COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 41/AM/Jun02
In the matter between :
Healthbridge (Pty) Ltd Applicant
(intervenor)
and
Digital Healthcare Solutions (Pty) Ltd Respondent
In re :
Digital Healthcare Solutions (Pty) Ltd Applicant
and
The Competition Commission 1st Respondent
Healthbridge (Pty) Ltd 2nd Respondent
(intervenor)
Reasons on the scope of intervention
Introduction
This matter relates to an intervention application brought by Healthbridge to
intervene in merger related proceedings (‘the main application’), which we
describe more fully below. Until the day of the hearing Digital Healthcare
Solutions (‘DHS’) opposed the intervention application. On the day of the hearing
it indicated it would no longer oppose the intervention application but sought
limitations on Healthbridge’s right to participate in the main application. DHS also
raised certain in limine points, which we have to decide.
Factual Background
The dispute originates from the merger between DHSwitch 1, a subsidiary of
Digital Healthcare Solutions (Pty) Ltd (“DHS”) and Persetel’s QEDI 2, which was
approved by the Competition Commission on 30 April 2001 subject to the
following conditions:
For a period of three years after the approval of this transaction by the
Commission:
1. The merged entity shall, on reasonable written request by any
healthcare switch entity, integrate the applicable latest versions of
PMS packages which it owns or controls, with an API which
enables an interface with the switching technology of the
healthcare switch entity requesting such integration, in accordance
with an agreement referred to in paragraph 2 below.
2. Pursuant to such reasonable written request, the merged entity
shall use all reasonable endeavours to conclude a written
agreement with the requesting healthcare switch entity concerned,
within a period of 60 days after receiving such request, containing
commercially, financially and technically reasonable terms.
3. The merged entity shall provide a quarterly report to the
Commission, for a period of 12 months after the date of approval,
detailing all requests by third party healthcare switch entities to
integrate their API and functionality with the PMS packages owned
or controlled by the merged entity, as well as detailing the
agreements and time frames concluded with such third party
healthcare switch entities in respect of the integration process.
Subsequent to the merger Healthbridge, a competitor of DHS, 3 requested DHS
to provide it with access to DHS’ practice management software (“PMS”).
1 Erroneously called Mediswitch by the Competition Commission in its papers
2 Persetel now called Comparex
3 DHS, the complainant, and Healthbridge, the intervenor, both provide an
3 DHS, the complainant, and Healthbridge, the intervenor, both provide an
electronic switching mechanism, called a switch, through which claims of
healthcare service providers are conveyed directly to the patient’s medical aid.
2
However, despite ongoing negotiations over a period of 12 months, and way
beyond the 60 day period stipulated by the Commission, the merged entity and
Healthbridge could not conclude an integration agreement. Accordingly, the
Competition Commission issued, on the 28 th May 2002, a Notice of Apparent
Breach to DHS alleging that DHS has failed to comply with the conditions. On 11
June 2002 DHS applied to the Tribunal to have this Notice reviewed in terms of
the procedure set out in Rule 39(2)(b) of the Competition Commission’s rules.
This rule allows a firm that has been served with a notice of apparent breach to
apply to the Tribunal to review the notice on the grounds that the firm has
“substantially complied with its obligations with respect to the approval or
conditional approval of the merger”.
In its Rule 39(2)(b) application DHS requested the Tribunal for an order on the
following terms:
1. The Notice of Apparent Breach issued by the Respondent against
the Applicant dated 28 May 2002 be set aside.
2. It is declared that the Applicant and its subsidiaries have complied,
alternatively substantially complied, with the merger conditions set
out in the Respondent’s merger clearance certificate dated 4 April
2001.
3. It is declared that the Applicant and its subsidiaries are not obliged
to continue to negotiate and conclude an agreement with
Healthbridge (Pty) Ltd for the integration of the latest versions of
practice management software packages which they own or
control, with an application programme interface which enables an
interface with the switching technology of Healthbridge (Pty) Ltd.
4. As an alternative to prayer number 3, it is declared that the merger
conditions set out in the Respondent’s merger clearance certificate
dated 4 April 2001 be amended to include the following sentence at
the end of the second condition: “including, without limitation, that
the end of the second condition: “including, without limitation, that
such other healthcare switch entity shall cancel any agreement
which it may have with healthcare funders or administrators of the
switching technology of such healthcare switch entity for the
electronic conveyance of claims, whether by batch or in real time”.
5. The Respondent is ordered to pay the Applicant’s costs of this
application on the attorney and own client scale, including the costs
of two Counsel and provide further and/or alternative relief.
3
On 23 August 2002 Healthbridge filed an application to intervene in the Rule
39(2)(b) application. Up until the date of the hearing of the intervention
application DHS opposed Healthbridge’s intervention application. However, at
the hearing the intervenor’s interest was conceded but the scope of its
participation was not. It is our task to proceed to determine the extent of that
participation. Before we do this we need to deal with certain in limine objections
regarding the intervenor’s application that DHS raised.
In Limine points
DHS argues that the intervention application is defective for the following
reasons
(1) The application is not properly before the Tribunal because it was
not brought in the prescribed form CT 6;
(2) In the Notice of motion it is stated that the affidavit of Gerhardus
Johannes van Zyl will be relied upon to support the application but
in fact the affidavit attached is from Jerome Howard Sackstein; 4
and
(3) It does not contain a concise statement of the matters in respect of
which the intervenor wishes to make representations as required by
Tribunal Rule 46(1)(a).
The first two points are purely matters of form and DHS was unable to state that
it had been prejudiced in anyway by this want of compliance with formality. The
notice of motion accompanying the intervention application contains all the
information required by the CT6 form and its deficiencies are purely cosmetic and
warrant no further attention. 5 As to the second point, any confusion about the
erroneous reference to the deponent did not prevent DHS comprehensively
responding to the application.
Both points are devoid of substance and we find that the intervention application
is properly before us.
4 The applicants said that it was a typing error and that they would submit a resolution to cure it.
The respondent accepted this and we therefore do not need to address this issue.
5 In NAPW and Others v Glaxo Wellcome and Others the Competition Tribunal found that the Act
does not impose any formalities on the form that a complaint should take. The forms are intended
to be fact driven and user friendly. Note that in terms of Tribunal Rule 10(1) all that is required of
initiating documents is that they are “substantially in the form of the annexure listed” in the Rules.
There is no dispute that the intervention application as a whole meets the test of substantial
compliance with the formal prerequisites of form CT 6. The only complaint would be that the order
is set out in the body of the affidavit and not in the notice of motion.
4
The third point merits further discussion and so we deal with it separately.
Scope of the intervention
DHS argues that the intervention application does not contain a concise
statement of the matters in respect of which the intervenor wishes to make
representations as required by Tribunal Rule 46(1)(a).
In order to cure this DHS proposes that Healthbridge file an affidavit that
addresses the order that is sought so that it knows precisely what it is that is
challenged and, on the basis of that submission, could then ascertain what the
scope of the intervention should be. The argument goes on to state that unless
the above matters are set out precisely in the application, the Tribunal has
nothing pertinent on which to base a decision as to the scope of participation and
the question of whether the intervenor’s interests are within the scope of the Act
or are already represented.
Section 53 of the Act and Rule 46 of the Tribunal Rules, govern an intervenor’s
rights.
Section 53(1)(c)(v) provides that
1) The following persons may participate in a hearing, in person or through a
representative, and may put questions to witnesses and inspect any
books, documents or items presented at the hearing:
(c) if the hearing is in terms of Chapter 3 –
(v) any other person whom the Competition Tribunal recognised as
a participant.
It is common cause that this is the relevant section that deals with the
rights of third parties to participate in hearings related to proceedings in
terms of Chapter 3 of the Act, which would include Rule 39(2)(b)
proceedings.
The Tribunal rules in addition regulate the rights of parties to intervene in
proceedings in terms of Rule 46, which provides:
“Intervenors
5
(a) At any time after an initiating document is filed with the
Tribunal, any person who has a material interest in the
relevant matter may apply to intervene in the Tribunal
proceedings by filing a Notice of Motion in Form CT 6, which
must –
(i) include a concise statement of the nature of the
person's interest in the proceedings, and the matters
in respect of which the person will make
representations; and
(b) be served on every other participant in the
proceedings.
2) No more than 10 business days after receiving a motion to
intervene, a member of the Tribunal assigned by the
Chairperson must either –
i.make an order allowing the applicant to intervene,
subject to any limitations –
1. necessary to ensure that the proceedings
will be orderly and expeditious; or
2. on the matters with respect to which the
person may participate, or the form of
their participation; or
(b) deny the application, if the member concludes
that the interests of the person are not within the
scope of the Act, or are already represented by
another participant in the proceeding.
(b) Upon making an order in terms of subrule (2), the assigned
member may make an appropriate order as to costs.
(4) If an application to intervene is granted –
(i) the registrar must send to the intervenor a list of all
documents filed in the proceedings prior to the day on
which the request for leave to intervene was granted;
and
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(b) access by an intervenor to a document filed or
received in evidence is subject to any outstanding
order of the Tribunal restricting access to the
document.”
DHS relied on the language of paragraph 1(a) of Rule 46 to supports its
contention that the application is deficient in its present form.
The ambit of rule 46 is open to considerable doubt since the recent decision of
the Competition Appeal Court in Anglo South Africa Capital (Pty) Ltd and others v
IDC and one other . 6
In that matter the Court dealt with the issue of intervention in merger proceedings
and, in particular, what the threshold requirement was for the right to intervene,
given the fact that the requirements in section 53 are less onerous than those
found in Rule 46. The Court held that the language of section 53(1)(c)(v) was
clear, and that there is no reference to the requirement of ‘interest’ with regard to
intervention in merger proceedings. The Court went on to state that the Rules
couldn’t introduce a threshold, which the legislature never introduced in the Act.
Therefore, in the absence of specified criteria for participation the Court would be
reluctant to read in a test such as “substantial and material interest”. The mere
requirement in the Act is that “a party must be recognized by the Tribunal as a
participant”. The Court held that even if it were to be argued that a party must
have some interest such an interest is not qualified.
The Court did state, however, that although leave to intervene is discretionary the
Tribunal‘s discretion is not unfettered and must be exercised according to the
rules of reason and justice. 7
It was not necessary for the Court in the Anglo case to consider whether Rule
46(1) raised any other threshold for participation not contemplated in the Act, as
the Court was chiefly concerned with the requirement of a ‘material interest’ set
out in Rule 46(1). It did not deal with the other requirement in the Rule that the
out in Rule 46(1). It did not deal with the other requirement in the Rule that the
intervenor must set out the matters in respect of which the person will make
representations, which we will refer to as the scope requirement.
It is arguable either; that the scope requirement sets out an additional threshold
not mandated by the Act, or that it is no more than a guide to the Tribunal’s
discretion and thus not inconsistent with the requirement that our discretion be
exercised judiciously.
6 see Competition Appeal Court Case No: 26/CAC/Dec02
7 Page 25 of the judgement.
7
We do not need to decide that point as we are of the view that the application
meets the requirement of Rule 46 in any event and that Healthbridge has
properly set out the scope of its intervention.
The intervenor has stated in its Founding affidavit in paragraphs 32, 33 34 and
36 what relief it seeks and in what matters it seeks to make representation. We
therefore find that intervenor has complied substantially with Rule 46 and that the
application is properly before us.
Scope of intervenor’s participation
According to Healthbridge it is uniquely placed, as the party with whom Digital
Healthcare failed to conclude an agreement, to provide evidence to the Tribunal
regarding the failure of negotiations. The Commission wasn’t part of this process.
Healthbridge also avers that it has a clear and direct personal and private interest
in the main proceedings that is not represented by the Commission.
It also contends that it is incompetent for DHS even to pursue the alternative
relief that it seeks in the main application. It submits that in terms of Commission
Rule 39(2)(b), DHS is limited to requesting the Tribunal to review the
Commission’s Notice on the grounds that it has “substantially complied” with its
obligations in terms of the merger clearance certificate, and cannot in terms
thereof seek an amendment of the Commission’s conditions. The Commission
has not taken this jurisdictional objection to the main proceedings and it
accordingly lies in the hands of Healthbridge to make submissions in that regard.
Furthermore, it argues that since it is the company with which DHS has failed to
conclude an integration agreement, it will be affected by DHS’ request that it be
relieved from the obligation to continue its negotiations. If DHS is allowed to
amend the terms of the integration agreements Healthbridge will be uniquely
amend the terms of the integration agreements Healthbridge will be uniquely
affected since this condition is specifically aimed at forcing Discovery Health and
Medscheme to allow DHS unfettered access to their claims processing systems
on the same terms as they have agreed with Healthbridge. 8 Should the review
inquiry ever reach any substantive questions of competition law dealing with the
relationship Healthbridge would also have to traverse matters relating to the
relationship and the effect it may have on competition.
In addition, it alleges in par 36.1 of its affidavit, that the representatives of
Healthbridge will be able to assist the Tribunal in:
8 See par 33 the two medical scheme administrators are also shareholders of Healthbridge
8
Ensuring that all written and oral evidence is placed before it pertaining to:
1. DHS’ failure to comply with the merger conditions imposed on it;
2. the effect of DHS’ conduct on Healthbridge, and on competition
more generally;
3. addressing DHS’ allegations that it and its subsidiaries have
complied or substantially complied with the Commission’s merger
conditions; and
4. addressing legal argument on the merits of DHS’ application.
DHS argues that it cannot find the paragraphs that address the question of scope
pertinently in Healthbridge’s affidavit, and those that do refer to scope are too
broad to be of any use. Because of this the DHS is unable to deal with it. 9
We do not agree. Healthbridge has identified its interest and the scope of its
participation. If DHS had wanted to frame a proposed order that would have
narrowed the scope of intervention it should have done so either in its papers or
at the hearing. Delaying the matter for further filings on this point would serve no
purpose and in any event the issues in dispute are pertinently addressed in
Healthbridge's papers. In our view the scope of intervention sought is by no
means overbroad and furthermore contemplates issues on which Healthbridge is
in a position to be of assistance to us.
DHS’s difficulties in this regard have been occasioned by its last minute change
in stance to concede the intervenor’s interest, when it had till the hearing
disputed this point, and not by any deficiency in Healthbridges application for
intervention. If DHS considered the application’s scope to wide in ambit, having
conceded its interest, it was for DHS to suggest what it considered a more
appropriate delimitation. Its failure to do so cannot be ascribed to any fault on
behalf of the intervenor.
One must not lose sight of the primary purpose of an intervention for our
proceedings. Jali JA in the Anglo states on page 27 of his judgement that:
proceedings. Jali JA in the Anglo states on page 27 of his judgement that:
“…The main focus of the hearing before the Tribunal is the truth
finding process.”
and later on, on page 28:
“ the purpose of participation in hearings is to assist the Tribunal in its
9 Yet it is able to identify and argue the scope in its answering affidavit on page 804 of the record.
9
investigations. … I cannot see the logic in this Court limiting the basis upon
which the first respondent may participate. It is for the Tribunal to decide as it
deems fit. It is within the Tribunal’s discretion.”
From the above it is clear that the Competition Appeal Court favours a wide
scope of intervention. Moreover, it is within the discretion of the Tribunal to
decide the extent of those rights, to limit or widen it, as it deems fit in order to
fulfil its mandate in accordance with the provisions of the Act.
The Main application concerns merger conditions imposed upon the merger to
the effect that the merged entity should, upon receiving a reasonable request
from a competing switch entity use reasonable endeavours to conclude an API
integration agreement relating to PMA packages which it controls, upon
commercially, financially and technically reasonable terms. Healthbridge is such
a competing switch entity that made a request for API integration. Because DHS
allegedly could not meet the conditions the Commission issued a Notice of
Apparent Breach after Healthbridge complained to the Commission.
This is a highly technical matter. In order to understand whether or not there was
a breach of the merger conditions, i.e. whether or not DHS did substantially
comply with the conditions, the Tribunal needs to understand the approach and
measures taken by both parties in trying to come to an agreement. Moreover, the
Tribunal needs to know from each side why and how the commercial dispute
developed that led to a breakdown in negotiations. The Commission was not a
party to this process and can therefore only give hearsay evidence.
In our view the scope of the intervenors application as set out below will assist us
to resolve this question.
Order
In light of the above we make the following order:
1. The applicant’s scope of participation should be in respect of the
following:
following:
1.1 To place before the Tribunal any evidence regarding the failure
of DHS to substantially comply with its merger conditions for
purposes of Competition Commission Rule 39(2)(b);
1.2 Address DHS’ allegations that it and its subsidiaries have
complied with the Commission’s merger conditions; and
1.3 Argue the jurisdictional point taken in paragraph 34 of its
10
founding affidavit with regard to DHS’ application to amend the
Commission’s conditions in terms of Competition Commission
Rule 39(2)(b).
1.4 The effect of DHS’ conduct on Healthbridge as a competitor in
the market if the Commission’s order is amended with regard to
negotiating an integration agreement.
2. The intervenor must file its answering affidavit to the main application
within 10 business days of this order and the respondent must file its
reply within 10 business days of that.
3. The respondent (DHS) is to pay the intervenor’s costs of the
intervention application, which include the costs occasioned by the
employment of two legal representatives.
Application to stay
In April 2002 DHS filed a complaint with the Competition Commission alleging
that Healthbridge’s exclusive arrangements with Discovery and Medscheme
constitute restrictive practices because it was being denied so called ‘back end
access’.
On the 19 th September 2002, which is a month after Healthbridge had filed its
application for intervention in the main application, 10 DHS filed an application to
stay the hearing of the main application pending the Tribunal’s adjudication of the
complaint referral, on the basis that the main application and the complaint dealt
with essentially the same subject matter and the main application could not be
adjudicated upon without the complaint being disposed of. 11
Both the Commission and Healthbridge duly opposed this stay application. Both
filed answering affidavits to which DHS replied.
The stay application was set down for hearing at the same time as the
intervention application was heard.
At the hearing we were advised by counsel for DHS that they were applying to
have the stay application postponed on the basis that if the intervention was
allowed, the stay application was premature because issues may arise out of the
allowed, the stay application was premature because issues may arise out of the
intevenor's filings in the main application that could be relevant to the stay
10 Recall that the main application is the application brought by DHS to review the Commission ‘s
notice of apparent breach.
11 At the time of the hearing the complaint had not yet been referred to the
Tribunal nor has a notice of nonreferral been issued.
11
application in the sense that the further filings might clarify the differences
between the parties. According to DHS it had never intended to have the two
applications heard simultaneously and the registrar had arranged the setdown.
Both Healthbridge and the Commission opposed the postponement. DHS
informed us that if the postponement was not granted it would have no option but
to withdraw the stay application.
Healthbridge argued that the application for stay should be dismissed and not
postponed. Any prematurity in the stay application was of DHS ‘s own doing.
Counsel for DHS points out that, in the notice of motion in the stay, his client
Healthbridge is cited as a party conditional on the outcome of the intervention
application. The Commission however is cited as a respondent without any
qualification and would have been one irrespective of the outcome of the
intervention application. He argued that DHS necessarily contemplated the
intervention application, because the latter had preceded the stay application,
and further that it must have contemplated that the intervention application might
prove successful. There was no basis for DHS then to argue that there had been
some change in circumstances that had come as a surprise. As counsel
eloquently expressed it, if it was premature now, this was because it had been
brought prematurely and nothing since has happened to render premature that
which was not premature at the outset.
Counsel for DHS in reply conceded that the application might have been better
kept for launching at the moment when it was clear what the outcome was of the
application to intervene, but that this should not preclude us from granting them
the postponement.
In our view the contentions of Healthbridge are well founded and if the
application for stay was ill conceived on the basis of its prematurity then the
applicant must bear the consequences.
The application for the postponement is refused and given the applicant’s stance
to withdraw the application if the postponement is refused we award the wasted
costs occasioned by the application to stay, as well as the application to
postpone the stay, to Healthbridge, these costs to include the costs occasioned
by the employment of two legal representatives.
12
15 May 2003
N. Manoim Date
Concurring: D Lewis,U Bhoola
13