTURERS AND THE SERVICE
PROVIDERS IS ANTICOMPETITIVE IN NATURE?

III.

WHETHER THE MANUFACTURERS HAVE ABUSED THEIR DOMINANT POSITION UNDER

SECTION

IV.

V.

4 OF THE ACT?

WHETHER THE BMA ACTED AS A PLATFORM FOR CARTELIZATION?

WHETHER THE MRI MANUFACTURERS ACTED IN VIOLATION OF SECTION 3(3) READ

OF THE COMPETITION ACT,

-MEMORIAL

2002?

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S TATE M E N T

OF

FACTS-

-Page 11

S TAT E M E N T

OF

FACTS

1. HCF Medi Machines AG (HCF) is an international conglomerate operating out of Germany,

specializing in the manufacture and supply of high-cost medical equipment, particularly
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
was adopted by Takshi and Parry as well.
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
and Parry only.
-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S TATE M E N T

OF

FACTS-

-Page 12

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
share, particularly after the BMA resolution passed in December 2012.
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
agreement and were thus, anti-competitive.
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.

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S TATE M E N T

OF

FACTS-

-Page 13

9. The Riverdale High Court ruling in favour of the petitioner ordered that the DGs
investigation and the resulting final order of the CCB was void as the DG did not have any
authority to extend its investigation to a violation of Section 4.
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,
since the BMA meeting in December 2012.
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
Parry. The CCB, as a result, upheld these findings.
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
appeals together and ruled in favour of the petitioners.
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
appealed against the order of COMPAT.

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S UMM ARY

OF

AR G U M E N T S -

-Page 14

S U M M A RY
1. WHETHER

THE ORDER OF THE

DIRECTOR GENERALS

REPORT

OF

ARGUMENTS

RIVERDALE HIGH COURT

AND

THE

ENSUING

CCB

DECLARING THE
ORDER

VOID

IS

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 Honble Court that the order of
the High Court declaring the DGs investigation and the ensuing final order of the CCB as void is
not justifiable.
2. WHETHER

THE AGREEMENT BETWEEN THE

MRI

MANUFACTURERS AND THE

SERVICE PROVIDERS IS ANTICOMPETITIVE IN NATURE?

It is humbly submitted that the agreement between the MRI manufacturers and the service
providers is anti-competitive. It is contended that the anti-competitive nature of the agreements
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

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S UMM ARY

OF

AR G U M E N T S -

-Page 15

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,
Section 3(1) read with Section 3(4) stand violated.
3. WHETHER

THE

MANUFACTURERS

DOMINANCE UNDER

SECTION 4

CONDUCT

OF THE

AMOUNTED

TO

ABUSE

OF

COMPETITION ACT, 2002?

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
abused their position of dominance in the relevant market.
4. WHETHER

THE

BMA

ACTED AS A PLATFORM FOR CARTELIZATION?

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
-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

S UMM ARY

OF

AR G U M E N T S -

-Page 16

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
platform for cartelization.
5. WHETHER
OF

THE MANUFACTURERS CONDUCT AMOUNTS TO AN INFRINGEMENT

SECTION 3(3)

READ WITH

SECTION 3(1)

OF THE

COMPETITION ACT,

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
the term agreement and evidence of the existence of an agreement is determined by
circumstantial evidence. Circumstantial evidence is gathered by a variety economic and
noneconomic evidence which is indicative of the markets conduciveness to cartelization and
facilitating practices adopted by the manufacturers, respectively. Further, it is contended that
price fixing agreements are per se illegal and hence, the manufacturers must be held to have
infringed Section 3(3) read with Section 3(1) of the Act.

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

WRITTEN SUBMISSIONS-

-Page 1 of 29

W R I T T E N S U BM I SS I O N S
I. WHETHER

THE ORDER OF THE

GENERALS

REPORT

BOHEMIAS (CCB)

AND

RIVERDALE HIGH COURT

THE

ENSUING

DECLARING THE

COMPETITION

DIRECTOR

COMMISSION

OF

ORDER VOID IS CORRECT IN LAW?

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 Courts 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
statutory and legal duty in doing so.

Hereinafter the Act.

Hereinafter DG.

Proposition 10.

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-

WRITTEN SUBMISSIONSI.1.

THAT

THE

DG

IN REPORTING A VIOLATION OF

SECTION 4

OF THE

-Page 2 of 29
ACT

HAS ACTED

WITHIN THE SCOPE OF HIS AUTHORITY.

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
Commission, on consideration of an information forms an opinion that there exists a
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 of the DG cannot be tailored to suit such finding. In case an in depth
investigation reveals another or a different violation emerging from the same set of facts,
such a finding should be reported.
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

Grasim Industries Limited v. CCI, 2014 (206) DLT 42.

Competition Commission of India v. Steel Authority of India Limited, (2010) 10 SCC 744.

P. RAMANATHA AIYAR, ADVANCED LAW LEXICON (5TH Edn, 2005).

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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
included.9 Such pricing is indicative of abuse of dominant position as provided under
Section 4(2) (a) of the Act. Therefore, the DG has acted within the scope of his authority
in reporting the violation of Section 4.
I.2.

THAT

NOT REPORTING THE VIOLATION OF

SECTION 4

OF THE

ACT

WOULD HAVE

RESULTED IN THE VIOLATION OF DUTY ESTABLISHED BY STATUTE AS WELL AS

ESTABLISHED LEGAL PRINCIPLES.

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
to the facts at hand.
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.

Proposition 4.

Proposition 8.

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investigatory functions.10 Therefore, the DG has acted in fulfilment of the investigatory

power bestowed on him to fulfil a statutory end.
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 Commissions direction, it would
have amounted to non-application of mind resulting in the subversion of the purpose of
the Act. Thus, the order of the High Court must be set aside.

II. WHETHER

THE AGREEMENT BETWEEN THE

MRI

MANUFACTURERS AND THE SERVICE

PROVIDERS IS ANTICOMPETITIVE IN NATURE?

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
All India Tyre Dealers Federation v. Tyre Manufacturers, decided on 30.10.2012, RTPE No.
20 of 2008, Competition Commission of India.
10

11 Brundaban

Chandra Dhir Narendra v. The State Of Orissa, AIR 1953 Ori 121.

12

Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212.

13

Hereinafter AAEC.

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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

HAVE AN ADVERSE EFFECT ON COMPETITION.

14

Hereinafter RPM.

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II.1.1. It is humbly submitted that the clause stipulating that the authorized service providers 15
require prior written approval to deal in MRI machines of competing manufactures 16 is an
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
interpreted as includes and covering total prohibition, or to confine within bounds.18
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.

Explosive Manufacturers Welfare Association v. Coal India Limited & its Officers, 2012
Comp LR 525 (CCI).
17

18

Gotiram v. Sonabai, AIR 1970 Bom 73.

19

Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors., 2014 Comp LR 001 (CCI).

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for the welfare of their business. The ASPs can only sell as many spare parts and service
as many machines as the manufacturer manages to sell. It is contended that, further
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
entrant into the aftermarket.
II.2.

THAT

THE EXCLUSIVE DISTRIBUTION CLAUSE IN THE AGREEMENT IS LIKELY TO HAVE

ADVERSE EFFECT ON COMPETITION.

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
sole service provider21 amounts to an exclusive distribution agreement which is likely to
result in price increase and foreclosure of the aftermarket.
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
to an exclusive distribution agreement.

20

Point 20, Clarification to the Proposition.

21Proposition

4, clause iii.

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II.2.3. It is submitted that agreements that have granted absolute territorial protection to
distributors have been held to be anti-competitive.22Further, since an ASP is the sole
service provider in a particular geographic area, intra-brand competition for spare parts
and service is significantly reduced. The loss of intra-brand competition becomes
problematic in the absence of inter-brand competition.23 In the instant case, the
aftermarket is not subject to inter-brand competition. When a customer buys an MRI
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
not exist in competing distribution formats. Therefore, an exclusive distribution
agreement results in the elimination of competitive pricing altogether. Such a situation
results in consumer exploitation.
II.2.4. Moreover, agreements are said to have an adverse effect on competition where in addition
to reduction in intra-brand competition distributors having a different distribution format
are foreclosed.25 In this scenario, a factor that would discourage new entrants from
entering the market as an Independent Service Provider26 has emerged. Such

22Societe

Technique Minire v. Maschinebau Ulm, [1996] ECR 235; Consten & Grundig v.
Commission, 1966 ECR 299.
Commission 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.
23

24Point

12, Clarification to the Proposition.

Report on the Application of the Competition Rules in the European Union, XXVth Report on
Competition Policy (1996), p.135.
25

26

Hereinafter ISP.

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27

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By hindering ISPs entry into the

market such a format of distribution is likely to be foreclosed. Therefore, the exclusive

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 CONSUMERS

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 Manufacturers 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

27Europeann

Commission, Online Glossary

http://ec.europa.eu/translation/english/guidelines/documents/glossaries_on_europa_en.pdf [last
acessed on 4th March 2015].
28

Proposition 4 clause iv.

Alkali Manufacturers Association of India RTP Enquiry No. 26/1984, Order dated 29-51985.
29

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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
the price as recommended, it amounts to RPM.
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
impact of its decision on its partner in the vertical structure.

33

As a result, the price is

likely to be too high.34 In the present case, the rate negotiated between the ASPs and the

Commission Notice: GUIDELINES ON VERTICAL RESTRAINTS (2010) 125, available at

http://ec.europa.eu/competition/antitrust/legislation/guidelines_vertical_en.pdf [last accessed on
February 24th 2015].
30

31

Id.

32

Proposition 4 clause; Point 13, Clarification to the Proposition.

33Green

Paper on Vertical Restraints in EC Competition Policy, 59 available at

http://europa.eu/documents/comm/green_papers/pdf/com96_721_en.pdf [last accessed on 27th
February 2015].
34

Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

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Bohemian Medical Association35 is exorbitant as is evidenced by the price that the

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
lifecycle cost analysis.
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
term appreciable adverse effect on competition has to be adopted.37It is an accepted
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.
II.4.

THAT

THE COMBINATION OF VERTICAL RESTRAINTS IN THE AGREEMENT IS LIKELY TO

HAVE AN ADVERSE EFFECT ON COMPETITION.

35Hereinafter

BMA.

36Proposition

11.

37Exclusive

Motors Pvt. Ltd. v. Automobili Lamborghini SPA, [2014] 121 CLA 230 (CAT).

38Communication from the Commission: NOTICE GUIDELINES ON THE APPLICATION OF

ARTICLE 81(3) OF THE TREATY, OJ C 101, 27.4.2004.

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II.4.1. It is humbly submitted that bundling of vertical restraints might be the reflection of a
combination of motives. If a given vertical restraint is introduced to solve coordination
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
competition and the resultant high price being charged.
II.4.2. Moreover, it is submitted that if a clause in an agreement can be held to be an anticompetitive practice, the other practices followed by companies such as tie in
arrangement, exclusive supply agreement etc. can be held anti-competitive.41
II.5.

THAT THE
AND

39

CUMULATIVE EFFECT OF THE AGREEMENTS ENTERED INTO BY

HCF, TAKSHI

PARRY CAUSES A SUBSTANTIAL ADVERSE EFFECT ON COMPETITION.

Supra note 33, at 68.

European Commission, Block Exemption Regulation, Resolution No. 2790/1999 105,

available at http://ec.europa.eu/competition/state_aid/legislation/block.html [last accessed on 2
March, 2015], (hereinafter BER).
40

41

Supra note 10.

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II.5.1. It is submitted that access to the relevant market or competition therein is significantly
restricted by the cumulative effect of parallel networks of similar vertical agreements
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
the relevant market is likely to be intensified.
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
of a number of such systems leaves no room for other forms of distribution.

44

The

European Commissions BER with regards to individual networks of selective

distribution, considers withdrawal of the block exemption in case of cumulative effects.45
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
43

4.

Supra note 38, at 75.

44Metro SB-

Gromarkte GmbH & CoKG v. Commission, (No 2) [1986] ECR 3021;

Groupements dachat Edouward Leclerc v. Commission, [1996] ECR-II 1851.
45Supra

note 40, at 105.

46Proposition

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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.
II.5.4. It is submitted that in a highly competitive market, vertical restraints would be
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
the format of retailing they prefer.52
II.6.

THAT

THE

COMPATS

DECISION HOLDING THAT THE AGREEMENT WAS NOT ANTI-

COMPETITIVE SHOWS AN INCORRECT APPLICATION OF LAW

II.6.1. The COMPAT held that the agreement was not anti- competitive stating that its terms and
conditions resulted in fewer repairs because of the increased longevity of components

47Id.
48Point

22, Clarification to the Proposition.

M/s Cine Prekshakula Viniyoga Darula Sangh v. Hindustan Coca Cola Beverages Pvt. Ltd.,
RTPE 16/2009.
49

50Proposition

6.

51Proposition

3.

52EUGENE

BUTTIGIEG, COMPETITION LAW:SAFEGUARDING THE CONSUMER INTEREST, VOL.

40(2009).

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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
accrue from it.
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
competition or whether it is such that it suppresses or destroys competition. 56 It has been
held that has in instances where an agreement, irrespective of the fact that it may contain
certain efficiency enhancing provisions, allows an enterprise to completely eliminate
53Proposition
54

14.

Point 21 and 22, Clarification to the proposition.

55Copperwel

Corpn. v. Independence Tube Corporation, 467 US 752 (1984).

56National Society

of Professional Engineers v. United States, 435 US 679 (1978).

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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
SECTION

THE MANUFACTURERS HAVE ABUSED THEIR DOMINANT POSITION UNDER

OF THE ACT?

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.
It is asseverated that when an enterprise exercises a dominant position, it has a special
responsibility of not to allow its conduct to impair competition. 58 In disregard of the same, the
manufacturers impaired competition by engaging in exclusionary abusive conduct. It is
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.
III.1. THAT

THE RELEVANT MARKET EXTENDS TO THE AFTERMARKET OF A PRIMARY

PRODUCT.

57

Supra note 19.

58 Treaty on

the Functioning of the European Union Art. 102, 2008 O.J. C 115/47 [hereinafter

TFEU].

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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
as interchangeable or substitutable by the consumer by virtue of the characteristics of the
products or services, their prices and intended use.
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)
spare parts of the original equipment manufacturer.
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
locked in and the feasibility of switching to another manufacturers machine to avoid a
price increase in the service and maintenance of the MRI machines is limited.

59

Proposition 3; Point 4, Clarification to the Proposition.

60

Supra note 19.

61

Point 12, Clarification to the Proposition.

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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
maintenance services. An aftermarket is defined as the market comprising
complementary or secondary products and services which are purchased after another
product i.e. the primary product which they relate to.62
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)
operate independently of competitive forces prevailing in the relevant market.
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
our purposes, dominance shall be assessed on the basis of (a) market share,

63

(b) entry

barriers,64 and (c) size and resources of the enterprise65.

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.

63

Section 19 (4) (a) of the Act.

64

Section 19(4) (h) of the Act.

65

Section 19(4) (b) of the Act.

66

Hoffmann-La Roche v. Commission, [1979] ECR 461.

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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,
each manufacturer is dominant in its relevant aftermarket.
III.2.4. It has been held in the United Brands68 case that product differentiation acts as a barrier to
entry. Product differentiation is the development or incorporation of properties such as
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,

homogenous products are often viewed as being different by consumers.

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
It is submitted that this differentiation acts as a barrier to entry.
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,
67

Hilti v. Commission, Case T-30/89, [1991] ECR II-01439.

68

United Brands v. Commission, (1978) ECR 207.

HENRY CAMPBELL BLACK: BLACKS LAW DICTIONARY, 6TH ED., CENTENNIAL ED. (18911991).
69

70

Proposition 6.

71

Id.

Continental Can Company Inc. v. Commission of the European Communities, [1973] ECR
215.
72

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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
international links and share in the global market is indicative of dominance.
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
Therefore, based on the above assessment the manufacturers enjoyed a position of
strength enabling them to operate independently of the practices of their competitors.
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
vertically integrated dominant player applies dissimilar conditions to equivalent
transactions with other parties, thereby placing them at a competitive disadvantage.75

73

Proposition 3.

74

Supra note 19.

75

Supra note 58.

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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
Section 4(2) (a) of the Act.
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
vertical integration and (iii) blanket conditions on warranties.

76

Proposition 8.

77

Supra note 58.

European Commission, Competition discussion paper on the application of Article 82 of the

Treaty to exclusionary abuses (2005), available
at http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf [last accessed on March 15,
2015].
78

79

Id.

80

Proposition 7.

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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
with its competitors at reasonable cost.81
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
heavily integrated dominant undertakings tend to monopolize markets throughout the
81

Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 427 U.S. 585 (1985).

82

Point 4, Clarification to the Proposition.

83

Michelin v. Commission, [1983] ECR 3461.

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chain by market foreclosure.84 Given the special responsibility85 of dominant enterprises

not to impair genuine competition in the relevant market it is submitted that the conduct
is exclusionary and leads to the denial of market access.
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
manufacturers conduct is exclusionary and likely to lead to denial of market access.
III.3.9. Therefore, the Court may hold that the manufacturers abused their position of dominance
under the provisions of Section 4 (2) (c) of the Act.
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
84

United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).

85

Supra note 58.

86

Proposition 3; Proposition 5.

87

Eastman Kodak Company v. Image Technical Services, Inc., 504 U.S. 451 (1992).

NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities,

[1983] ECR 3461.
88

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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
be shown to be a direct result of the restrictions imposed upon the customer.89 It is
submitted that (a) the restriction must be shown as being indispensable and (b) sufficient
gains must be passed onto the consumer.
III.4.2. In the present matter the maintenance of quality standards may be achieved by less
restrictive alternatives. These alternatives include laying down the specifications of
compatible spare parts or limiting the breach of warranty to the extent that there has been
faulty repair by an ISP. Moreover, it is contended imposition of conditions for the
maintenance of quality standards in the health sector amounts to self-regulation. Selfregulation by groups of competitors is viewed skeptically because of a concern that the
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
considerations. Therefore, the restrictions imposed by the manufacturers are not
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.
89

Supra note 58.

90 ABA SECTION OF ANTITRUST

SETTING (2004).

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91

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
conduct resulted in efficiency gains.

IV. WHETHER

THE

BMA

ACTED AS A PLATFORM FOR CARTELIZATION?

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,
Report of High Level Committee on Competition Law & Policy, SVS Raghavan Committee
(2000).
91

92

Id.

93

Proposition 5.

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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.

THAT THERE IS AN AGREEMENT BETWEEN MEMBERS OF THE ASSOCIATION.

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,
an agreement needs to be established.
IV.1.2. It is submitted that the decision of an association is tantamount to an agreement. Courts
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,

FICCI - Multiplex Association of India v. United Producers/ Distributors Forum, Case No. 01
of 2009, Decided On: 25.05.2011.
94

95

In Re: Shri P.V. Basheer Ahamed, Case No. 32 of 2013.

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.
96

Varca Druggist & Chemist & Ors. v. Chemists and Druggists Association, Goa, MRTP C127/2009/DGIR4/28.
97

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the resolution passed is reflective of the collective intent of the BMA 98 and constitutes an
agreement.
IV.2.

THAT THE BMA OPERATED AS A PRICE FIXING CARTEL.

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
to a consumer, and do not, then cartelization has taken place.100
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.

THAT THE BMAS RESOLUTION AMOUNTED TO A REFUSAL TO DEAL.

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.

M/s Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists and
Ors. 2013 CompLR 223 (CCI).
99

100

Id.

101

Proposition 5.

102

Proposition 11.

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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
justified by efficiency arguments.
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
not have any efficiency justification.

103

Section 2(b) of the Act, Proposition 5.

104

Hartford Ins. Co. v. California, 509 U.S. 764, 800-804 (1993).

Northwest Wholesale Stationers, Inc. v. Pacific Stationary & Printing Co., 472 U.S. 284,
293-295 (1985).
105

106

Point 15, Clarification to the Proposition.

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IV.3.4. Therefore, it is submitted that the resolution to exclusively avail the services of the ASPs
is in contravention of Section 3(1) of the Act.
IV.4.

THAT THE DEFENSE OF PASSING ON CANNOT BE TAKEN.

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
negotiable terms to the hospitals.
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).

108

Point 15, Clarification to the Proposition.

109Proposition
110

5.

Proposition 4.

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enterprise.111 Hence, the hospitals cannot claim that they faced the risk of expulsion from
the association.112
IV.5.2. Further, competition policies aim at increasing consumer welfare by protecting
consumers 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/s

Peeveear Medical Agencies, Kerala v. All India Organization of Chemists and Druggists
and Ors., Case No. 30 of 2011.
112

Point 16, Clarification to the Proposition.

113

Section 18 of the Act; Section 19 of the Act.

Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists
Association, 2013 CompLR 223(CCI).
114

115Id.

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P R AY E R

WHEREFORE IN LIGHT OF THE ISSUES RAISED, ARGUMENTS ADVANCED AND

AUTHORITIES CITED, IT IS HUMBLY PRAYED THAT THIS HONORABLE COURT
MAY BE PLEASED TO:

I.

HOLD

THAT THE DIRECTOR GENERAL DID NOT EXCEED THE SCOPE OF HIS

AUTHORITY IN INVESTIGATING A VIOLATION OF SECTION

II.

4 OF THE ACT.

HOLD THAT THE AGREEMENT BETWEEN THE MANUFACTURERS AND AUTHORISED

SERVICE PROVIDERS IS ANTI-COMPETITIVE.

III.

HOLD

THAT THE

MRI

MANUFACTURERS HAVE ABUSED THEIR DOMINANT

POSITION.

IV.

HOLD

THAT THE MANUFACTURERS AND

BOHEMIAN MEDICAL ASSOCIATION

ARE

GUILTY OF CARTELIZATION.

Counsel for Petitioner/Appellants

-MEMORIAL

ON BEHALF OF THE

APPELLANTS/PETITIONER-