Watchdog armed to the teeth

2013-03-17 10:00

In a matter of weeks, the competition commission will get more powers to combat collusion and the cartels that appear to be under every rock in corporate South Africa.

When section 6 of the Competition Amendment Act becomes law on April 1, the commission will be empowered with the legal right to conduct market inquiries.

So unlike the commission’s banking inquiry, where banks voluntarily complied and decided which documents the commission could access, it will now be able to subpoena witnesses to testify and demand documents.

It can also charge a firm based on information obtained during the inquiry.

First in its sights is the private healthcare sector, which has been a source of much debate in South Africa of late, with Health Minister Aaron Motsoaledi pushing for a more transparent private sector.

The inquiry was this week welcome by the sector, saying it would enable it to avail more information on challenges and opportunities.

At a press briefing this week, members of the commission’s senior management said the inquiry was at “proposal stage” and there had been consulting on it for six months.

An independent committee and its chair are being appointed to guide the work of the commission during the inquiry.

They will “drive decisions”, as one senior manager from the commission put it.

“A market inquiry has to be a logical, factual decision,” says Shan Ramburuth, the competition commissioner.

Ramburuth argues there is a lot of concern around private healthcare costs and mentioned Motsoaledi personally when he said: “The minister wants to understand how prices in these markets work.

Said another senior manager at the commission: “There are concerns about pricing, the state of competition and the lack of innovation to serve lower LSM consumers.”

Says Ibrahim Bah, the divisional manager for mergers and acquisitions at the commission: “Healthcare is difficult to deal with everywhere.”

Bah has recently returned to the commission from a stint with the Irish competition authorities and has experience with medical sector regulation from a similar Irish process.

Another senior manager at the commission indicated that some of the key recommendations from the banking inquiry could be reinvestigated now that the commission had greater powers.

Discovery Health’s CEO, Jonathan Broomberg, said they would cooperate fully with the proposed inquiry since the company viewed it in a positive light.

“This process will increase the information available to policy makers, as well as the understanding of the challenges and opportunities facing our healthcare system,” said Broomberg.

Netcare’s director of strategy and health policy, Melanie Da Costa, said: “We see such an inquiry as a transparent process affording an opportunity for the facts to be conveyed with the view to a more informed debate on healthcare access and delivery in South Africa.”

Peter Jordan, the principal officer of Fedhealth, said that it was early for them to comment and that “we have consulted a competition law expert, who we will work with moving forward. However, we don’t see any direct impact on the scheme, or see any reason to be concerned.”

He added: “All our negotiations are conducted in the best interests of our members, and we negotiate price independently with the various hospital and service providers.”

Board of Healthcare Funders spokesperson Heidi Kruger said they welcomed the inquiry and believed that the commission’s new powers would “enable the process to move from one that was voluntary into something which will have much more credibility”.

“As such, it will form the basis on which policy makers can legislate private sector providers. There is currently no transparency in the pricing of healthcare services,” Kruger said.

She said there was a lack of scientific approach in arriving at tariffs.

“There are also many other cost drivers within the industry that need to be curtailed through reform.”

“We hope this inquiry will expose these issues and the necessary reform will take place so that our world-class private sector can become more affordable to more of the population and that the private sector can begin to position itself to become an integral part of the proposed National health Insurance.

“We believe that the commission should not necessary limit itself to two years, as this may not be sufficient time to delve into what is a very complex environment.”

What legal minds think

In my view, the market inquiry provision is problematic because it in effect permits the commission to go on a fishing expedition at the expense of the parties being investigated.

- Martin Versfeld, Webber Wentzel

It is not likely that the new provisions can be used to go on a fishing expedition where the commission has no good reason to suspect a problem.

The process for a market inquiry is full of formalities and requires a great deal of time and resources to put in place – with the result that they will not be embarked upon lightly as an alternative to a targeted investigation.

- Chris Charter, Cliffe Dekker Hofmeyer

This amendment will significantly bolster the commission’s powers to investigate sectors of the economy in which they perceive competition to be deficient, even if they do not suspect a contravention of the (Competition) Act has taken place.

But the section is very broadly drafted and it remains to be seen how invasively new powers will be used.

- Heather Irvine, Norton Rose

The simple point is that the commission will have to strike a careful balance between a procedurally fair, informative inquiry and an unduly invasive fishing expedition with dubious results.

- Paul Coetser, Werksmans

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