Hospitals and Tyres: Re-evaluating CCI's approach to flawed DG methodologies

In May 2026, the Competition Commission of India (CCI) closed a long pending case against 12 super speciality hospitals in Delhi for unfair conduct and excessive pricing, finding fault with the investigation conducted by the Director General (DG). Given that one would be hard pressed to find an individual who did not think hospital processes and practices were unreasonable, this decision of the CCI attracted a fair amount of concern and criticism.

Patients locked-in: The DG came to the conclusion that patients once admitted into a hospital, had no choice but to pay the room rent, undergo various medical tests, use the applicable medical devices, and pay for all the consumables and medicines the hospital provides. In other words, once the patient in admitted, she/he is a captive consumer of all the products and services the hospital provides. There is effectively no chance of getting medical tests from an independent diagnostic centre outside the hospital, or purchasing consumables or medicines from pharmacies outside the hospital.

Excessive pricing: The DG then examined the prices of room rents, medical tests, medical devices, consumables, and medicines, by way of comparing:

(i) Room rents to tariffs by three and four-star hotels;

(ii) Medical tests and devices to those conducted by four diagnostic labs;

(iii) Procurement prices of consumables and medicines to the selling price of those consumables and medicines to admitted patients.

The DG concluded that the prices charged were in fact excessive.

Patients not locked-in:  The Commission held that patients seeking elective treatment are given a reasonable cost estimate prior to admission, and while the data showed that in-patients almost always use the hospital’s in-house laboratories and pharmacy for tests, consumables, and medicines, a consumer can shift to another hospital at any time during the treatment without bearing substantial switching costs or financial burden. Nevertheless, the Commission concedes that there may exist a case for aftermarket in some limited situations of elective treatment like post-surgical stay, etc.

No data: The Commission then examines the comparisons made by the DG and holds:

• The comparison of hospital room rents to tariffs by three/four-star hotels is inappropriate. The DG ought to have looked at hospital rooms across different hospitals. Since this hasn’t been done, “no finding on ‘excessive’ and ‘unfair’ pricing can be rendered by the Commission on this count”.

• The Commission held that the comparison of rates of medical tests charged by the hospital with standalone labs was inappropriate. The DG ought to have looked at other hospitals providing similar services, as the price charged for certain medical tests may be termed as unfair only if it is significantly higher in comparison with prices charged by other hospitals providing similar services. Consequently, this allegation “cannot be conclusively established."

• Similarly, the Commission faulted the comparison of rates for X-Rays/ MRIs/ Ultrasounds operations charged by the hospitals with only one stand-alone lab. The charges levied by a hospital would qualify as unfair only where they are significantly higher than those charged by other hospitals for comparable services. Since this was not done, the allegation of unfair prices was not sustainable.

• Finally, with regard to consumables and medicines, the Commission again held that the comparison of sale price to the procurement price and profits margins is not the correct methodology as the procurement price does not cover overhead expenses. The price charged by the hospital ought to have been compared with prices charged in other super speciality hospitals or nearby pharmacies. Since this was not done, the Commission could not make any determination on unfair pricing.

The Commission is quite right in examining the methodology employed and comparisons made by the DG. To borrow Sherlock Holmes’ famous quote, the Commission cannot make bricks without clay – no evidence no sentence. Two critical questions arise:

(a) Why didn’t the CCI intervene during the investigation process itself, and

(b) Whether the CCI ought to have sent it back to the DG for further investigation instead of closing the case.

Overseeing the investigation

It seems this situation could have been avoided with a simple discussion between the DG’s investigation team and the CCI officials. The investigator would have discussed his proposed methodology and when the CCI heard that a comparison was going to be made with three or four star hotels, it could have provided its opinion that the correct comparison was to hospital rooms across different hospitals. The same would apply to the DG’s other proposed comparisons and analyses. This way, the CCI would eventually have received what it perceived was the correct data.

This, however, raises the question of institutional fairness – can the investigator and adjudicator be the same? The thinking is that the adjudicator must maintain some degree of impartiality while weighing the evidence gathered and therefore cannot be involved in the investigative process itself. This is reason why the statute originally mandated that DG be appointed by the Central Government and not the CCI. However, in practice, the DG’s investigators and the CCI officials regularly interacted during the course of an investigation, and was ‘de facto a part of the CCI’, as noted by the Competition Law Review Committee in 2019. The Committee, therefore, recommend that the office of the DG should formally be folded into the CCI, noting that the European Commission and US Federal Trade Commission follow the same model, as do other domestic regulatory bodies such as SEBI and IRDAI. Consequently, in 2023 the Competition Act was amended to transfer the power of appointing the Director General from the Central Government to the CCI. [Section 12 of the Competition Amendment Act, 2023 which amended Section 16 of the Competition Act,2002]

To be sure, the issue of maintaining fairness and impartiality is a valid one, and the CCI must avoid looking at each piece of evidence as it is gathered. But the issue in the hospitals case is one of approach and methodology. This ought to have been discussed and settled so the correct data was gathered. And this should be done in every case.

How about sending it back?

Now that the investigation report was finalized sans this basic discussion, why not send it back? When the CCI determines that the DG ought to have considered certain factors, be it peer-to-peer comparisons or holistic cost assessments, the appropriate response should not be to terminate the proceedings, but to remand the matter for further investigation with clear directions. The CCI is empowered to do so and indeed already used this power in this very investigation in 2018 sending the matter back to the DG for further investigation /consideration of certain issues. Nothing prevented the CCI from doing so again if it was of the opinion that the DG’s comparisons were not appropriate.

In July and August this year, the CCI levied a penalty on HP and its resellers and agents of tyre manufacturers JK and CEAT, for bid rigging in public procurement tenders for printers and tyres respectively. In both proceedings, the CCI exercised its power to send the matter back to the DG for further investigation. The Commission even has the power to carry out the further enquiry itself if required. Given the importance of hospitals in the healthcare industry, perhaps the CCI ought to have exercised these powers to dig a little deeper.

If after further investigation (with the appropriate comparisons), the data showed that hospitals were not being unfair or pricing excessively, the CCI would have good ground to say it considered all the facts and found no contravention was established, rather than saying there was insufficient data and so it could not establish anything. This is more true when it is statutorily empowered to summon the very data that it says is required.

Holmes would certainly have kept probing till he found his clay.

About the authors: Abdullah Hussain is a Partner and Ishan Handa is a Senior Associate at DSK Legal.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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