The recent fines incurred by four Palmerston North Eye Surgeons highlights the risks of co-operating with competitors when negotiating arrangements to supply goods or services. It also emphasises the current focus of the Commerce Commission on conduct in the health sector.

In 1998/99 MidCentral Health Limited (MCH) approached the four ophthalmologists to seek provision of eye services (in particular, 24 hour seven day on-call services which then could not be provided by the hospital).

The four ophthalmologists agreed among themselves that they would negotiate jointly and not separately with MCH. They agreed on prices and other terms on which they would supply publicly funded eye services to MCH. They then acted on this understanding by negotiating jointly with MCH. Negotiations culminated in the ophthalmologists entering into a contract to provide eye services at specified rates that applied to services supplied by each of them.

The Commission issued proceedings alleging that the ophthalmologists had contravened sections 27 and 30 of the Commerce Act 1986 by fixing the prices at which each of them would provide eye services to MCH.

The Commission and ophthalmologists reached a settlement whereby three of them agreed to pay $15,000 in fines and other agreed to pay $10,000. The High Court recently approved this settlement.

The fines incurred by the ophthalmologists come in the wake of the unrelated successful proceedings brought by the Commission earlier this year relating to an arrangement involving the Ophthalmological Society of New Zealand and a number of surgeons to exclude Australian surgeons undertaking operations in Southland. This latest ophthalmological case also has some similarities to the Manawatu funeral directors, who were warned by the Commission following submission of a joint proposal to the New Zealand Police. In that case, the joint proposal was unsuccessful, perhaps explaining why the funeral directors escaped with only a warning.

While the prices fixing provisions of the Commerce Act contain an exclusion for joint ventures, this exclusion is narrowly drafted and care needs to be taken by parties seeking to rely on the exclusion. In addition, while joint ventures are excluded from the strict price fixing provisions of the Act, the general prohibition on arrangements, contracts or understandings that substantially lessen competition will still apply to the relevant arrangement.

Finally, it is interesting to note that in Australia, the type of collective bargaining undertaken by the four ophthalmologists might be permitted under the proposed ‘small business’ amendments to the Australia Trade Practices Act (provided that notice of arrangement was given to the Australian Competition and Consumer Commission and the Commission did not object). This collective bargaining regime will be introduced by the Trade Practices Amendment (Collective Bargaining for Small Business) Bill 2005 that is currently before the Australian Senate.

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.