On 5 October 2012, details were published concerning a 5
September 2012 decision by the German Federal Cartel Office
("FCO") prohibiting a proposed merger between two
hospitals in Worms, a city on the west bank of the Rhine River in
According to the FCO, the proposed acquisition by the Klinikum
Worms of the Agaplesion Hochstift Hospital ("Hochstift")
would have resulted in a dominant position for the Klinikum Worms
on the regional market for acute inpatient hospital services, i.e.,
in the provision of stationary medical services provided by general
hospitals to patients. The FCO distinguished the market for acute
inpatient hospital services from the markets for services provided
by purely private hospitals, rehabilitation centres and nursing
homes, on the basis that public health insurance covers the costs
for general hospitals but generally does not cover the costs for
services of these other kinds of care suppliers. The FCO defined
the relevant geographic market as the region of Worms.
With 555 beds, the Klinikum Worms is already the largest
hospital in the Worms region, with a market share of around 37.5%.
Post-transaction, this share would have increased to 52.5%, whereas
all remaining competitors would have had individual market shares
of 7.5% or less, as a consequence of which the FCO considered that
patients' choice would have been considerably decreased
Interestingly, the FCO considered whether Hochstift met the
requirements of the failing firm defence, i.e., whether: (i)
Hochstift was in need of restructuring and could not have survived
on its own, (ii) there was no less harmful alternative from a
competition point of view than the proposed transaction, and (iii)
Hochstift's market position in any event would have been taken
over by the Klinikum Worms in the absence of the merger.
Considering each prong of the test (which has been a recognised
defence in merger cases going back to the European Commission's
1997 approval of the Boeing/McDonnell Douglas deal), the FCO found
the failing firm defence not to apply to the facts at issue. In
particular, there was no indication that Hochstift would become
insolvent and the seller did not enter into any negotiations or
talks with any companies other than the Klinikum Worms (thus making
it impossible to know whether another buyer might have existed
whose acquisition would have been less harmful to competition).
Moreover, the FCO considered that the Klinikum Worms's market
share would have been likely to increase only up to around 42.5% in
the event of Hochstift ceasing its activities (about 10% less than
if the transaction were allowed to go ahead).
This decision, which can still be appealed, marks the sixth
prohibition of a proposed concentration in the hospital sector in
Germany since 2004.
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