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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