The Competition Commission has recommended that the Competition
Tribunal prohibit an acquisition in the healthcare services
industry on the basis that it would undermine competition between
hospitals when negotiating terms and conditions of service with
medical aid schemes.
The Competition Commission (Commission) has recommended that the
Competition Tribunal (Tribunal) prohibit the proposed acquisition
by Life Healthcare Group (Proprietary) Limited (LHG) of additional
shares in Joint Medical Holdings Limited (JMH), which would
increase its current 49% shareholding in JMH to a majority
stake.
The Commission found that an increase in LHG's shareholding in
JMH would result in a shift from joint to sole control. The
Commission found that this increased shareholding is likely to lead
to a reduction in the countervailing power of large medical
schemes, especially in terms of their ability to construct
cost-effective service provider networks. These networks enable
medical funders to achieve discounts from hospitals, which
translate into lower contribution rates by medical aid
members.
The Commission also found that the transaction could result in the
countervailing power of the remaining shareholders of LHG, who are
mostly doctors, being substantially reduced. The Commission has
therefore found that the proposed merger is likely to substantially
prevent or lessen competition in the supply of private healthcare
services in the Durban area and consequently lead to increased
costs of healthcare.
The merging parties do not agree with the Commission's
assessment of the transaction and the matter will be heard by the
Tribunal in the coming weeks. The Tribunal will ultimately decide
whether or not to approve the proposed transaction. Webber Wenzel
acts for the merging parties.
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