Facts
Decision
Comment


The Federal Cartel Office (FCO) recently prohibited the acquisition of the hospital Agaplesion Hochstift Krankenhaus by fellow hospital Klinikum Worms. According to the FCO, the intended merger would have created a dominant position on the relevant market and substantially reduced patient choice.

Facts

Both hospitals are situated in the city of Worms. With 555 beds and nine specialist departments, Klinikum Worms is the largest hospital in Worms, but is not part of a hospital chain. Agaplesion Hochstift Krankenhaus has 141 beds and six specialist departments, among which include several departments that also exist at Klinikum Worms. St Marienkrankenhaus is the only other hospital in the Worms area, and has 85 beds.

Decision

The FCO blocked the acquisition on the grounds that it would have created a dominant position on the market.(1)

The FCO defined this as the acute hospitals market, encompassing all hospitals offering inpatient medical services.

For the purpose of defining the relevant geographical market, the FCO followed its standard approach and made an assessment based on a survey of patient traffic flows between hospitals which were interchangeable from the patient's point of view. The FCO concluded that the geographical market in this case consisted of the Worms area. However, since some hospitals outside this area are regularly chosen by a significant number of patients from Worms, the FCO took the market shares of these hospitals into account when calculating the market shares in the Worms area.

After the merger, the new entity would have held a 50% market share. The position of the remaining competitors would have been weak, with the largest competitor holding a 7.5% market share. Therefore, the FCO concluded that the merger would have created a dominant position for the new entity and would have substantially reduced patient choice in the region.

Comment

This is one of very few cases in which the FCO has blocked a merger between hospitals. Only 10% of the 170 acquisitions in the hospital sector assessed by the FCO since 2004 involved the second phase proceedings, and only six of these acquisitions were ultimately prohibited.

The prohibition in this case affected a large regional player whose nationwide market share would be negligible. This is a consequence of the FCO's local approach to the definition of the geographical market, which is unfavourable for regional players. However, for large hospital chains the FCO's approach means that they can acquire hospitals in local markets in which they do not yet have a presence without significant difficulties.

The FCO upheld its opinion that the relevant markets in the hospital sector are:

  • acute hospitals;
  • rehabilitation facilities;
  • nursing homes; and
  • private hospitals.

It claimed that no further segmentation of these markets is required. However, the FCO assessed – as in previous cases – the parties' combined market shares in narrower markets for specialist medical services. This was done because the Federal Court of Justice, in Kreiskrankenhaus Bad Neustadt,(2) had left open the question of whether such markets must be distinguished should a merger particularly affect a certain field of medical services. Thus, the possibility of such narrow market definitions must be kept in mind in hospital merger cases.

For further information on this topic please contact Ann-Christin Richter at CMS Hasche Sigle by telephone (+49 40 37 63 00), fax (+49 40 37 63 040 600) or email (ann-christin.richter@cms-hs.com).

Endnotes

(1) FCO, Decision September 5 2012, B 3 - 86101- Fa – 43/12, see www.bundeskartellamt.de/wDeutsch/download/pdf/Fusion/Fusion12/B3-43-12.pdf?navid=84 .

(2) Federal Court of Justice, Decision January 16 2008, KVR 26/07, NJW-RR 2008, 1426.

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