Commission closes in on health care

Time of article published Mar 11, 2013

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Ann Crotty

THE COMPETITION Commission has moved one large step closer to launching an inquiry into the health-care sector with the news that after a three-year delay, the “market inquiry” provision of the Competition Amendment Act will come into effect on April 1.

Health Minister Aaron Motsoaledi told Business Report over the weekend that he had been calling for an inquiry into the sector for some time.

“Prices in this sector are artificial and distorted and we certainly look forward to an inquiry if the commission agrees to initiating one.”

Motsoaledi said he had been encouraging the commission and the Department of Economic Development to give effect to the “market inquiry” provision for some time.

Competition commissioner Shan Ramburuth told Business Report yesterday that he welcomed the development.

“The ability to undertake market inquiries provides us with a new tool that will enable us to look at behaviour in inter-related markets… we will be able to look across value chains,” he said.

Ramburuth could not comment at this stage on what sectors might be investigated but he did confirm that the commission “has been deliberating on the need for an inquiry into the health-care sector”.

He also said that in anticipation of being given the power to undertake market inquiries the commission had budgeted to employ the necessary skills.

While the private health-care sector is expected to be the subject of the first legally backed “market inquiry”, competition lawyers say the print media, food retail, food production and cellular sectors are possible targets for subsequent inquiries.

Although food retailers have already been investigated and cleared of price fixing, the lawyers noted a more vigorous “market inquiry” might allow the commission to take a closer look at a number of concerns it said it had with the sector.

With regard to an inquiry into private health care, Nick Altini, the national head of Cliffe Dekker Hofmeyr’s competition practice, said it was common knowledge that the commission had long intended to proceed with an inquiry into the working of the sector.

The commission is believed to have already undertaken preliminary research into the sector and indicated more than a year ago that it would launch a formal investigation.

“But the commission said it would only proceed with an inquiry if the Competition Amendment Act came into force,” Altini said. The commission’s approach was based on the fact that the amendment act provided it with much wider and more focused investigatory powers than those it was able to employ in the banking inquiry where participation by the stakeholders was on a voluntary basis, he added.

Recent legal challenges to the commission’s authority by Woodlands Dairy, Loungefoam and SABMiller are also likely to have discouraged the commission from undertaking some investigations.

However, once the amendment act comes into force the commission will be able to launch a legally-backed inquiry on the grounds that it has reasonable suspicion of anti-competitive behaviour.

Last September, Motsoaledi told delegates at the sixth annual conference of the competition authorities that he welcomed an inquiry into the health-care sector and the cost of health care in South Africa.

He said although South Africa spent more than most of the Brics (Brazil, Russia, India, China and South Africa) countries on health care, the outcomes in the other four members were far better than in South Africa.

The amendment act, which was enacted in 2009, had not yet come into effect because it was not given a commencement date. This reflected the highly controversial, and legally problematic nature, of most of the provisions of the act.

It introduced the concept of “complex monopoly” and provided for criminalisation of cartel conduct. The market inquiry provision of the amendment act was generally regarded as its best part. “It’s a very good idea to have that section put into force and leave the other problematic stuff behind,” one practitioner said.

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