The new Enterprise and Regulatory Reform Act (ERRA) received Royal Assent on 25 April 2013, although most provisions are not due to come in to force until 2014. From 2014, the ERRA will combine the Office of Fair Trading (OFT) and the Competition Commission (CC), the general competition authorities, into a new body called the Competition and Markets Authority (CMA). It has potentially significant consequences for the development of NHS competition.
Duty to promote competition - The CMA will have a more active, promotional role in respect of competition including the NHS
Both the OFT and Monitor have concurrent powers under the Competition Act 1998 to enforce competition law. However, unlike the position in relation to Monitor, the CMA will have a duty to promote competition for the benefit of consumers.
There was much political opposition to Monitor having a duty to promote competition in the NHS and, during the passage of the Health and Social Care Act 2012 (HSCA), the Government's position notably softened. Now the HSCA only requires Monitor to "exercise its functions with a view to preventing anti-competitive behaviour". In effect, Monitor was given a wide discretion as to whether to investigate anti-competitive behaviour.
This is in contrast with other sector regulators such as Ofgem, Ofwat and Ofcom, which all have duties to promote competition. Historically, in both the energy and telecoms sectors, the regulator, spurred on by complaints of new entrants and its duty to promote competition, drove the competition agenda, resulting in greater levels of competition. Given the CMA's duty to promote competition, new entrants might be more inclined to complain to the CMA rather than Monitor.
The ERRA will give priority to competition law enforcement
Latterly, sector regulators have been criticised for being too passive in relation to enforcing competition law. So, in common with other sector regulators, ERRA will require Monitor to consider using its Competition Act powers first. This means that where an agreement or conduct could breach both sets of rules, Monitor is obliged to consider using its Competition Act powers first.
It is worth recalling that the duties on Monitor regarding the duty to enable service integration, for instance, do not apply when it is exercising its Competition Act functions; however, it may have regard to them. Given Monitor's duties otherwise, it is quite possible that the CMA will give such issues less weight than Monitor. Arguably, therefore, the CMA is more likely to view competition issues and complaints in isolation from issues such as service integration. This is another reason why complainants might find it more attractive to complain to the CMA rather than Monitor.
Currently, the Competition Act 1998 (Concurrency) Regulations 2004 (SI 2004, No 1077) govern concurrency and these require notification and agreement by the OFT and the sector regulator as to which will investigate a particular complaint. Failing such an agreement, the matter is then to be decided by the Secretary of State. More informally, the regulators debate issue-allocation through the Concurrency Working Party. Current policy has seen the sector regulator undertaking cases which fall within its areas, although following ERRA, for the reasons discussed, this position may evolve differently.
This could result in a far more aggressive competition regime with, for example, large financial penalties and competition decisions which do not properly incorporate issues such as service integration.
Private party access to NHS facilities may become a reality despite opposition efforts
In the liberalisation of the utility markets, regulated non-discriminatory access to the incumbent's facilities (the 'natural monopoly' areas, which may be defined as those markets where it is efficient to have only one firm) was instrumental in generating more competition. This allows private firms to enter a market which previously would have been uneconomic. It's another area in which, during the passage of the HSCA, the Government's position softened. Currently, the HSCA prohibits Monitor from imposing third party access licence conditions on NHS providers; however, access might be mandated under competition law.
Consistent with European competition law, a refusal to grant access, where both the incumbent provider is dominant and the facility is considered essential, may be an abuse of a dominant position under the so-called "essential facilities doctrine". NHS facilities, such as expensive diagnostic equipment and operating suites, particularly in more rural areas, might be considered essential, depending on how markets are defined by the relevant competition authority. Those in breach of competition law rules may be fined up to 10% of turnover and the relevant competition authority may issue directions mandating access.
The development of competition in the NHS in England may be far more ad hoc
The ERRA risks undermining the concessions achieved by opposition parties during the passage of the HSCA and conceivably its changes are likely to result in greater levels of competition. It may mean that NHS competition is more likely to be shaped through a series of ad hoc Competition Act cases which do not take full account of NHS-specific considerations, rather than through deliberation, consultation and discussion.
This comes at a time when the ability of clinical commissioners and others to mitigate the effect of provider deficits and manage the impact of competition could be significantly restricted. The European General Court has recently set aside a Commission decision which approved payments to fund Belgian public hospital deficits; raising the distinct possibility that such payments could be considered unlawful State aid.
Under European law, unlawful State aid, plus interest, is required to be repaid and those making the payments could be liable for damages to affected competitors.