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[2015] ZACT 23
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Competition Commission v Mediclinic Southern Africa (Proprietary) Limited and Others (020743) [2015] ZACT 23 (18 March 2015)
COMPETITION
TRIBUNAL
REPUBLIC OF SOUTH
AFRICA
Case No: 020743
In the matter
between:
The Competition
Commission
.......................................................................................
Applicant
And
Mediclinic Southern
Africa (Proprietary) Limited
Victoria Hospital
(Proprietary) Limited
Newcastle Private
Hospital (Proprietary) Limited
Mediclinic Tzaneen
(Proprietary) Limited
Howick Private
Hospital Holdings (Proprietary) Limited
Mediclinic Upington
(Proprietary) Limited
Mediclinic
Hermanus (Proprietary)
Limited
................................................................
Respondents
Panel: A Roskam
(Presiding Member)
I Valodia (Tribunal
Member)
F Tregenna (Tribunal
Member)
Heard on: 18 March
2015
Decided on: 18 March
2015
Order
The Tribunal hereby
confirms the consent agreement as agreed to and proposed by the
Competition Commission and Mediclinic Southern
Africa (Proprietary)
Ltd; Victoria Hospital (Proprietary) Ltd; Newcastle Private Hospital
(Proprietary) Ltd; Mediclinic Tzaneen
(Proprietary) Ltd; Howick
Private Hospital Holdings (Proprietary) Ltd; Mediclinic Upington
(Proprietary) Ltd; Mediclinic Hermanus
(Proprietary) Ltd , annexed
hereto marked “A”.
18
March 2015
Date
Presiding
Member
Mr. A Roskam
Concurring: Prof.
I Valodia and Prof. F Tregenna
IN THE
COMPETITION TRIBUNAL OF SOUTH AFRICA
HELD IN PRETORIA
CC
Case No: 2010Oct5392/2012Feb5781/2013Feb0083
In the matter
between:
The Competition
Commission
.......................................................................................
Applicant
and
Mediclinic
Southern Africa Proprietary
Limited
................................................
1
st
Respondent
Victoria Hospital
Proprietary
Limited
.................................................................
2
nd
Respondent
Newcastle Private
Hospital Proprietary
Limited
................................................
3
rd
Respondent
Mediclmic Tzaneen
Proprietary
Limited
.............................................................
4
th
Respondent
Howlck
Private Hospital Holdings Proprietary
Limited
.....................................
5
th
Respondent
Mediclinic
Upington Proprietary
Limited
............................................................
6
th
Respondent
Mediclinic
Hermanus Proprietary
Limited
...........................................................
7
th
Respondent
CONSENT AGREEMENT
IN TERMS OF SECTION 490, READ WITH SECTION 58(1 }(b) OF THE
COMPETITION ACT, NO. 89 OF 1998
AS AMENDED, BETWEEN THE COMPETITTION
COMMISSION, MEDICLINIC SOUTHERN AFRICA PROPRIETARY LIMITED AND THE
MANAGED HOSPITALS, IN REGARD
TO ALLEGED CONTRAVENTIONS OF
SECTION 4(1
)(b) OF THE
COMPETITION ACT
PREAMBLE
The Commission and
Mediclinic together with the Managed Hospitals hereby agree that
application be made to the Tribunal for the
confirmation of this
Consent Agreement as an order of the Tribunal in terms of
section 49D
read with
section 58(1
}{b) of the Act, on the terms set out below.
1 Definitions
1.1
"Act”
means
the
Competition Act
89
of
1998
,
as
amended;
1.2
"Commission"
means
the Competition Commission, a statutory body established in terms of
section 19
of the Act, with its principal place of business at 1
st
Floor, Mulayo Building (Block
C),
the
DTI Campus, 77 Meintjies Street, Sunnyside, Pretoria;
1.3
"Confirmation
Date"
means
the date upon which the Tribunal confirms this Consent Agreement as a
consent order in terms of
section 49D
, read with
section 58(1
)(b) of
the Act;
1.4
"Consent
Agreement"
means
the agreement as set out herein, reached between the parties hereto,
that will be referred to the Tribun a Í for confirmation;
1.5 "Hermanus”
means Medidinic Hermanus Proprietary Limited (registration number
1995/008998/07), with its principal
place of business at Hospital
Street, Hermanus;
1.6
“
Howick”
means
Howjck Private Hospital Holdings Proprietary Limited (registration
number 2002/013282/07), with its principal place of business
at 107
Main Street, Howick;
1.7
“
Managed
Hospitals”
means collectively Victoria, Newcastle, Tzaneen, Howick, Upington and
Hermanus;
1.8 "Mediclinic"
means Mediclinic Southern Africa Proprietary Limited (registration
number 2008/004849/07), with its principal
place of business at
Strand Road, Stellenbosch, 7600;
1.9 ’’Newcastle"
means Newcastle Private Hospital Proprietary Limited (registration
number 1995/011368/07), with
its principal place of business at
corner Hospital and Bird Street, Newcastle;
1.10 "Respondents'’
means Mediclinic and the Managed Hospitals;
1.11
‘Tribunal" means the Competition Tribunal, a statutory
body established in terms of
section 26
of the Act, with its
principal place of business at
Z
rá
Floor,
Mulayo Building (Block C), the DTI Campus, 77 Meintjies Street,
Sunnyside, Pretoria;
1.12 "Tzaneen”
means Mediclinic Tzaneen Proprietary Limited (registration number
2001/021422/07), with its principal
place of business at Wolkberg
Avenue R71, Tzaneen;
1.13 'Upington”
means Mediclinic Upington Proprietary Limited (registration number
1996/001943/07), with its principal place
of business at corner 4th
Avenue and Du Toit Street, Upington;
1.14 ’Victoria"
means Victoria Hospital Proprietary Limited (registration number
1984/003424/07), with Its principal
place of business at 35 High
Street, Tongaat;
1.15 "Victoria
Merger” means the Commission’s unconditional approval of
Mediclimc’s acquisition of control
of Victoria dated 17 October
2003 under Commission case number 20030ct668;
1.16 "WDGMC”
means Wits University Donald Gordon Medical Centre Proprietary
Limited (registration number 1998/004532/07),
with its principal
place of business at 21 Eton Road, Parktown, Johannesburg; and
1.17
"Wits
University"
means
the University of the Witwatersrand, Johannesburg.
2 Background
2.1 Mediclinic is
primarily involved in the financial and operational management of
private hospitals- Mediclinic currently operates
and manages 49
(forty nine) private hospitals throughout South Africa, which it
either wholly owns, owns as to a majority share
or owns as to a
minority share.
2.2 Currently,
Mediclinic's direct or indirect shareholding In the Managed Hospitals
is as follows;
2.2.1 Hermanus -
34.9% (thirty four point nine percent);
2.2.2 Howick - 49.1%
(forty nine point one percent);
2.2.3 Newcastle -
15.1% (fifteen point one percent);
2.2.4 Tzaneen -
49,4% (forty nine point four percent);
2.2.5 Upington -
40.8% (forty point eight percent); and
2.2.6 Victoria -
33.7% (thirty three point seven percent).
2.3 in the case of
each of the Managed Hospitals, the remaining shareholding is widely
dispersed amongst individual shareholders*
none of whom are
individually able to exercise control over the hospital, as meant by
section 12(2)
of the Act,
2.4 Mediclinic
commenced negotiating and determining tariffs on behalf of each of
the Managed Hospitals after entering into management
agreements,
coupled with its shareholding interests (which the Respondents
contend is a form of control over the Managed Hospitals
as meant by
section 12(2)
of the Act). Specifically:
2.4.1 Mediclinic
acquired its shareholding and entered info management agreements in
respect of Hermanus, Upfngton and Newcastle
on 1 July 1998. This did
not require merger notification because it pre-dated the Act, There
was no retrospective obligation to
obtain merger approval.
2.4.2 Tzaneen and
Howick were new “greenfield” developments, started by
Mediclinic and the other shareholders, which
similarly did not
attract any obligation to be notified as mergers under the Act.
2.4.3
The Victoria Merger was unconditionally approved by the Commission (a
copy of the merger clearance certificate is attached
as
Annexure
1)
after disclosure that, upon implementation, Mediclinic would be
negotiating tariffs with healthcare funders on behalf of Victoria,
The Commission did not regard Mediclinic’s acquisition of
control of Victoria as giving rise to substantially negative
competition
or public interest consequences. According to Mediclinic
the Commission’s unconditional approval of the Victoria Merger
gave
rise to an assumption by Mediclinic that the same conduct in
respect of all the Managed Hospitals was lawful
2.5 Mediclinic
negotiated tariffs on behalf of the Managed Hospitals since its
acquisition of its shareholding and conclusion of
management
agreements in respect of the Managed Hospitals, referred to in
paragraph 2.4 above. It has done so openly and with full
knowledge of
other industry players,
2.6 Since entering
into the aforementioned management agreements, Mediclinic has
regarded the Managed Hospitals as being fuliy operationally
and
financially integrated with it For example, in ail merger
notifications submitted to the Commission by Mediclinic, it included
the number of beds at all hospitals within its group, including the
Managed Hospitals in its market share calculations. The Commission
assessed Mediclinic's market share on this basis.
2.7 According to the
Respondents, the Respondents do not regard each other as competitors.
2.8
The Respondents contend that they were
bona
fide
in
their intentions and actions,
3 Complaint
Investigation and findings
3.1 On 11 October
2010 the Commission received a complaint from Mr Otto Wypkema, Chief
Executive Officer of the National Hospital
Network, alleging that
Mediclinic was engaging in price fixing with Victoria and Newcastle
because Mediclinic determines the tariffs
applicable in respect of
these two hospitals. On 10 February 2012 the Commission initiated its
own investigation against Mediclinic,
Victoria and Newcastle. On 26
February 2013 the Commission initiated a new price fixing
investigation against Mediclinic and its
respective relationship with
Howick, Tzaneen, Hermanus and Upington, again on the basis that
Mediclinic negotiates and determines
tariffs on behalf of each of
these hospitals.
3.2
The Commission conducted an investigation and formed the view that,
despite Mediclinic and each of the Managed Hospitals being
in a
bona
fide
commercial
relationship in view of Medicllnic's shareholding in and management
agreements with each of the Managed Hospitals* the
parties were in a
horizontal relationship because they did not, in the Commission's
view, constitute a company and its wholly owned
subsidiary or
constituent firms within a single economic entity as provided for in
section 4(5)
of the Act.
3.3 Accordingly, the
Commission views Medicllnic’s tariff determination on behaff of
the Managed Hospitals as a contravention
of
section 4(1)(b)(i)
of the
Act
4 Cessation of
conduct
4.1
As mentioned in paragraph 3,3, the Commission views the Respondents'
conduct as
a
contravention
of
section 4{1){b)(S)
of the Act. in response the Respondents have
agreed to take prompt steps to bring an end to the conduct as a
settlement undertaking,
without admitting to the alleged
contravention.
4.2 Mediclinic
intends to obtain control, as defined in
sections 12{2)(a)
t
(b) and (c), over the Managed Hospitals so as to constitute a company
and its wholly owned subsidiary or constituent firms within
a single
economic entity. In this regard:
4.2.1 Within 60
(sixty) business days of the Confirmation Date, Medidinic’s
acquisition of the aforementioned forms of control
In respect of the
Managed Hospitals will be notified to the Commission as separate
mergers in the prescribed manner and form.
4.2.2
In the event that Mediclinic is unable to obtain the control referred
to in paragraph 4,2 above over one or more Managed Hospitals,
or
should the competition authorities prohibit the acquisition of
control in respect of one or more Managed Hospitals, or approve
same
subject to conditions unacceptable to the parties concerned, and
Mediclinic has exhausted all appeal and review remedies
("Appeal
and Review Exhaustion Date"),
it
will cease negotiating tariffs on behalf of the Managed Hospitals)
concerned by a date no later than 24 (twenty four) months
after the
Appeal and Review Exhaustion Date, unless specifically authorised
thereto by the Commission pursuant to an exemption
application or
other authority granted by the Commission in terms of the Act, The
Respondents concerned will, within 80 (sixty)
days after the Appeal
and Review Exhaustion Date, provide the Commission with a written
plan setting out the steps that will be
taken to achieve the
aforementioned, and the Commission will be apprised by the
Respondents concerned of every step of this process.
4.3
WDGMC is a legitimate and
hona
fide
public
private partnership between Mediclinic and Wits University (a copy of
the Tribunals unconditional approval of the merger
between Mediclinic
and WDGMC is attached as Annexure 2). The Commission and Mediclinic
agree that Medtdinic's tariff determination
on behalf of WDGMC does
not amount to price fixing in terms of
section 4{1)(b)(i)
of the Act,
despite Mediclinic's shareholding in WDGMC amounting to 49.9% (forty
nine point nine percent).
5 Future conduct
5.1
Given the Commission’s view as recorded in paragraph 3.3 above,
Mediclinic undertakes that it will not
m
future
conduct tariff negotiations, or otherwise involve itself in tariff
determination, on behalf of firms that are not its wholly
owned
subsidiary or constituent firms In a single economic entity with
Mediclinic. This undertaking expressly excludes
bona
fide,
legitimate
joint ventures and public private partnerships or conduct which are
otherwise authorised in terms of the Act. The Commission
recognises
that forbidding
bona
fide,
legitimate
joint ventures and public private partnerships between competitors
could result in the loss of significant technological,
efficiency,
pro-competitive and/or public interest gains where the arrangements
do not contravene
section 4{1}{b)(i)
of the Act.
5.2 Mediclinic has
in place a regularly updated competition law compliance guideline,
applicable in all the jurisdictions in which
Mediclinic operates,
including South Africa. Employees of Mediclinic, including the
members of its funder relations and contracting
department, are
trained by external lawyers on compliance with the Act.
5.3 Subject to the
remaining provisions of this paragraph 5.3, Mediclinic and the other
Respondents confirm that they will continue
with these existing
compliance efforts, independent of the steps proposed for the
cessation of the alleged conduct referred to
In paragraph 4. In this
regard the Respondents shall provide" the Commission with its
competition law compliance training
programme for the next 12
(twelve) months, including the broad outline of the topics that would
form the subject matter of the
training and the categories of
employees that will be trained, within 60 (sixty) days of the
Confirmation Date,
5.4
Within
80 (sixty days) of the end of the aforementioned 12 (twelve) month
period, the Respondents shall provide the Commission with
a report
regarding the training given during that period, which report shall
include the broad outline of the topics that formed
the subject
matter of the training, and the names and designation of all
employees who attended the training and the dates of such
attendances.
6
No payment of administrative
penalty
The
Commission and the Respondents have agreed that the payment of an
administrative penalty will not be appropriate. This agreement
was
reached given,
inter
alia,
the
circumstances in which the Respondents conduct took place (as
outlined in paragraph 2 above), and the sanctioning of the Victoria
Merger by the Commission.
7 No admission of
liability
The Respondents do
not admit that they have contravened the Act and nothing in this
Consent Agreement amounts to an admission of
liability on their part,
8
Co-operation
The Respondents
cooperated fully with the Commission during the course of its
investigation. The Respondents have also entered into
a settlement
agreement with the Commission prior to it referring the complaints to
the Tribunai.
9 Full and final
settlement
This Consent
Agreement upon confirmation as an order by the Tribunal, is entered
into in full and final settlement and concludes
all proceedings
between the Commission and the Respondents relating to any alleged
contravention of the Act that is the subject
of the Commission's
investigation under Commission Case Numbers 2010Oct5392, 2012Feb5781
and 2013Feb0083.
For Mediclinic and
the Managed Hospitals:
Dated
and signed Stellenbosch
at on the
25
day
of November
2014
Mediclini Southern
Africa (Pty) Ltd
Abraham Jozua
Joubert (duly authorised)
Director
Dated
and signed at Stellenbosch on the 25
day
of
November
2014
Mediclinic Hermanus
Proprietary Limited
Edmund Marais van
Wyk (duly authorised)
Director
Dated and signed at
Stellenbosch on the 25
th
day of November 2014
Howick Private
Hospital Holdings (Pty) Ltd
Willem Frederik
Burger (duly authorised)
Director
Dated and signed at
Stellenbosch on the 27
th
day of November 2014
Newcastle Private
Hospital (Pty) Ltd
Willem Frederik
Burger (duly authorised)
Director
Dated and signed at
Stellenbosch on the 25
th
day of November 2014
Mediclinic Tzaneen
(Pty) Ltd
Gerrit Johann
Geertsema (duly authorised)
Director
Dated
and signed at Stellenbosch
on
the
25 day of November 2014
Mediclinic Upington
(Pty) Ltd
Andre Danie Viljoen
(duly authorised)
Director
Dated and signed at
Stellenbosch on the 25
th
day of November 2014
Victoria Hospital
(Pty) Ltd
Willem Frederik
Burger (duly authorised)
Director
Dated and signed
at Pretoria on the 3
rd
day of February 2015
For
Competition
Commission
Tembinkosi
Bonakele
Competition
Commissioner