ACCC blocks Sonic acquisition of Delta

Published On 04/02/2014 | By Pam Cue | Mergers

Last month, the ACCC announced that it would oppose Sonic Healthcare Limited’s proposed acquisition of the assets of the Delta Imaging Group, which was in liquidation.

The ACCC considered that the proposed acquisition would substantially lessen competition in the markets for the supply of MRI services in Newcastle and Maitland; and the supply of general diagnostic imaging services in Maitland.

Both Sonic and the Delta Imaging Group operated radiology practices in the Hunter region of New South Wales, offering a variety of diagnostic imaging services, including both Medicare-eligible and non-eligible MRI services.

“If Sonic acquires the Delta Imaging Group’s MRI units, it will remove a significant competitive constraint on Sonic, particularly in relation to the pricing of MRI scans,” ACCC Chairman Rod Sims said.

‘The proposed acquisition would [also] remove a significant competitor in an already concentrated market and give Sonic the ability to increase prices charged to patients for [general diagnostic imaging] services such as X-ray, CT scans and Ultrasounds’, Mr Sims went on to say.

Following the proposed acquisition, Sonic would have been the only private supplier of Medicare eligible MRI services in Newcastle and Maitland. The proposed acquisition would also reduce the number of private suppliers of general diagnostic imaging services in Maitland from three to two, with Sonic operating radiology four out of five radiology practices.

The ACCC did not consider that public hospital providers of general diagnostic imaging services in the area were likely to constrain Sonic. This was because hospitals tended to prioritise providing services to in-patients over out-patients.

The ACCC also considered that barriers to entry were likely to be significant and that it was unlikely that Sonic would be constrained by the threat of new entry post-acquisition.

The ACCC commenced its public review of the proposed acquisition on 15 October 2013 and published a Statement of Issues outlining its preliminary competition concerns on 5 December 2013.

This is the first ACCC merger decision to be announced this year and the first decision to ‘oppose’ a proposed acquisition. Typically, the ACCC opposes only a small number of transactions a year. For instance, in FY2012-13, the ACCC opposed only six out of the 76 public and confidential reviews it conducted.

Photo credit – Flickr / adrianrbarnes / CC BY 2.0

About The Author

is a solicitor in the Competition Law and Regulatory Group at King & Wood Mallesons Sydney.

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