Hospital’s by-laws flatline on the competition table

Published On 22/12/2014 | By Tyson Beckman | Cartels, Enforcement, Litigation

The ACCC has launched proceedings in the Federal Court against Little Company of Mary Health Ltd and its subsidiary Calvary Health Care Riverina Ltd (together “Calvary”) seeking pecuniary penalties, declarations and costs. Both companies generate their primary income through the provision of hospital care services and facilities.

The ACCC alleges that Calvary engaged in conduct with the purpose of substantially lessening competition in the day surgery market, particularly in Wagga Wagga. In March 2011, Calvary introduced by-laws which complemented their contractual arrangements governing the conduct of the medical practitioners who wanted to engage Calvary’s medical facilities.

The ACCC alleges that, through these by-laws, Calvary threatened to revoke existing contractual rights, or refused to grant future contractual rights, to medical practitioners for the use of the Calvary facilities if the practitioners engaged in the operation of any business in competition with Calvary. The ACCC’s case is that the purpose of this conduct was to substantially lessen competition, in breach of section 45 of the Competition and Consumer Act 2010 (Cth) (“CCA”) (which prohibits contracts, agreements or understandings that have the purpose, effect or likely effect, of substantially lessening competition in a market).

The competition concerns of the ACCC

The ACCC Chairman Rod Sims has been reported as stating that the primary competition concern was the impact of these arrangements on independent day surgeries, which are often operated by medical practitioners themselves. Medical practitioners may be deterred from establishing more surgeries in order to retain their existing agreements with Calvary’s established facilities, thereby limiting the availability of day surgery procedures to consumers.

Keeping the promise

The ACCC announced earlier this year in its Compliance and Enforcement Policy that preventing anti-competitive agreements remains an enduring priority, as demonstrated not only by enforcement of the cartel provisions of the CCA but also by its recent cases against Cement Australia Pty Ltd and others for entering into anti-competitive agreements.

In the ACCC v Cement Australia Pty Ltd  matter, the contravention of section 45 of the CCA related to conduct of the respondents which had both the purpose and effect of substantially lessening competition. This was because the respondents prevented competitor access to Flyash (a by-product of burning coal used as a partial substitute for cement in ready-mix concrete) by entering into exclusive contracts, thereby disallowing the possibility of new entrants into the market.

In the Calvary case, the ACCC has alleged that the relevant arrangements had the purpose (but not the effect) of substantially lessening competition. It will be interesting to see what evidence the ACCC relies upon in support of this contention.

Side effects 

Thes case serves as a reminder that the ACCC also continues to rely on section 45 in cases where the cartel provisions could also be used. In the Informed Sources matter, the ACCC alleges that petrol retailers together with Informed Sources (which collects and disseminates retail petrol price data) entered into information sharing arrangements which had the effect or likely effect of substantially lessening competition by increasing retail price coordination and cooperation, and decreasing competitive ?

The Calvary proceedings also serve as a reminder to companies that, not only contracts themselves, but internal policies, by-laws and indirect rules attaching to contracts, agreements or understandings, may be caught by section 45 of the CCA.

The case is listed for a directions hearing on 4 February 2015. We will keep you updated as the case progresses.

By Marijana Banovac and Tyson Beckman.

Picture: Courtesy Pixabay / EKG heartbeat frequency pulse

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