The Constitutional Court of South Africa (CC) delivered a groundbreaking judgment in the proposed merger between Mediclinic Southern Africa (Pty) Limited and Matlosana Medical Health Services (Pty) Limited that reversed the conditional approval by the Competition Appeal Court (CAC). When the case came into competition circles, the major concern was that the merger could substantially lessen competition in the private health sector and adversely impact the accessibility and affordability of healthcare services in the private healthcare sector. In this blog post, I explore key aspects of the case and the implications of the Constitutional Court’s ruling on the Competition Authority/Competition Tribunal, the private sector, and on the public going forward in the Republic of South Africa.
Background
In 2016, as required by law, the Mediclinic and Matlosana merger was notified to the Competition Commission. The Commission immediately expressed concerns about the merger's potential adverse effects on competition in the private health sector with envisaged post-merger impacts such as increased healthcare costs for both insured and uninsured patients, especially in the Northwest province of South Africa.
The merger was prohibited in 2019 by the Competition Tribunal because investigations showed that it would limit uninsured patients’ access to affordable healthcare options. The Tribunal held that the proposed merger would take away the lower tariffs available to uninsured patients at the target hospitals, and given the significant differences in the tariffs, the merger would significantly affect uninsured patients by limiting their ability to negotiate and switch to cheaper hospitals. Respondents did not tender remedies before the Tribunal that could effectively address the competition concerns raised by the merger, in the absence of remedies, the Tribunal prohibited the proposed merger. Mediclinic-Matlosana were not satisfied with the Tribunal’s decision and appealed to the Competition Appeal Court (CAC).
The CAC, in its majority decision, overturned the Tribunal’s ruling, asserting that the evidence was insufficient to prove substantial harm resulting from the merger. It approved the merger conditionally. On the contrary, the minority confirmed that the merger would undermine the public’s right to access to healthcare services. The Competition Commission took the case to the Constitutional Court after the Tribunal’s ruling was overturned. In 2012, the Constitutional Court, the highest court in South Africa, overturned the ruling of the CAC.
Implications of the Constitutional Court’s ruling
The Competition Authority and Competition Tribunal
The Constitutional Court established that appellate courts like the CAC should ideally interfere with factual findings (considering the level of expertise of the Competition Tribunal in these matters) only in exceptional circumstances where clearly decisions are in error. The Constitutional Court found that the CAC exceeded its authority by substituting the Tribunal’s factual findings with its own.
This decision implies that the Tribunal's expertise is acknowledged, particularly in understanding the intersection between competition and constitutional law. The Constitutional Court found that the Tribunal (based on advice from the competition authority) based its decisions on the expertise of its members, economists, and other expert witnesses. These decisions, according to the CC, were well-reasoned, insightful, and comprehensive. The CC noted that the CAC overlooked the Tribunal's specialized expertise and comprehensive understanding of economic, financial, and policy aspects in its ruling. Accordingly, the judgment underscores the authority attributed to the Tribunal’s factual and economic findings. The decision encourages the need for the competition authority and the Tribunal to continue to interpret the Competition Act in a way that upholds the principles of the Bill of Rights.
The determination, based on sound evidence, of whether the merger would result in a substantial lessening of competition were found to be pertinent by the constitutional court as it included:
Whether the merger would lead to a significant reduction of competition.
Determination of the local geographic marker and regional dominance.
Assessment of the likelihood of harm resulting from the merger.
Evaluation of the substantial negative impact on the public’s access to healthcare services, considering the constitutional right of access to healthcare.
Considering whether prohibition is the suitable remedy given the circumstances.
The Constitutional Court highlighted that the CAC misinterpreted section 12A of the Competition Act, which deals with public interest considerations in mergers, and it clarified that the Act’s main focus is on determining whether a merger would substantially prevent or lessen competition, particularly concerning potential price increases.
The above are considered in most merger assessments by the competition authority. This ruling implies that this approach to merger reviews would continue to form the basis for assessing mergers in South Africa, with greater emphasis on public interest impacts of mergers.
The private sector (or merging parties)
The Constitutional Court’s ruling sets a crucial precedent for future merger evaluations in South Africa’s private healthcare sector. By considering the public interest ground and the right to access healthcare, the CC has brought the Bill of Rights perspective to merger assessments. The ruling by the Constitutional Court puts on a pedestal the need for competition law to be interpreted and applied with regard to the Constitution as is the case with all laws in South Africa, which includes the Competition Act.
Going forward, legal experts state that the decision represents uncharted territory, implying that merging parties need to assess whether their merger might have implications for any constitutional right, including the possibility that market power could now come under the purview of constitutional regulation.
The public
The Mediclinic-Matlosana merger case highlights the complexities of balancing corporate interests with the public interest provisions contained in the Competition Act. The Constitutional Court’s ruling sends a powerful message about the need to prioritize access to affordable healthcare for all South Africans.
The Constitutional Court’s decision emphasized that section 27 of the Constitution, which guaranteed the right to access healthcare, should serve as a significant public interest ground for evaluating the merger. An approach that strongly aligns with constitutional principles and promotes the well-being of citizens in the Republic of South Africa.
Disclaimer: The opinions expressed above are those of the author and do not reflect the official position of the Competition Commission of South Africa.
References
Author's profile
Neelofah Ally is a guest writer for Econolicy Africa. She is currently a Senior Analyst in the Advocacy Division of the Competition Commission of South Africa. She was a member of the Technical Team of the Private Health Market Inquiry. She is a lawyer, with an LLM from the University of Witwatersrand
Comentários