Supplying old Machines, Overcharging on Spare parts: MRI Maker Esaote told to pay Rs 9.33 lakh fine

The complainant, a diagnostic lab in Delhi alleged that the company had supplied it with an old machine with defects and was charging huge some of money for spare parts. 

New Delhi: In a one of its kind order, that may give precedence to many others, the Competition Commission of India has imposed a Rs 9.33 lakh fine on a leading diagnostic device maker for abusing its dominant position in supplying dedicated standing/ tilting MRI machines.

The Competition Commission has penalised Italy's Esaote SpA and its group entity Esaote Asia Pacific Diagnostic for unfair business practices in supply of certain MRI machines. Besides imposing a fine of Rs 9.33 lakh on the two entities, the watchdog has directed them to "cease and desist" from indulging in anti-competitive practices.

The order has been passed on a complaint filed by House of Diagnostics LLP - which is engaged in the business of medical diagnostic imaging services, against Esaote alleging inter alia supply of old machines with various manufacturing and other defects. The firm also alleged that Esaote charged huge sum of money for supplying spare parts and by refusing to perform its obligations under the contract. Essentials terms of the contract were also alleged to have been changed unilaterally by Esaote

Holding Esaote to be the only manufacturer who was found to supply standing/ tilting MRI
machines in India, CCI held Esaote to be dominant in this market.

The CCI further found Esaote to have misled HoD by supplying old machines instead of new
machines as ordered by the Informant. The CCI also held that Esaote acted unfairly and
thereby abused its dominant position by refusing to provide Head Coils with the machines to
the firm.

The CCI also found Esaote to have demanded arbitrary charges in derogation of its
contractual obligations for comprehensive maintenance contract in respect of G-Scan MRI
machines. The CCI also noted that Esaote S.p.A has given exclusive distribution rights to its
Indian subsidiary in respect of G-Scan MRI machines. Such exclusivity was found to limit provision of services in after sale market besides denying market access to third party service providers. Accordingly, a penalty was imposed upon Esaote. Besides, a cease and desist order was also issued against them

The fine amount of Rs 9.33 lakh translates to 10 per cent of the average relevant turnover of the preceding three financial years from the sale of G-Scan MRI machines in India only. While imposing the penalty, the Commission applied the principle of relevant turnover and based the penalty on the revenue generated by Esaote from sale of GScan MRI Machines in India only. The penalty was imposed by the Commission @ 10% of the average relevant turnover of the preceding three financial years of Esaote.

The final order was passed by a majority of 2-1 with the Chairperson issuing a Dissenting
Note. In his Dissenting Note, the Chairperson held that the relevant market cannot be
narrowed to standing/ tilting MRI machines alone as any market delineation would have to
necessarily include all MRI machines irrespective of some additional features or
functionalities. In the absence of market power, the question of abuse of dominance did not
arise, added the Chairperson in his Dissent Note.