Through the looking glass and a little bit beyond.

Dominique Arteiro

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BACKGROUND TO COMMISSION’S NEW POWERS> Competition Amendment Act, No. 1 of 2009 gazetted on 28 August

2009.

> Included a new power to conduct market inquiries.

> Chapter 4A was the only provision of the Competition Amendment Act that has come into force – all of the other provisions are not yet in force.

> Power allows the Commission, on its own initiative or in response to a request from the Minister, to conduct a market inquiry at any time:

> if it has reason to believe that any feature or combination of features of a market for any goods or services prevents, distorts or restricts competition within that market; or

> to achieve the purposes of the Competition Act, 1998.

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STATED RATIONALE FOR MARKET INQUIRY> Panel wishes to evaluate the levels of prices, expenditure and

costs in the sector as well as the reason for the above-inflation increases in prices in private healthcare (paragraph 15 of draft Statement of Issues).

> The former Chief Justice Ngcobo stated at a stakeholder engagement session held by the Panel on 16 April 2014 that:

“It is therefore in the interest not just of competition that the private healthcare sector functions effectively and efficiently, but in the public interest that the private healthcare markets function in a manner that promotes rather than undermines the purposes of the Act”

> Market studies were commissioned and performed by Professor Alex van den Heever on 19 June 2012 and Genesis Analytics on 31 August 2012 prior to the Commission issuing its draft Terms of Reference for public comment.

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MEET THE PANEL

Chairperson: Chief Justice Sandile Ngcobo (retired)

Panellists: Professor Sharon Fonn Mr Cornelis (Cees) van

Gent

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MEET THE PANEL (CONTINUED)

Panellists: Dr Lungiswa Nkonki Dr Ntuthuko Bhengu

Inquiry Director: Ms Tamara Paremoer

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COMMISSION’S MARKET INQUIRY POWERS> The provisions of sections 44 to 45A of the Competition Act apply. Therefore,

crucial to claim confidentiality over information which constitutes “confidential information” and have measures in place to deal with requests for information / documentation.

> Commission does not have the power to search premises.

> However, the Commission may summon any person to furnish relevant information or subpoena any person in possession of any document that has a bearing on the subject of the inquiry.

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COMMISSION’S MARKET INQUIRY POWERS (CONTINUED)> The Commission may:

> question any person under oath or affirmation;

> accept oral submissions from any participant;

> accept any other information that is submitted by a participant.

> Participants can still be guilty of the offences under sections 72 and 73(2)(a), (b), (c), (d) and (f). For example:

> failing to answer fully or truthfully;

> doing anything to improperly influence the Commission, knowingly provides false information to the Commission or wilfully interrupts the proceedings.

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WHERE ARE WE GOING?

> “Where should I go?" - Alice. "That depends on where you want to end up." - The Cheshire Cat. Lewis Carroll, Through the Looking Glass and What Alice Found there.

> Is it a moving target? The Commission may amend the Terms of Reference, including the scope of the inquiry, or the time within which it is expected to be completed.

> The Terms of Reference exclude the public sector as a focus area. However, the Panel will seek to understand how the public and private healthcare sectors interact and what, if any, constraints exist between the two that affect competitive outcomes in the private health sector. In this regard, submissions to the Commission must be related to issues pertaining to the private health sector (source: paragraphs 45 and 46 of the draft Statement of Issues).

> The Commission must publish a report of the inquiry and submit it to the Minister.

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WHERE ARE WE GOING? (CONTINUED)

> In that report, the Commission may make recommendations, including:

> for new or amended policy, legislation or regulations; and

> recommendations to other regulatory authorities in respect of competition matters.

> The Minister must table in the National Assembly the report received from the Commission if that report deals with a substantial matter relating to the purposes of the Competition Act.

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WHERE ARE WE GOING? (CONTINUED)

> On the basis of information obtained during a market inquiry, the Competition Commission may –

> initiate a complaint and enter into a consent order, with or without conducting any further investigation;

> initiate a complaint against any firm for further investigation;

> initiate and refer a complaint directly to the Competition Tribunal without further investigation;

> take any other action within its powers in terms of the Competition Act recommended in the report of the market inquiry; or

> take no further action.

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WHAT WILL THE INQUIRY YET UNEARTH?> Expect to see settlements, complaint referrals and/or recommendations by the Commission regarding, amongst other things:

> Information asymmetry (price insensitivity of patients and lack of knowledge of healthcare products and services);> Role of agents (general practitioner and specialists) of the patient;> Concentrations of market power in key markets (hospital groups, administrators and medical schemes);

> Similar issues came to the fore in the UK’s market inquiry.> Further challenges to the Commission’s new powers? We have already seen a High Court challenge to the Commission’s use of certain experts (KPMG).

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WHAT WILL THE INQUIRY YET UNEARTH (CONTINUED)> Other market inquiries to follow - the Liquefied Petroleum Gas (LPG) inquiry

was initiated on 20 June 2014 and draft Terms of Reference have been issued.

> The Commission is assessing the impact of its interventions in private healthcare through enforcement action and merger regulation. Thus, there may be changes in this regard.

> The Panel will consider alternative techniques for defining relevant markets and analysing competition – the use of the logit competition index as a measure of hospital market power.

> The need for price regulation (SEP)?

THANK YOU

Date: 23 July 2014

Legal notice: Nothing in this presentation should be construed as formal legal advice from any lawyer or this firm. Readers are advised to consult professional legal advisors for guidance on legislation which may affect their businesses.

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