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[2016] ZACT 70
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Afrocentric Health Limited v Discovery Health Medical Scheme and Others; In re: Afrocentric Healthcare Limited v Discovery Health Medical Scheme and Another (CP003Apr15/Joi120Sep15) [2016] ZACT 70; [2016] 2 CPLR 888 (CT) (15 August 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: CP003Apr15/Joi
1
20Sep15
In
the interlocutory matter between:
Afrocentric
Health
Limited
Applicant
and
Discovery
Health Medical
Scheme
1
st
Respondent
Discovery
Health
Limited
2
nd
Respondent
Retail
Medical
Scheme
3
rd
Respondent
Quantum
Medical Aid
Society
4
th
Respondent
LA
Health Medical
Scheme
5
th
Respondent
Lonmin
Medical
Scheme
6
th
Respondent
Naspers
Medical Fund
7
th
Respondent
University
of Kwazulu Natal Medical
Scheme
8
th
Respondent
Remedi
Medical
Aid
Scheme
9
th
Respondent
Anglo
Medical
Scheme
10
th
Respondent
BMW
Employees Medical Aid
Society
11
th
Respondent
Malcor
Medical
Scheme
12
th
Respondent
University
of the Witwatersrand
Johannesburg
13
th
Respondent
Staff
Medical Aid Fund
Anglovaal
Group Medical
Scheme
14
th
Respondent
Tsogo
Sun Group Medical
Scheme
15
th
Respondent
TFG
Medical
Aid Scheme
16
th
Respondent
Bankmed
Medical
Scheme
17
th
Respondent
In
re
the Complaint referral between
Afrocentric
Healthcare
Limited
Applicant
and
Discovery
Health Medical Scheme
1
st
Respondent
Discovery
Health
(Pty)
Ltd
2
nd
Respondent
Panel
: Yasmin Carrim (Presiding Member)
: Anton Roskam (Tribunal
Member)
: Fiona Tregenna
(Tribunal Member)
Heard
on
: 18 April 2016
Order
Issued on
: 15 August 2016
Reasons
Issued on
: 15 August
2016
Reasons
for Decision
INTRODUCTION
[1]
This matter concerns an application brought in terms of rule 45 of
the Competition Tribunal's Rules ("CTR") for the
joinder of
fifteen medical schemes.
[2]
The
applicant,
Afrocentric
Health
Ltd
("Afrocentric"),
seeks
to
join
the
3rd
to 17th
respondents to a complaint referred by it
to the
Competition Tribunal ("the Tribunal") in terms
of
section
51(1)
of
the
Competition
Act
("the
Act").
[1]
The
section
51(1) referral
was
made after
the
Competition
Commission
("the Commission")
had
non-referred
a complaint
l
odged
by
Afrocentric
to
it under
section
498(2).
[3]
Afrocentric
is a
medical aid administrator.
Discovery
Health
Medical Scheme ("OHMS"), the first respondent,
is an open
medical scheme.
Discovery
Health Limited
("DH"),
the 2nd
respondent,
is an
administrator
of
medical
schemes and provides administration
services to
all the
other
respondents.
The 3rd to
17th respondents
are all
closed
medical
schemes
currently
being or
soon to be
administered
by DH.
[2]
Closed
medical
schemes
are
typically
restricted
to
the
employees
of a
particular
employer or
the
members
of a particular profession,
trade,
industry
or
calling.
Open
medical
schemes,
on
the
other hand,
are open to any member of the
public.
[3]
[4]
We have decided to dismiss the application for the joinder and our
reasons follow.
BACKG
ROUN D
[5]
On 30 June 2014 Afrocentric submitted a complaint against OHMS and DH
to the Commission in terms of section 498(2) of the Act.
[6]
On
the CC1
form
of
the
complaint
(which
we
also refer
to as
"the
s49B
complaint") Afrocentric
alleged
that
DH
and
OHMS
contravened
section 4
of the Act
by engaging
in a
"prohibited
horizontal
practice
ito
section
4(1)(b)(i),
(ii)
and/or
(iii)
alternatively
collective
bargaining
ito
section 4(1)(a)" .
The
prohibited collective
bargaining
complaint
apparently
emanates
from the complainant's
understanding
of
an
earlier
decision of
the
Tribunal,
which involved
the
confirmation
of
a
consent
order
between
the
Commission
and the
Board of
Healthcare
Funders of
Southern
Africa
("BHF").
In that
matter BHF
had
admitted
to
contravening
s
4(1)(b)(i)
by directly
or
indirectly
fixing
prices, in
that
the
association
had recommended and published
tariffs
to and/or
for
its
members.
[4]
[7]
While
the
CC1
form
cited
only DH
and OHMS,
in
the
supporting
affidavit attached
to
it,
deposed
to
by
Mr
Dewald
Dempers,
[5]
("the
s49B
affidavit")
it
was
alleged
that
DH
and
OHMS,
together
with
"14
other
medical
schemes
administered
by
DH",
were
engaged
in
prohibited conduct which was
in
contravention of
s4(1)(b),
alternatively
engaged
in
collective
bargaining
in contravention
of s4(1
)(a).
[6]
[8]
In
paragraph 46 of the
s49B
affidavit
and
later in an
unnumbered
table found
on
page
26
of
that
document
we
find
a
reference
to
certain
named
medical
schemes. It
bears
mention
at
this
juncture
that
of
the
fifteen
respondents Afrocentric
now seeks
to join
in this
application
the
following
schemes
were not
mentioned
on this
list:
the
1oth
respondent
Anglo
Medical
Scheme, the
12th
respondent
Malcor
Medical
Scheme
and the
15th
respondent
Bankmed
Medical
Scheme
("Bankmed").
Notably
Altron
Medical Aid
Scheme
("Altron")
which was
listed in
para 46
has
not been cited as a respondent
in this
joinder application.
[7]
Bankmed
had
recently,
in
2016,
awarded
a
tender
to
DH
for
administration which
explains
why
it
was
not
originally
referenced
in the s49B
complaint
and
later
in the
self-referral
to
the
Tribunal.
[8]
No
explanation
however was
provided
by
Afrocentric
as to the
whether
Altron was
still
administered
by DH and
the
positon
of the
1
oth
and 12th respondents.
[9]
On 12 March
2015 the Commission notified Afrocentric
that
it had
decided
not
to
refer
the
complaint
to the Tribunal.
[9]
[10]
In its letter to Afrocentric, the Commission stated that it had
investigated the complaint and based on the available information
at
the time decided not to refer the matter to the Competition Tribunal
for two reasons, namely -
10.1.
DH does not operate in the "same line of business" as the
fourteen medical schemes
which it administers. The Commission
concluded that since DH engages in different economic activities from
the medical schemes
which it administers, the allegations that it
engages in collusive conduct with medical schemes fails to
substantiate a contravention
of s4(1)(a) and 4(1)(b) of the Act.
10.2.
Further that the outsourcing arrangements between medical schemes and
medical scheme
administrators form part of the Commission's market
inquiry into the private healthcare sector currently underway. The
Commission
noted that the complainant has also made submissions to
this inquiry.
[11]
From this
letter we
see
that
the
Commission
had
included
fourteen
medical
schemes within
the scope
of
their
investigation.
While it
does not
name them,
[10]
the
Commission
had
communicated
to
the
complainant
that
it
considered the
medical
schemes
to
be in a
separate
market from
the
medical
scheme
administrators
and
that it
did
not
consider
the
complaint
as articulated,
sufficient
to
sustain
a
contravention
of
s4
presumably
because DH
and the
medical
schemes
it
administered
were
not
in a
horizontal
relationship.
Having
received
the
notice
of
non-referral,
and
notwithstanding
the
fact
that
it
had
been
alerted
to
an
apparent
deficiency
in its case
by the
Commission, Afrocentric
elected to
refer the complaint to the Tribunal in
terms of
s51(1) ("the self-referral").
[11]
[12]
The self-referral cited only OHMS and DH as respondents and relief in
the form of an administrative penalty was only sought
against these
two respondents.
[13]
Both DH and
OHMS opposed the self-referral and in
their
answering affidavits raised
two
preliminary
objections;
namely,
material
non-joinder
and that
the
referral did
not
disclose
a
cause of action ("the exception").
[12]
[14]
Afrocentric
subsequently
[13]
launched
this
application to
join the
fifteen
medical schemes
being
administered
by
DH,
including
Bankmed
("the
proposed
respondents').
It
sought to
join the
proposed respondents in
terms of
CTR 45
and
on
the basis
of material
interest
and
convenience.
[15]
In support of its application, Afrocentric argued that because it was
alleging conduct on the part of the 2nd to 13th and 15th
respondents
to be in contravention of s4, its relief against each of them would
depend on the determination of the same questions
of law and fact.
For this reason, it argued that it was convenient to join them now
instead of require Afrocentric to engage in
separate actions against
each of them. In relation to Bankmed it was accepted by Afrocentric
that they had not been administered
by DH at the time of the s49B
complaint. However, given that the legality of their prospective
arrangements with DH was being challenged
on the same questions of
law or fact by Afrocentric, it submitted that Bankmed should be
joined. Afrocentric also argued that in
any event Bankmed had a
material interest, as did all the schemes administered by DH, in the
outcome of these proceedings because
the legality of their
arrangements with DH were being challenged.
[16]
While there were slight differences in nuance and emphasis in the
cases put forward by the proposed respondents, in essence
they
opposed the application on two main grounds. The first basis of
opposition was that Afrocentric was not entitled to join the
proposed
respondents, as this would offend the "referral rule"
established by the courts. The second was that no substantive
basis
for joinder had been established because the referral did not
disclose a cause of action.
The
referral rule
[17]
In relation to the first ground the proposed respondents argued as
follows. The s49B complaint had only been initiated against
DH and
OHMS. It had not been initiated by Afrocentric against the proposed
respondents, as required by the prevailing jurisprudence.
It was not
competent in law for Afrocentric to expand the s49B complaint through
joinder at the referral stage or for the Tribunal
to consider such an
expanded complaint at referral stage if the expanded complaint had
not first been lodged with the Commission
under s49B.
[18]
Furthermore
in the
s49B
complaint
Afrocentric
alleged
that
open and
closed
medical
schemes do not compete for members
[14]
,
but in the
self-referral
it was
now
seeking to
redefine
the market
to suggest
that all
medical
schemes
competed
in
the broad
medical
schemes
market.
[15]
In
other
words,
the
argument
went,
if
Afrocentric
now desires
to expand
the
complaint
(and seek
relief)
against
the
proposed
respondents
it
ought
to
first
lodge
a
new
expanded
complaint
with
the
Commission
(i.e.
a
new
s49B
complaint).
The
proposed
respondents
relied
on
Glaxo
and
Woodlands
[16]
in
support
of
this
argument.
No
cause of action
[19]
In
relation
to
the
second
ground
of
opposition,
the
proposed
respondents argued
that
because
the
self-referral
did not
disclose
a
cause
of
action
to
substantiate
a
contravention
of s4, no
substantive
basis had
been established for joinder
and the
application
ought to
be
dismissed.
[17]
[20]
In relation to the former ground, Afrocentric argued that
although the complaint lodged with the
Commission (and subsequently the self-referral)did n ot seek
relief against the proposed respondents, the content of the
supporting affidavit in the s498 complaint did expressly refer to the
conduct of the proposed respondents which amounted to a contravention
of s4(1)(a) or (b). This was contained, for example, in paragraph 10
of the s498 complaint, where it was alleged that DH and OHMS
"
.
..in
conjunction
with
14
other medical schemes administered by
Discovery Health".
In their joinder
application, Afrocentric urged the Tribunal not to adopt an over
formalistic approach to the fact they were not
cited as respondents
in the CC1 form s498 complaint because their
conduct
had
been complained of in the supporting affidavit. Joinder at referral
stage was therefore competent and in accordance with the
principles
established in
Glaxo.
[21]
Afrocentric submitted that its self-referral did disclose a cause of
action and that in any event this objection should be
raised in the
course of the self referral itself (i.e. in the main matter) and
that it was not a basis for an opposition to
the joinder issue.
[22]
Afrocentric argued further as follows: The test for joinder, is a
question of whether, in terms of CTR45(1 ), the relief sought
by
Afrocentric against the proposed respondents would depend on the
determination of the same questions of law or fact. The test
under
common law is whether material interest or convenience and not
whether the referral was excipiable. All the proposed respondents
had
a material interest in the outcome of these proceedings because the
legality of their agreement with DH was being challenged
and it would
be convenient to join them at this point of the proceedings.
ASSESSMENT
[23]
The relevant provision of CTR 45 provides the following:
"(1)
The Tribunal, or the assigned member,
as
the
case
may be, may combine any number of persons,
whether
jointly, jointly
and severally, separately, or
in the alternative,
as
parties in the
same
proceedings, if
their respective rights to
relief depend on
the determination of
substantially the
same question of
law
or facts.
…
........
4)
An application
to join
any person
as
a
party
to proceedings,
or to be substituted
for
an
existing party,
must
be
accompanied
by
copies
of
all
documents previously delivered, unless
the
person concerned
or
that
person's representative
is
already
in
possession
of
those
documents.
(5)
N
o
joinder or substitution
in terms of
this rule will affect any prior
steps
taken in
the proceedings."
[24]
From CTR 45(1) it is evident that the Tribunal
may
combine
any number of persons as parties in the same proceedings if their
respective rights to relief depend on the determination
of
substantially the same question of law or facts. As indicated by the
use of the word "may'', rather than the peremptory
"must'',
the power to combine any number of persons in the same proceeding is
discretionary.
[25]
This
rule
is
analogous
to Uniform
Rule
10.1
and 10.3
of
the High
Court.
[18]
Uniform
rule
10.1
applies
to
the
joinder of
plaintiffs
and
10.3
to
joinder of
defendants.
In terms of
Uniform
rule 10.3 any number of respondents
may be sued
in
one
action
either
jointly,
jointly and
severally,
separately
or
in
the
alternative,
whenever
the
question
arising
between
them
or
any of them
and the
plaintiff
or
any
of the
plaintiffs
depends
upon the
determination
of
substantially
the same
question of
law or fact
which,
if
such defendants were sued separately,
would
arise
in each
separate
action.
Until the
promulgation
of
Uniform
rule
10, it was
not
possible
under
the
common
law for
a
plaintiff,
with
separate
causes of
action
against
two
or
more
defendants,
to
sue them in
one
summons.
Uniform
rule
10
altered the common
law by
permitting such joinder
provided
that the
right to
relief or
the
question
arising
depends
on
the determination
of
substantially
the
same
question
of
law or fact
However,
the common
law rules
relating to obligatory joinder
remain
unaltered;
namely that
anyone with
a direct
and
substantial
interest
in a matter
must be joined.
[19]
[26]
Leaving aside the issue of the referral rule debate, it cannot be
disputed that all the proposed respondents would have a substantial
interest in the outcome of this matter. All of them are medical
schemes who have engaged or are in the process of engaging DH as
their administrative agent to
inter
alia
negotiate
tariffs with health service providers, attend to claims submitted by
members and to ensure compliance with regulatory
and financial
imperatives of the medical scheme itself. The fact that the legality
of these arrangements is being challenged by
Afrocentric would
suggest that they have a direct and substantial interest in the
outcome of these proceedings.
[27]
However
whether
or
not
joinder of
the
proposed
respondents
ought
to
be
permitted
at
this
point
in
these
proceedings
is a matter
of our discretion. That discretion
is
conferred
upon us not
only in terms of CTR 45(1
), but also
in the provisions
of
s55 read
with
CTR
55,
which
confer
on
the
Tribunal a
wide
discretion to conduct and manage its
proceedings,
such discretion
to be
exercised
on a
case
by case
basis.
[20]
[28]
Recall
that in
the
answers
to
the
self-referral,
both
DH
and OHMS
have
alleged
that
the
referral
discloses
no
cause
of
action
for
a
s4
contravention
because
DH
and
OHMS
are
not
parties
in a
horizontal
relationship.
[21]
They argue
that
DH
competes
with other
medical
scheme
administrators
and OHMS
with
other
open
medical
schemes.
They
allege
further
that
there
can be
no
co-ordinated
conduct
between
restricted
medical
schemes
and
open
medical schemes
because, on
Afrocentric's
own version
as stated
in para 8.4
of
the
self-referral
affidavit,
they
do
not
compete
with
each
other
and
are
therefore
not in a
horizontal
relationship
as
contemplated
in s4.
[29]
In their submissions at the joinder hearing on 20 April 2016, the
proposed respondents relied on the same argument as a basis
for
opposing the joinder.
[30]
While we agree with Afrocentric that the test for joinder is not
whether or not the referral discloses a cause of action and
that is a
matter that ought to be raised and decided in the main matter, we
cannot ignore the fact that the issue has already been
raised by the
1
st
and 2
nd
respondents in their answering
affidavits to the Afrocentric's founding affidavit in the
self-referral and that the proposed respondents
rely upon the same
grounds as a basis for opposing the joinder.
[31]
Given that all the respondents have raised this challenge - the 1st
and 2nd respondents as an exception in the referral and
the proposed
respondents in this joinder application - it would be in the
interests of justice that the exception be determined
before putting
the proposed respondents to the cost and effort of mounting a defence
to a case that is alleged to be unclear. If
the exception is upheld,
then one of two possibilities will result. The first possibility is
that the referral is dismissed. This
would render the joinder
unnecessary. The second is that it will lead to a better articulation
or understanding of the case, which
might prevent protracted
proceedings and which might go a long way in enabling the proposed
respondents to assess their position
in relation thereto. In
fairness, the fifteen proposed respondents, which are all non-profit
medical schemes acting on behalf of
consumers, are entitled to
clarity and coherence in the case that they are being asked to join.
[32]
In light of the above we are of the view that joinder, at this point
of the proceedings prior to the determination of the exception,
would
be unfair and would put the proposed respondents to the unnecessary
cost of preparing for a case that is already being challenged
at a
substantive level. For this reason we are of the view that the
joinder application should be dismissed at this stage.
[33]
It does not follow that any of the proposed respondents cannot
participate in the referral should they so desire. In terms
of s53(1
)(a)(iv) the Tribunal is entitled to permit any person who has a
material interest to participate in a hearing provided
the interests
of that person are not adequately represented by another participant.
[34]
At
the
same
time,
proceedings
which
seek
to
challenge
the
legality
of
the
arrangements
of medical
schemes
that
act on
behalf of their
members,
could pose
a significant risk
to
consumers, who
are their
beneficiaries, and therefore ought
not
to
be
protracted.
It
is
imperative
therefore
that
the
exception
be
determined
expeditiously.
The
1st
and
2nd
respondents
have
already
indicated their
desire to
approach
this
Tribunal for
a hearing
in that
regard.
[22]
[35]
Accordingly, we make the following order.
Order
[36]
The joinder application in respect of the proposed respondents is
dismissed.
[37]
The following directive is made-
37.1.
The parties must approach the Registrar within 10 days hereof to set
down the hearing of the exception application.
[38]
There is no order as to costs.
15
August 2016
DATE
_________________________
p
Ms
Yasmin Carrim
Mr
Anton Roskam and Prof Fiona Tregenna concurring
Tribunal
Researcher:
Aneesa Raval
For
the applicant:
Adv. Subel and adv Landman instructed by Rooth & Wessels
Attorneys
For
the respondents:
Adv Wim Trengrove and Adv Shana instructed by ENS for the 3rd to 17th
respondents and Adv Engelbrecht instructed by Bowman Gilfillan
for
the 14th respondent
[1]
The Competition Act,
1998 (Act
89 of l998).
[2]
The
17th
respondent is in the process
of
moving to DH for administration
services.
[3]
All medical
schemes
(open and
closed)
are
non-profit
organisations,
controlled
and
managed by an
independent
boards of trustees.
[4]
Case no. 07/CRJFeb05.
[5]
CEO of Afrocentric
at the
time.
[6]
Para
10
Complaint
to the
Commission
30 June
2014
[7]
Para 46
also lists
Afrox Medical
Aid
society,
PG Bison Medical
Aid
society,
Nampak
SA
Medical
Scheme,
Edcon
Medical
Aid
Scheme
and IBM
(SA) Medical Aid
Scheme
which
it
lists and submits that these
schemes
have been
amalgamated
into
DHMS.
[8]
Para
17
of the respondent's
answering
affidavit
to the
joinder application.
[9]
See letter
dated
11 March
2015.
[10]
Para
17
of the respondent's
answering
affidavit
to
the
joinder
application.
[11]
On 10
April
2015.
[12]
See paras 3-10 of DH's Answering Affidavit and paras 15.1-15.11 of
DHMS's Answering Affidavit
[13]
On 26 August
2015
[14]
See
para
25 of Afrocentrics's s49B affidavit.
[15]
See
para
6 of the Afrocentric's self-referral affidavit
[16]
Glaxo Wellcome v National
Association
of
Pharmaceutical
Wholesalers
[2002] zacac
3 (21
October
2002) and
Woodlands
Dairy v
Competition
Commission
2010
(6)
SA
108 (SCA)
[17]
The respondents pointed to several aspects of the
self-referral
in
support of this
contention
[18]
See Harms B-10.1
[19]
See Harms B-102
[20]
See paras
24-30
of
Competition
Commission
of
South Africa v Federal
Mogul
Aftermarket
Southern
Africa
(Ply)
Ltd
and
Others
(Case
No.
08/CR/Feb01)
and paras
13-14 of
Cancun
Trading and
others
v Seven-Eleven Corporation SA
(Pty}
Ltd
(Case
No.
18/IR/Dec99).
[21]
See paras
3 and
13 of the
Discovery Health AA and paras
9.
I I
of the
DHMS
AA
[22]
See letter dated 7 August
and email
dated 7 August
2016 from
DHMS
and
DH respectively.