On 24 July 2012 the Competition Tribunal unconditionally approved the large merger involving Life Healthcare and Joint Medical Holdings (JMH), following the Competition Commission's recommendation that the Tribunal prohibit the merger. The Tribunal's reasons for the approval were issued on 24 October 2012.

Life Healthcare is a listed private hospital group that owns and operates private hospitals throughout South Africa. JMH, in turn, owns and operates five private hospitals situated in the Durban city centre and surrounding areas. The parties' activities overlap in the provision of private healthcare services in the greater Durban area.

Life Healthcare held 49 % of the share capital of JMH before the merger and, in terms of the proposed transaction, it made a public offer to the other JMH shareholders (comprising 300 private doctors, their families and trusts) to acquire an additional 21 % of JMH's shares. The merger would increase Life Healthcare's interest in JMH to 70 %.

The Commission opposed the merger on the grounds that it would allegedly result in a lessening of competition. It argued that the merger would:

  • result in higher prices for uninsured patients and notional regional medical schemes operating in the Durban area;
  • reduce other independent hospitals' ability to be included in designated service provider networks established by medical schemes; and
  • reduce the ability of independent hospitals in the Durban area to compete for specialists.

Although Life Healthcare, with its 49 % interest and de facto control in JMH, had negotiated medical aid tariffs on behalf of the JMH hospitals with medical schemes since 2003, the Tribunal considered the appropriate counterfactual in assessing the merger to be a situation in which Life Healthcare did not negotiate tariffs on behalf of JMH.

The Tribunal was therefore concerned about whether JMH's pricing to medical schemes would increase after the merger. The Tribunal found that any increases related to the counterfactual situation would be negligible post-merger.

In respect of the Commission's other theories of harm, the Tribunal found that there is no concrete evidence that JMH offers uninsured patients better terms than Life Healthcare and even if it does, that Life Healthcare has an incentive to alter this offering. When dealing with the issue of the notional regional medical schemes operating in Durban and the ability of independent hospitals to compete for specialists, the Tribunal held that the Commission's theories of harm, although plausible, lacked the detail to make them relevant or specific to the current merger.

The Tribunal held that the merger would not bring about a substantial lessening of Competition. The merger was therefore approved without conditions.

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