Commission grants conditional exemption to the National Hospital Network

The National Hospital Network (NHN), a network of independently owned private hospitals earlier this year applied for an exemption in terms of s10 of the Competition Act, No 89 of 1998 (Act). Section 10 of the Act provides for very limited instances in which a firm can apply for an exemption from Chapter 2 of the Act, relating to prohibited practices (horizontal, vertical and abuse of dominance).

The NHN sought an exemption in respect of tariff negotiations between it and medical schemes and medical scheme administrators and collective bargaining agreements which would constitute price fixing, which is per se prohibited in terms of the Act. The NHN, in its exemption application, is of the view that this conduct promotes the ability of small businesses and firms controlled by historically disadvantage persons to become competitive in the context of a market that is notoriously difficult to function in.

The Commission has granted the exemption for a period of four years commencing on 1 January 2014 (as opposed the 5 year exemption sought by the NHN), subject to the NHN annually submitting relevant information to the Commission to enable the Commission to monitor the impact of the measures taken to meet the objective of the exempted conduct (ie whether the conduct, in fact, promoted the ability of small business and firms controlled by historically disadvantaged persons to become competitive).

The Commission has on two previous occasions granted similar exemptions to the NHN and, in this instance, indicated that it found that the exemption of this conduct has assisted the members of the NHN to effectively negotiate prices and compete with the three large incumbent hospitals in the market, resulting in the members of the NHN gaining market share in the last five years.

The Commission further acknowledges that the inquiry into the private healthcare market is likely to provide them with additional information to be able to assess the market in more detail, although, it is not clear to what extent the healthcare inquiry, in fact, informed the Commission decision in this instance.