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
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
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
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
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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