COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM092Oct21
In the matter between:
Bonitas Medical Fund Primary Acquiring Firm
And
Nedgroup Medical Aid Scheme Primary Target Firm
Y Carrim (Presiding Member)
E Daniels (Tribunal Member)
Panel:
F Tregenna (Tribunal Member)
Heard on: 09 November 2021
Order Issued on: 09 November 2021
ORDER
Further to the recommendation of the Competition Commission in terms of section
14A(1)(b) of the Competition Act, 1998 (“the Act”) the Competition Tribunal orders that–
1. the merger between the abovementioned parties be approved in terms of section
16(2)(a) of the Act; and
2. a Merger Clearance Certificate be issued in terms of Competition Tribunal Rule
35(5)(a).
09 November 2021
Presiding Member
Ms Yasmin Carrim
Date
Concurring: Mr Enver Daniels and Prof. Fiona Tregenna
Date : 09 November 2021
To : GMI Attorneys
Case Number: LM092Oct21
Bonitas Medical Fund And Nedgroup Medical Aid Scheme
You applied to the Competition Commission on 04 October 2021
for merger approval in accordance with Chapter 3 of the
Competition Act.
Your merger was referred to the Competition Tribunal in terms of
section 14A of the Act, or was the subject of a Request for
consideration by the Tribunal in terms of section 16(1) of the Act.
After reviewing all relevant information, and the recommendation
or decision of the Competition Commission, the Competition
Tribunal approves the merger in terms of section 16(2) of the Act,
for the reasons set out in the Reasons for Decision.
This approval is subject to:
x no conditions.
the conditions listed on the attached sheet.
The Competition Tribunal has the authority in terms of section 16(3)
of the Competition Act to revoke this approval if
a) it was granted on the basis of incorrect information for which
a party to the merger was responsible.
b) the approval was obtained by deceit.
c)a firm concerned has breached an obligation attached to
this approval.
The Registrar, Competition Tribunal
Notice CT 10
About this Notice
This form is prescribed by the Minister of Trade and Industry in terms of section 27 (2) of the Competition Act 1998 (Act No. 89 of 1998).
Contacting
the Tribunal
The Competition Tribunal
Private Bag X24
Sunnyside
Pretoria 0132
Republic of South Africa
tel: 27 12 394 3300
fax: 27 12 394 0169
e-mail: ctsa@comptrib.co.za
Merger Clearance Certificate
This notice is issued in
terms of section 16 of
the Competition Act.
You may appeal
against this decision to
the Competition
Appeal Court within 20
business days.
1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM092Oct21
Bonitas Medical Fund (Primary Acquiring Firm)
and
Nedgroup Medical Aid Scheme (Primary Target Firm)
REASONS FOR DECISION
[1] On 9 November 2021, the Competition Tribunal unconditionally approved a large
merger between Bonitas Medical Fund (“Bonitas”) and Nedgroup Medical Aid Scheme
(“NMAS”).
[2] The transaction involves the amalgamation of Bonitas and NMAS in terms of which
NMAS will transfer its existing members, assets and liabilities, as a going concern, to
Bonitas. Following the implementation of the proposed transaction, NMAS will be
deregistered and cease to exist.
[3] Bonitas is a medical scheme duly registered in terms of section 24(1) of the Medical
Schemes Act, 1 (“the MSA”) and regulated by the Council for Medical Schemes
(“CMS”). Bonitas is not directly or indirectly controlled by any shareholder or firm and
does not control (directly or indirectly) any firm. In terms of the MSA, Bonitas is
managed by a board of trustees, elected directly from amongst its members.
[4] Bonitas is an open medical scheme offering 14 benefit options. 2 Other services that
Bonitas offers to its members include administration services, managed care services,
asset management, capitation arrangements, actuarial services, investment
consulting and auditing services through third party providers. Bonitas uses
Medscheme Holdings (Pty) Ltd (“Medscheme”) as its administrator for the medical
scheme administration services.
[5] NMAS is also a medical scheme registered in terms of the MSA and regulated by the
CMS. NMAS is not directly or indirectly controlled by any firm, and it does not control
any firm.
[6] NMAS operates as a restricted or closed medical scheme with membership restricted
to employees and retirees of Nedbank and Old Mutual Insure. NMAS provides five
1 Act No 131 of 1998.
2 (i) BonComprehensive, (ii) BonClassic, (iii) BonComplete, (iv) Standard, (v) Standard Select,
(vi) BonSave, (vii) Primary, (viii) Primary Select, (ix) Hospital Standard, (x) BonFit Select,
(xi) BonEssential, (xii) BonEssential Select, (xiii) BonCap and (xiv) BonStart.
2
benefit options.3 Pre-merger, it was compulsory for Nedbank and Old Mutual Insure
employees and retirees to join NMAS, unless they were already a member of their
spouse’s medical scheme. NMAS also provides administration services, managed
care services, asset management services, capitation arrangements, actuarial
services, investment consulting and auditing through third party providers. NMAS is
also administered by Medscheme as its administrator.
[7] The Competition Commission (“the Commission”) found horizontal overlaps in the
activities of the merging parties in that both Bonitas and NMAS are involved in the
provision of medical schemes in South Africa. The proposed transaction does not
result in any vertical overlaps as there is no pre-existing relationship between the
merging parties that could result in vertical concerns. The Commission identified two
relevant markets based on case precedent. A broad market for the provision of both
open and closed medical schemes and a narrow market for the provision of closed
medical schemes.4
[8] In the broad market, the Commission found that post-merger the merged entity will
have a market share below 10%, with a market share accretion of approximately less
than 1%. 5 The merged entity would continue to face competition from numerous
schemes6 in a market with overall 76 medical schemes (with 18 open schemes)
operating in South Africa. Given the presence of many alternatives in the market and
the minimal market share accretion arising as a result of the proposed transaction, the
Commission was of the view that the proposed transaction was unlikely to substantially
prevent or lessen competition in the broad market for the provision of medical schemes
in South Africa.
[9] Despite the absence of overlap in the narrow market, the Commission considered
NMAS’ market share estimates in the narrow market for the provision of closed medical
schemes. NMAS was estimated to have a market share of less than 2%. The
schemes. NMAS was estimated to have a market share of less than 2%. The
Commission also solicited the views of the CMS on the proposed transaction; and no
competition or public interest concerns were raised. Accordingly, the Commission was
of the view that, regardless of the market considered (whether broad or narrow), the
proposed transaction is unlikely to raise any competition concerns in the affected
markets.
[10] The Commission has considered whether the proposed transaction will have any effect
on NMAS members’ premiums/contributions post-merger. This concern was based on
the merging parties’ submissions that post-merger, NMAS will be deregistered and will
no longer be offering any benefit options to its members. The merging parties have
submitted that, post-merger, each of NMAS’ members will be able to elect a benefit
3 (i) Platinum, (ii) Comprehensive, (iii) Traditional, (iv) Savings and (v) Hospital network.
4 In this regard, open schemes refer to medical schemes that are open to the general public, such that
anyone can join given that they can afford the relevant contributions. Closed or restricted schemes on
the other hand are schemes that allow only a pre-specified group of people to join. These specified
groups may include current or former employees of a firm or members of a particular profession,
professional association or union.
5 Market share estimates are based on membership numbers as at 31 December 2020.
6 Such as Discovery Health Medical Scheme, Momentum Health, Key Health, Bestmed Medical
Scheme, Fedhealth Medical Scheme, Medihelp, Medshield Medical Scheme, Sizwe Medical Fund,
Cape Medical Plan, Compcare Wellness Medical Scheme, Genesis Medical Scheme, Health Squared
Medical Scheme, Hosmed Medical Aid Scheme and Suremed Health, amongst others.
3
option from Bonitas’ 14 current benefit options. The merging parties also provided the
independently prepared Exposition Report - a statutorily required 7 report that aims to
assess whether an amalgamation would be in the interest of medical scheme
members. In the evaluation, the actuaries compiled a detailed benefit option mapping
exercise to identify which Bonitas benefit option is best suited for NMAS members. It
was found that there are various Bonitas benefit options which provide very similar
benefit structures to NMAS’ options.8 The Commission further notes that, post-merger,
NMAS’ members will be free to choose from the full range of Bonitas’ 14 options best
suited to their needs and circumstances.
[11] The Commission noted that NMAS’ members will not be compelled to switch to Bonitas
post-merger. Those who do not move to Bonitas will still have the option of joining
Discovery or Bestmed schemes, which provide a wider range of benefit options than
the NMAS offering. Considering the above, the Commission is of the view that
members will not be in a worse off position, instead they may be in a better position
given that they would have access to three possible medical scheme options, which
each provide a wider range of benefit options than the NMAS offering. The
Commission also noted that NMAS members had in fact voted in favour of the
proposed transaction.
[12] The merging parties submitted that the proposed transaction will not have any adverse
effects on employment. Bonitas currently has 15 employees and they are not
represented by any trade unions. NMAS has no employees. The Commission engaged
Bonitas’ employee representative who disclosed that none of the employees raised
any concerns regarding the proposed transaction. The merging parties have also
provided an unequivocal statement that there will be no retrenchments as a result of
the proposed transaction. The Commission did not find any evidence to suggest that
the proposed transaction. The Commission did not find any evidence to suggest that
the merging parties intend retrenching employees as a result of the merger.
[13] Regarding the spread of ownership public interest consideration, the merging parties
submit that no shareholder or entity holds ownership of any form in Bonitas or NMAS
because, in terms of the MSA, 9 the business of a medical scheme must be managed
by a board of trustees elected directly from amongst its members. While a board of
trustees oversees each respective scheme, the schemes belong to the members. The
Commission found that all members will become part of the amalgamated scheme thus
the identity of the members to the respective schemes before and after the
implementation of the proposed transaction will not change, save for the fact that
members will now be part of an amalgamated scheme. Accordingly the Commission
found that the proposed merger is unlikely to result in a negative effect on the
promotion of a greater spread of ownership.
7 In terms of section 63 of the MSA.
8 In particular, 91% of current NMAS members utilise the Traditional, Savings and Hospital Network
benefit options, which have a good fit with their equivalent Bonitas options and largely result in the
same level of contributions being paid. Moreover, NMAS members with the Comprehensive benefit
option will pay lower contributions for the same level of benefits. However, NMAS members with the
Platinum benefit option, 5% of NMAS membership as of May 2021, would have to pay significantly
higher contributions under the comparable Bonitas option (BonComprehensive) for the same level of
benefits. They are therefore expected to opt for BonClassic, which has a lower level of benefits, but
they will also pay lower contributions.
9 Section 29(1)(a).
4
[14] We agreed with the Commission’s findings and concluded that the proposed
transaction is unlikely to substantially prevent or lessen competition in any relevant
market, or to have a negative impact on the public interest.
9 November 2021
Ms Yasmin Carrim Date
Prof Fiona Tregenna and Mr Enver Daniels concurring
Tribunal Case Manager: P Kumbirai and M Tshabalala
For the Merging Parties: A Mahomed and Z van der Westhuizen of GMI
Attorneys
For the Commission: Z Hadebe and T Masithulela