South Africa: Healthcare Sector Cautioned

Last Updated: 14 April 2013
Article by Dominique Arteiro and Neil Kirby

The advent of amendments to the Competition Act No. 89 of 1998 has, at least for one of those chapters, being chapter 4A dealing with market inquiries become a reality.

Section 6 of the Competition Amendment Act No. 1 of 2009 will come into force on 1 April 2013 as result of the proclamation published by the President of the Republic of South Africa in the Government Gazette on 8 March 2013. There is no indication on when the other provisions of the Competition Amendment Act may come into force.


The chapter dealing with market inquiries will be used, fi rst and foremost, to conduct an inquiry into the healthcare sector in South Africa. Much has been said about the healthcare sector in South Africa in so far as the provision of services by that sector to the public is concerned, more particularly, the costs at which those services are provided.

The prevailing view by the regulatory authorities within the healthcare sector in South Africa is that private healthcare is too expensive. Primary amongst the culprits that are fi ngered for expensive services are specialist medical practitioners and private hospitals. No doubt, any market inquiry will include those two constituencies.

In a recent presentation to the Parliamentary Portfolio Committee on Economic Development entitled “Market Enquiry into the Private Healthcare Sector” the Competition Commission stated that there were certain unique characteristics in the healthcare markets, such as information asymmetries, agency relationships and “distorted incentives”.

The Commission recognised in that presentation that there were concerns about pricing, costs and the state of competition and innovation in private healthcare. In its presentation to the Parliamentary Portfolio Committee on economic development, the Commission identifi ed the purpose of its proposed inquiry into the private healthcare sector as, amongst other things, to inquire into the nature of the price determination in the private sector and to examine the interactions between selected segments and their contribution to healthcare costs.

Market Inquiry

Initially, this process of inquiring into the cost of healthcare services was to be conducted in a cooperative manner as between the competition authorities and potentially members of the private healthcare sector in South Africa. The introduction of chapter 4A means that such comities are not necessary as the wide ranging powers of such an inquiry will now rest, as of 1 April 2013, with the Competition Commission. To this end, the market inquiry will be a “formal inquiry in respect of the general state of competition in a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm.” The prerequisite, in section 43A is that competition is to be investigated within the confines of such a market inquiry.

Amongst other things, on the basis of information obtained during a market inquiry, the Competition Commission may initiate a complaint and enter into a consent order with or without conducting any further investigation. In conducting its market inquiry into the private healthcare sector, the Competition Commission contemplates (according to its presentation) several methodologies, including, an inquisitorial public hearing process, information requests and consultation with stakeholders.

As part of its market inquiry powers, the Commission has the power to summon any person who is believed to be able to furnish information on the subject of the inquiry in question or who has possession of any documentation which has a bearing on that subject. Persons submitting information to the Competition Commission will still have the right to claim any such documentation or information as constituting “confidential information” as defined in section 1 of the Competition Act.

Background: Where we have been

The state of competition within the private healthcare sector has previously been examined by the competition authorities when it imposed penalties on a number of trade associations, including the Board of Healthcare Funders of Southern Africa, for the publication of tariffs amongst members for the purposes of charging for healthcare services. In 2004 and 2005, a number of consent orders (akin to settlement agreements) were concluded between the Competition Commission and each of the Board of Healthcare Funders of Southern Africa, the Hospital Association of South Africa and the South African Medical Association.

As a result of previous interventions by the competition authorities into the healthcare sector, association tariffs no longer exist. Certainly, debates rage within the private healthcare sector about the setting of tariffs, both reimbursement tariffs and ethical tariffs. In fact, the debate about setting ethical tariffs is currently afoot as between medical practitioners and dentists and the Health Professions Council of South Africa (“HPCSA”) following notifications published by the HPCSA in newspapers calling for comments on a process to be used to determine ethical tariffs.

The advent of the market inquiry provisions and the Competition Act is one that needs to be considered, when one is talking of an inquiry into the healthcare sector, within the context of the debates and issues occurring amongst members of the private healthcare sector and Government. Most importantly, the establishment of tariffs is of cardinal importance to the State in order to ensure that healthcare costs are controlled and, eventually, reduced. The debate on healthcare tariffs has been in existence since, at least, 2009 when the Minister of Health published the national health reference price list. The national health reference price list was eventually overturned by a decision of the North Gauteng High Court in Hospital Association of SA Ltd v Minister of Health and Another; ER24 EMS (Pty) Ltd and Another v Minister of Health and Another; SA Private Practitioners Forum and Others v Director-General of Health and Others (2010)(10) BCLR 1047 (GNP).

Current Context

Other primary issues concerning ethical tariffs and the provision of healthcare services, as stated, continue to be debated and promises have been made concerning the advent of national health insurance during 2014 as was stated by the President of the Republic of South Africa in his state of the nation address on 14 February 2013. Therefore, there is a great deal of context within which market inquiries within the healthcare sector, under the Competition Act, must be considered.

This is not simply a market inquiry to determine how competitive or anticompetitive, as the case may be, certain segments of the private healthcare sector are in South Africa. However, the existence of anti competitive behaviour does appear to be a prerequisite for the institution of a market inquiry by the Competition Commission – bearing in mind that section 43B (1) requires that a market inquiry may be instituted by the Competition Commission “if it has reason to believe that any feature or combination of features of a market for any goods or services prevents, distorts or restricts competition within that market”.

Therefore, market inquiries may not be used, for example, as surrogate tariff setting procedures or a fishing expedition to extract information from components of a particular sector in order, ultimately, to set tariffs in respect of the provision of services within that sector. Such procedures would be contrary to the principles of section 33 of the Constitution of the Republic of South Africa and the principles enshrined in the Constitution of the Republic of South Africa, 1996 pertaining to proper and legal state action.

In addition, the value chain in the private healthcare market is very complex and apart from the pharmaceuticals and consumables aspect, there are some intricate financing, administration and managed care services especially if one has regard to prescribed minimum benefits, capitation agreements, managed healthcare arrangements and designated service provider arrangements as envisaged in the Medical Schemes Act, 131 of 1998 (and the regulations thereto). The Competition Commission will therefore need to understand the vast and intricate array of managed healthcare arrangements when considering competition implications for selected aspects of the private healthcare sector.


Accordingly, the advent of a market inquiry into the private healthcare sector in South Africa needs to be cautiously approached and components of the private healthcare sector would, in all likelihood, be best encouraged to understand their rights both in respect of the competition legislation but also administrative law. Companies in the healthcare and other sectors should, of course, proactively consider their business interactions and agreements (especially around price setting mechanisms, information exchanges and interactions with competitors), ahead of any formal announcement by the Commission as to the scope of its first market inquiry/ies.

In addition, any market inquiry into the private healthcare sector would have to be approached with caution based on the degree of regulation that already exists within the private healthcare sector in South Africa and the effect of such a regulation on the provision of healthcare services in South Africa, which would include such specialist pieces of legislation as the Medical Schemes Act No. 131 of 1998, as amended, the National Health Act No. 61 of 2003 and the Health Professions Act No. 56 of 1974, as amended together with the various ethical rulings made by the HPCSA and that bind the medical practitioners, dentists and other healthcare providers who are governed by the HPCSA in respect of the provision of healthcare services to members of the public.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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