Tuesday, 25 March 2008

Netcare settlement rejected by SA Competition tribunal

In a case involving an application by the Competition Commission to confirm a settlement agreement of R6million (approx $800 000.00) reached between the Commission and the respondents (Netcare and the Community Hospital Group), the Tribunal refused to supply the order stating that they did not believe that the settlement agreement adequately safeguarded the public interest.

The settlement was made pursuant to section 49D of the Competition Act (the ‘Act’) for:

a) the implementation of a merger without the approval of the Competition authorities in contravention of section 13 A(3) of the Act; and

b) contravention of section 4(1)(b) of the Act, in that whilst not being members of a single economic entity, and being instead competitors, they adopted the same pricing structure for the tariffs charged by the hospitals in their respective groups

In particular, the Truibunal held that:

"Whilst we encourage parties to negotiate settlements with the Commission and believe this is in both the public interest and the interests of affected parties, we cannot sanction agreements which fall far short of the standard of an appropriate penalty..."

"...even though the respondents may have come clean when confronted at the time of the Commission’s non–notification investigation, the Commission is entitled and indeed ought to have had regard to the history of inconsistent explanations on the same issues before the Competition Authorities to assess properly the firms’ behaviour and degree of co-operation. If one or both of the respondents had been less than frank on this issue with the competition authorities this should be taken into account as an aggravating factor in assessing an appropriate quantum for the penalty. In our view, the Commission by failing to seek a satisfactory explanation on this aspect has given no consideration or insufficient weight to this issue in considering an appropriate penalty."

"Another criticism we have of the Commission’s approach is the fact that it entered into the consent order prior to the conclusion of the merger hearing."

"...the commission has failed to give due weight to certain considerations or taken them into account at all and has erred in calculating the affected turnover, an appropriate penalty, absent a satisfactory explanation to some of the concerns we have raised, should be substantially higher than the present one."

On "affected turnover" the Tribunal had this to say:

"IF NETCARES’ HOSPITAL TURNOVER IN SA WAS TAKEN INTO ACCOUNT AND ADDED TO THAT OF CHG, THEN THE PRESENT FINE WOULD CONSTITUTE A TINY FRACTION OF THIS FIGURE - LESS THAN 1%. THIS IS MINISCULE INDEED.."

For the full case click here

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