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[2014] ZACT 5
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Mediclinic Southern Africa (Pty) Ltd v Mediclinic Limpopo Ltd (018374) [2014] ZACT 5; [2014] 1 CPLR 109 (CT) (15 April 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 018374
In
the matter between:
MEDICLINIC
SOUTHERN AFRICA (PTY)
LTD
..................................................
Primary
Acquiring Firm
And
MEDICLINIC
LIMPOPO
LTD
.......................................................................................
Primary
Target Firm
Panel:
T Madima (Presiding Member)
:
I Valodia (Tribunal Member)
:
A Roskam (Tribunal Member)
Heard
on: 26 March 2014
Order
Issued on: 26 March 2014
Reasons
Issued on : 15 April 2014
Reasons
for Decision
Approval
[1]
On 26 March 2014, The Competition Tribunal
(“Tribunal”)
unconditionally
approved the acquisition by Mediclinic Southern Africa (Pty) Ltd of
an additional 1 % shareholding in Mediclinic
Limpopo Ltd.
[2]
The reasons for approving the proposed transaction follow hereunder.
Parties
to the transaction
[3]
The primary acquiring firm is Mediclinic South Africa
(“MCSA”),
a
wholly owned subsidiary of Mediclinic Investments Limited
(“Mediclinic
Investments”).
Mediclinic
Investments is controlled by Mediclinic International Limited
(“Mediclinic
International”),
a
company listed on the Johannesburg Securities Exchange and controlled
by several shareholders.
[4]
The primary target firm is Mediclinic Limpopo, a company controlled
de jure
jointly
by MCSA and individual shareholders. The individual shareholders all
hold less than 6% each. MCSA can appoint 5 out of the
10 directors on
the board of directors of Mediclinic Limpopo. Mediclinic (Pty) Ltd is
a subsidiary of MCSA and the exclusive manager
of Mediclinic Limpopo.
[5]
Mediclinic Limpopo wholly owns Mediclinic Limpopo Investments (Pty)
Ltd. Mediclinic Limpopo is operated through Limpopo Mediclinic
Trust
(“Limpopo
Trust”).
The
following shareholders are also Trustee’s:
•
Andre
Aemand Oosthuizen (appointed by MCSA)
•
Gerrit
Johann Geertsena (appointed by MCSA)
•
Michael
Bosman (appointed by the doctor shareholders)
Proposed
Transaction and Rationale
[6]
MCSA will acquire an additional share in Mediclinic Limpopo and
post-merger it will own 50% plus 1% shares. Alternatively the
Board
will issue a further share to MCSA and post-merger MCSA will exercise
de jure
sole
control over Mediclinic Limpopo.
[7]
According to the merging parties, the proposed merger arises from the
Competition Commission’s
(“Commission”)
price
fixing investigation in respect of certain hospitals controlled by
MCSA. Though Mediclinic Limpopo is not included in that
investigation. The merging parties want to remove any competition law
uncertainties going forward.
[8]
At the hearing, the merging parties were requested to clarify what
the rationale for the transaction was. MCSA explained that
the
Commission is investigating MCSA and some hospitals in which it holds
a minority shareholding but where it negotiates the tariffs
for those
hospitals. The Commission is concerned that a minority interest in a
hospital where MCSA determines the tariffs is a
problematic issue. To
alleviate the Commission’s concerns a pre-emptive measure is
being undertaken by MCSA to ensure that
it would increase the
shareholding to provide MCSA with an extra share so that it would
have
de jure
sole
control over this hospital.
Relevant
Market and Impact on Competition
[9]
The merging parties are both active in the market for the provision
of private hospital services which includes a variety of
general and
specialised medical services. MCSA controls numerous day hospitals
and multidisciplinary hospitals in South Africa.
MCSA operates from 3
platforms; Southern Africa, Switzerland and United Arab Emirates. In
South Africa MCSA operates 49 hospitals,
this is a total of 7,436
beds. Mediclinic Limpopo is a 203 bed private multidisciplinary
hospital, offering a range of general
and specialised healthcare
services.
[10]
The relevant market is that of provision for private hospital
services which include a variety of general and specialised medical
services.
1
[11]
The Commission found that Mediclinic Limpopo is servicing the larger
Limpopo and parts of eastern Botswana because the geographic
catchment area of Polokwane, as the economic hub of Limpopo, is much
larger than those of other cities. However, I agree with the
Commission that it does not affect the outcome of this transaction
whether we define the geographic market as local or regional
as the
transaction does not give rise to any change in market shares.
[12]
Competitors in the market for provision of private hospital services
that offer a variety of general and specialised medical
services are:
In
the national market:
•
Netcare
- 32%
•
Mediclinic
(target and acquiring group) - 25%
•
Life
Healthcare Group - 24%
•
National
Hospital Network - 12%
•
Other
Independents - 7%
In
the regional market:
•
Mediclinic
Tzaneen - 129 beds
•
St
Vincent Hospital - 83 beds
•
Zoutpansberg
Private Hospital - 22 beds
[13]
The proposed transaction will not result in increased tariffs. MCSA
currently owns 50% of the issued share capital of Mediclinic
Limpopo
and is the exclusive manager of Mediclinic Limpopo. Mediclinic
acquired Limpopo hospital on 1 July 1998, since then Mediclinic
has
openly negotiated tariffs on behalf of Limpopo Hospital. Mediclinic
therefore already determines Limpopo Hospital tariffs.
[14]
There are no horizontal or vertical overlaps in the activities of the
merging parties because MCSA already owns shares in the
target.
[15]
Countervailing power exists in the form of administrators who
negotiate tariffs and health care service providers. Administrators
handle the day-to-day services and are employed by Schemes. The
administrator negotiates annual tariff increases collectively on
behalf of all the schemes that it represents.
Smaller
schemes benefit from the countervailing power resulting from the
collective negotiations. This is regarded as a powerful
countervailing tool ir the market.
Conclusion
[16]
In light of the above I conclude that the proposed transaction is
unlikely tc substantially prevent or lessen competition in
the market
for private hospita services which include a variety of general and
specialised medical services In addition, no public
interest issues
arise from the proposed transaction Accordingly I approve the
proposed transaction unconditionally.
15
April 2014
DATE
Takalani
Madima
Anton
Roskam and Imraan Valodia concurring
Tribunal
Researcher: Moleboheng Moleko
For
the merging parties: Susan Meyer - Cliffe Dekker Hofmeyr
For
the Commission: Hardin Ratshisusu
1
Afrox
Healthcare Limited and Amalgamated Hospitals Limited case no:
53/LM/Sep01