TWO hospital groups, wanting to merge in the Durban area, argued at a Competition Tribunal hearing yesterday that the Competition Commission had taken various positions that could not be reconciled in its prohibition of their transaction.

The commission, in turn, accused the merging parties, Life Healthcare Group and Joint Medical Holdings (JMH), of colluding on prices since 2004 and said the history of collusion between the two hospital groups was relevant in the tribunal's consideration of their merger.

Danny Berger SC, appearing for the commission, said even if the tribunal held that the history of collusion was not relevant to this merger, it argued that the status quo would change post-merger and prices for medical schemes and private patients could increase.

Mr Berger said claims by the merging parties that Life Healthcare had joint control over JMH and was therefore entitled to set prices and arrange market conditions jointly was incorrect.

The commission and the parties delivered closing arguments yesterday. The tribunal must decide whether to confirm the commission's prohibition, or approve the merger with or without conditions.

The commission recommended the prohibition on the grounds that it would lessen or prevent competition in the greater Durban area, that it would result in the removal of an effective competitor and that the dominance of the merged entity in the area could give rise to higher prices for healthcare.

The merging parties said the commission's case was confused as it "steadfastly refused to have regard to the facts". The parties argued that Life Healthcare had joint control since its first acquisition of 25% in JMH in 1997.

It had subsequently increased its stake to 49%, which gave it joint control with the ability to materially influence the policy and strategic direction of JMH, including pricing. Life Healthcare now wants to increase its interest to 70%, which would give it sole control.

David Unterhalter SC, appearing for the merging parties, said since there was no complaint referred to the tribunal on price collusion between the merging parties, it was not relevant to the matter.

It was not unlawful for a joint controller to set the prices of the jointly controlled firm.

The commission's contention that the merger would result in the removal of a competitor was also at odds with its own submission that the merging parties had not been competing to date, but colluding. Mr Unterhalter said that it was of no consequence whether an effective competitor had been removed from the market or not, unless it showed harm to competition because of the removal. The commission's case did not show harm.

Mr Unterhalter also said the commission's case had been "ever-changing", with it first saying Life Healthcare had implemented its acquisition when moving from 25% to 49% without approval, then saying the case was about the move from joint control to sole control, and at the hearing before the tribunal, it advanced the collusion case.

vissera@bdfm.co.za