The Competition Tribunal has approved the merger of Netcare Group and mental health care provider Akeso Group subject to conditions relating to pricing and divestiture by Netcare of its Rand Hospital and Bell Street Hospitals to address concerns raised by the Competition Commission.

Both parties are active in the provision of private healthcare in South Africa with an overlap in mental healthcare. The primary acquiring firm, Netcare, operates a private hospital network in South Africa and the United Kingdom and has licenses for psychiatric beds in its acute hospitals. Target firm Akeso is a group of in-patient clinics that provide individual, integrated and family orientated treatment for a range of mental health, psychological and addictive conditions. The Akeso Group’s mental health hospitals are located throughout South Africa.

In terms of the conditional approval:
Netcare shall maintain the base tariff currently implemented at Akeso facilities as agreed to between Akeso and various medical aid schemes;
Netcare will not seek to alter the tariff classifications used at Akeso facilities for any existing treatment modalities;
Netcare will honour Akeso’s existing contractual agreements with medical aid schemes with regard to ARMs (Alternative reimbursement models);

The post transaction annual tariff increases for fee-for-service reimbursement at Akeso will be tied to the tariff increase negotiated by Netcare with medical aid schemes in respect of its acute hospitals.

Netcare will dispose of Rand Hospital and Bell Street Hospital which both presently have psychiatric health beds to a purchaser which is able to prove to the Commission that it has the requisite resources and incentive to develop the hospitals as a viable and active competitive forces in competition with Netcare and other competitors.

The Competition Commission had initially recommended to the Tribunal that the merger be prohibited concluding that the deal was likely to cause a substantial lessening of competition. The Commission said the merger would result in significant combined market shares in the provision of mental healthcare services in a local market in Gauteng, with the merged entity likely to exercise market power.

In response to questions raised by the Tribunal, the merging parties tendered further conditions to the merger which the Commission accepted would adequately address the concerns raised. The Commission thus reversed its recommendation from prohibition to approval subject to conditions.

The Tribunal will give its reasons for its decision in due course.

Find the order and conditions here.

Author: Competition Tribunal

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