The Australian Competition and Consumer Commission (ACCC) has continued its focus on the healthcare and life sciences sectors this year, most recently commencing litigation against Little Company of Mary Health Care, operator of Calvary Health (Calvary), a major Australian healthcare provider.

The ACCC alleges that Calvary's 2011 by-laws relating to the use of its medical facilities by medical practitioners amount to "exclusive dealing" under Australian law and had the purpose of substantially lessening competition in regional markets for day surgery services. This follows allegations made by the ACCC against a pharmaceutical company in relation to exclusive dealing earlier this year.

In light of recent cuts to the regulator's budget, instead of spreading itself more thinly across all industries in the Australian economy, the ACCC has determined to select target industries on which to focus its enforcement efforts, one of which clearly is healthcare and life sciences. In this environment it is important that businesses in these sectors exercise significant caution when assessing business activities for competition law compliance. In particular, the regulator has taken a keen interest in both discounting practices and restrictions that constructively amount to exclusivity provisions, and any compliance efforts should accordingly pay due regard to these issues.

The challenged conduct

Calvary operates a range of healthcare facilities in both metropolitan and regional areas across Australia, including private and public hospitals, day surgery centers, aged care centers and other rehabilitation facilities. Relevant to these allegations, Calvary provides day surgery facilities in a number of regional areas.

In March 2011 Calvary introduced new by-laws restricting the ability of medical practitioners who are contracted to perform day surgery procedures in Calvary's day surgery facilities from establishing or operating competing day surgery facilities.

The ACCC alleges that the introduction of the by-laws by Calvary constituted "exclusive dealing" and that the purpose of this conduct was to substantially lessen competition in each of the relevant day surgery markets. Exclusive dealing is prohibited under Australia's Competition and Consumer Act 2010(CCA) where it has either the purpose or effect of substantially lessening competition. In the alternative, the ACCC claims that the conduct amounts to an agreement with the purpose or effect of substantially lessening competition, which would constitute a breach of the broader competition prohibition on anticompetitive agreements under the CCA.

Part of a broader strategy for the ACCC

This case highlights the ACCC's continued focus on the healthcare and life sciences industries. In a telling sign of its view that competition law compliance in these industries requires attention, in announcing these proceedings the ACCC stated that "we want the medical profession … to understand that this is not an appropriate thing to do."

In contrast to past years, in the last twelve months the ACCC has increased its focus on the healthcare and life sciences industries. In particular, the ACCC has challenged alleged exclusive dealing and misuse of market power in pharmaceuticals and opposed the acquisition of hospitals and medical services businesses. The regulator has also imposed penalties on breast imaging providers and a health insurance comparison service in relation to conduct found to be misleading and deceptive.

ACCC action in these particular industries should be seen in the context of a broader Australian Government focus on the healthcare and life sciences industries. In particular the Government has directed the recently-established Competition Policy Review Panel to look specifically at competition issues associated with the healthcare and life sciences industries throughout the Australian economy and to report back with far-reaching recommendations for reform.

ACCC not alone in targeting competition law issues in the healthcare industry

The ACCC is not alone in its emphasis on the health care and life sciences industries. Competition authorities around the world pay keen attention to the potential for competitive harm in these rapidly evolving industries. 

The Director of the U.S. Federal Trade Commission's Bureau of Competition recently affirmed that, "effective antitrust enforcement is as important in a time of dynamic change as in periods of stability, if not more so." The FTC's "enforcement efforts help ensure that new and potentially more efficient ways of delivering and financing health care services can develop and compete, while preventing accumulations of market power that will injure consumers through reduced competition."

Implications for compliance

It continues to be the case that agreements or arrangements between competitors should always be approached with a great degree of caution in light of the competition law risks associated with these types of arrangements.

In addition to agreements between competitors, the ACCC is increasingly focused on more complex forms of conduct that in some circumstances can be anticompetitive, including discounting practices and restrictions that may constructively amount to exclusivity provisions. This is particularly the case in the healthcare and life sciences industries where such arrangements can be common.

Given enforcement officials' focus on healthcare and life sciences, businesses should ensure that compliance programs adequately address the antitrust risks associated with restrictive arrangements. In particular, any provision that prevents or restricts a customer or supplier from dealing with a competitor should be carefully reviewed for compliance risk. 

Jason A. Beer and Stella Lee, associates in the Sydney Office, assisted in the preparation of this Alert.