SOUTH AFRICA: GROUND-BREAKING CONSTITUTIONAL COURT RULING ON THE ROLE OF THE COMPETITION AUTHORITIES IN PROMOTING THE RIGHT TO HEALTHCARE
The Constitutional Court decision handed down on 15 October 2021 in Competition Commission of South Africa v Mediclinic Southern Africa (Pty) Ltd and Another may have far-reaching consequences for both merger review and adjudication of complaints under the Competition Act, 1998 (Competition Act).
The Court agreed to hear an appeal from the Competition Appeal Court (CAC) involving a proposed merger in the private healthcare sector, involving Mediclinic Potchefstroom and the Wilmed Park and Sunningdale hospitals, on the basis that this case involved the interpretation, protection and actualisation of the constitutional right of access to healthcare services.
Writing for the majority, Mogoeng CJ upheld the decision of the Tribunal to prohibit this proposed merger because it would have a significant effect on the healthcare costs of both insured and uninsured patients living in the rural Potchefstroom/Klerksdorp region; but in particular would impact on uninsured patients, because it would deprive them of the lower tariffs charged by the target hospitals, and limit their ability to negotiate better prices or switch to cheaper hospitals.
Quoting the Preamble and the Objectives of the Act, the majority noted that sight must never be lost of the central purpose for the enactment of the Competition Act and of the investigative and adjudicatory structures that it gave birth to.
The proposed merger should therefore ‘be approached with due regard to what would help achieve these goals and thus be in the best interests of the public’. This, the Court held, required an analysis of whether:
- approving the merger would contribute towards ownership and control targets in the private healthcare services market, which remains excessively concentrated in the hands of historical players, or would contribute towards the progressive realisation of the set ownership-spread objectives;
- entry into this market or sector would be eased to allow for greater participation by a greater number of South Africans or would be allowed to become an even more difficult objective to achieve;
- free and fair competition would be enhanced or hampered to some concerning degree;
- the determination of the local geographic market would enable consumers to have access to, and freely select, the quality and variety of services in the private healthcare services sector; and
- sufficient regard is being had, in dealing with substantial public interest considerations, to the ever-rising costs of private healthcare services in South Africa and whether regulatory and adjudicatory institutions in the competition environment do what the Constitution demands of them by containing this trend and discouraging mergers that would most likely or inevitably give rise to, and in a way normalise, tariff hikes for desperately needed goods or services in any economic space where they are already costly and somewhat unaffordable or inaccessible.
The Court emphasised that section 39(2) of the Constitution requires all courts, including those enforcing the Competition Act, to interpret legislation in a manner which promotes the spirit, purport and objects of the Bill of Rights, and noted that the Tribunal and CAC have an added responsibility to do so imposed on them by the Preamble to the Act and its purpose.
Moreover, in hearing appeals, the CAC should show due deference for the expertise of the Tribunal, in line with the CAC’s own decisions in the Imerys and Schumann cases.
Impact in the healthcare sector and beyond
Healthcare has already been subjected to significant scrutiny by our competition authorities throughout the pandemic, following the promulgation by the Minister of Trade, Industry and Competition of Consumer and Customer Protection and National Disaster Management Regulations and Directions (Regulations) in March 2020 to prohibit dominant firms from selling essential goods and services at excessive prices during the period of national disaster.
A contravention of the Regulations is an offence under the Competition Act 89 of 1998 as amended (Act), and firms may be liable for an administrative penalty of up to 10% of annual turnover and/or any other relief determined to be appropriate by the Competition Tribunal (Tribunal).
Tribunal rules regulating the process for dealing with complaint referrals for alleged COVID-19 excessive pricing contraventions (Rules) were also published. In terms of the Rules, the Tribunal may prosecute contravening firms under expedited time-frames and may also impose a pricing order against the future conduct of these firms (read more here). These Regulations and Rules remain in effect despite the recent relaxation of the lockdown.
The Commission announced, at its Annual Conference held virtually in October, that it is scrutinising prices of medicines and other healthcare-related products, and in particular, was concerned about the prices charged in South Africa for COVID-19 polymerase chain reaction (PCR) tests.
The Commission’s efforts to prosecute excessive pricing are likely to be enhanced by amendments to section 8 of the Competition Act in 2019, which broaden the factors to be taken into consideration when adjudicating complaints of this nature, and also require a dominant supplier to demonstrate its pricing is ‘reasonable’ once a prima facie case of excessive pricing has been demonstrated.
Whilst the CAC’s decision in the Babalegi case was decided in the particular circumstances of the pandemic and national lockdown, the approach taken to the concept of ‘market power’ may well be applied in other contexts, in which firms (even temporarily) find themselves able to act independently of their competitors or customers.
In prosecuting these complaints, the Commission is likely to be guided by the Constitutional Court, which observed in its Mediclinic decision that: ‘It ought never to be acceptable for any of us, including the corporate citizens of this land, to indulge, talk less of over-indulge, in the unconscionable practice of seeking to record the highest profit margin possible by any means necessary, in wanton disregard for what that would do to the rest of humanity’.
The Court’s decision may also find application outside of the healthcare sector, in the adjudication of both merger reviews and complaints, in cases in which a Constitutional right is implicated.