South African Market Inquiries: What Lies Ahead and is it Justified?

By Michael-James Currie

The South African Competition Commission (SACC) recently announced that it will be conducting market inquiries into both the Public Passenger Transport sector (Transport Inquiry) as well as investigate the high costs of Data (Data Inquiry).

These inquiries are in addition to the SACC’s market inquiries into the private healthcare sector and grocery retail sector (which are still on-going) and the recently concluded LPG market inquiry.

There are mixed feelings about the benefits of market inquiries in South Africa. Market inquiries are extremely resource intensive (both from the SACC’s perspective as well as for the key participants in the inquiry) and the outcomes of the inquiries which have been concluded (including the informal inquiry in the banking sector) are lukewarm at best. There is little evidence available which suggests that the resources incurred in conducting market inquiries in South Africa are proportional to the perceived or intended pro-competitive outcomes.

Leaving aside this debate for now, the SACC’s most recent market inquiries are particularly interesting for a variety of additional reasons.

Firstly, in relation to the Transport Inquiry, the Terms of Reference (ToR) set out the objectives and the key focus areas of the inquiry. In this regard, the ToR indicate that pricing regulation is one of the key factors which allegedly creates an uneven playing field between metered taxis for example and app-based taxi services such as Uber.

It should be noted that the metered taxi association of South Africa had previously and unsuccessfully submitted a complaint to the SACC against Uber for alleged abuse of dominance. The success of Uber in South Africa has widely been regarded as pro-competitive.

Both prior and subsequent to the complaint against Uber, however, an overwhelming number of metered taxi drivers (both legal and illegal) have resorted to deliberate violent tactics in order to preclude Uber drivers from operating in key areas (i.e. at train stations). In fear of having themselves, their passengers and their vehicles harmed, many Uber drivers oblige. It would be most interesting to see how the SACC tackles this most egregious forms of cartel conduct, namely market allocation (albeit entered into under duress).

Over and above the ‘metered taxi v Uber’ debate, there are additional issues which the Transport Inquiry will focus on – including alleged excessive pricing on certain bus routes, regulated route allocation and ethnic transformation within the industry.

What will likely become a topic (directly or indirectly) during the Transport Inquiry are the allegations, as African Antitrust (AAT) had previously reported, that ‘the “taxi and bus” industry is riddled with collusive behaviour. In light of the fact that most of South Africa’s indigent are fully dependent on taxis for transportation in South Africa and spend a significant portion of their disposal income on taxi fees, this is an issue which needs to be addressed urgently by the competition agencies by acting “without fear, favour or prejudice”’.

In this regard, the ToR indicates that “between 70% and 80% of the South African population is dependent on public passenger transport for its mobility”. The majority of these individuals would make use of ‘minibus taxis’.

The Transport Inquiry ToR do not mention this seemingly most blatant violation of competition law principles and it remains to be seen to what extent the SACC’s is prepared to investigate and assess hardcore collusion in the industry.

In relation to the second market inquiry, the SACC will also conduct an inquiry in relation to the high data costs in South Africa.

The High costs of data in South Africa seems to be key issue from the government’s perspective and the Minister of Economic Development, Mr Ebrahim Patel called for the SACC to conduct an inquiry into this sector. Further, the high costs of data in South Africa seems so important to economic growth and development that the Minister of Finance, Mr Malusi Gigaba, not only echoed Minister Patel’s calls for a market inquiry into high data costs, but identified such a market inquiry as part of his ‘14 point action plan’ to revive the South African economy.

Given that the three formal market inquiries which the SACC has commenced with to date have, only one (the LPG inquiry) has been finalized. Even the LPG inquiry took nearly three years to conclude. The private healthcare inquiry and the grocery retail inquiry which commenced in 2014 and 2015 respectively, still seem someway off from reaching any finality.

The length of time taken to conclude a market inquiry is, however, not the end of the matter from a timeline perspective. Following a market inquiry, recommendations must be made to Parliament. These recommendations may include legislative reforms or other remedies to address identified concerns with the structure of the market. Parliament may or may not adopt these recommended proposal.

Accordingly, it seems unlikely that from the date a market inquiry commences, that there will be any pro-competitive gains to the market within 5-7 years. That is assuming that the market presents anti-competitive features which can be remedies through legislative reform

While there appears to be consensus among most that data costs in South Africa are disproportionately high when compared to a number of other developing economies, the positive results envisaged to flow from a market inquiry is not only difficult to quantify, but will only be felt, if at all, a number of years down the line. Hardly a first step to revive the economy on a medium term outlook (let alone the short term).

Furthermore, and entwined with the SACC’s market inquiry into Data Costs, is that the Independent Communications Authority of South Africa (“ICASA”) decided to also conduct a market inquiry into the telecommunications sector, which includes focusing on the high costs of data.  ICASA has indicated that it will liaise with other regulatory bodies including the SACC.

It is not clear what level of collaboration will exist between the SACC and ICASA although one would hope that due to the resource intensive nature of market inquiries, there is minimal duplication between the two agencies – particularly as their objectives would appear identical.

As a concluding remark, absent evidence which convincingly supports the beneficial outcomes of market inquiries in South Africa, perhaps a key priority for the authorities is to conclude the current inquiries as expeditiously as possible and conduct an assessment of the benefits of market inquiries (particularly in the manner in which they are presently being conducted), before initiating a number of additional market inquiries.

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Gun jumping: Record antitrust fine for failure to notify merger

S.A. Competition Tribunal imposes record fine for missed merger filing in healthcare

By AAT guest author Meghan Eurelle

On 7 April 2016, the South African Competition Tribunal (“Tribunal”) confirmed that merger parties Life Healthcasouth_africare Group Proprietary Limited and Joint Medical Holdings Limited had entered into a consent agreement with record-breaking consequences.  The two hospital groups admitted to not complying with the Competition Act, 1998 (“the Act”) by failing to notify the competition authorities of their merger and to obtain the required approval prior to the merger being implemented; and subsequently agreed to jointly pay an administrative penalty of 10 million Rand, or approximately U.S. $690,000.  (Interestingly, the parties also conceded that they were guilty of fixing the price of services back in 2004 but the Tribunal dropped these charges.)

gunjumpingThe R10-million administrative penalty is a record amount for gun-jumping, or the failure to notify the competition authorities of a merger.  Previously, the highest penalty for a failure to notify was just over R1-million. The new record penalty follows numerous warnings by the Competition Commission (“Commission”) that it intended to materially increase penalties for failure to notify mergers — says Andreas Stargard, an antitrust practitioner with Pr1merio advisors, “South Africa has a suspensory merger-notification system, like most international antitrust regimes do.  And unlike other African countries, such as Senegal or Mauritius, the domestic S.A. competition legislation prohibits transacting parties from effecting the transfer of control or beneficial ownership prior to obtaining clearance from the authorities.”

In terms of the Act, transactions that are defined as “intermediate mergers” and “large mergers” must be notified to the Commission and may only be lawfully implemented if it has been approved, with or without conditions, by the relevant competition authorities. Small mergers do not have to be notified in the ordinary course and may be implemented without approval unless required by the Commission.

Merger notification thresholds in South Africa remain as follows:

Acquiring and Target firm (merger group) Target firm
Large Merger Combined assets and/or turnover of at least R6.6-billion. AND Assets and/or turnover of at least R190-million.
Intermediate Merger Combined assets and/or turnover equals or exceeds R560-million but is less than R6.6-billion. AND Assets and/or turnover equals or exceeds R80-million but is less than R190-million.
Small Merger Combined assets and/or turnover of less than R560-million. OR Assets and/or turnover of less than R80-million.

In light of the above, it serves as an important reminder to parties that they ensure compliance with the competition authorities and the Act so as to avoid costly consequences.

Commission details plans for private healthcare sector inquiry

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Further details revealed by inquiry panel

On Friday, subsequent to outlining the time table of the project, the South African Competition Commission Competition Commission released important frameworks for its sectoral inquiry into the competitiveness of the private healthcare sector in the RSA. The key documents are a draft “statement of issues” (which the Commission warned may further “evolve” during the course of the inquiry) and “guidelines for participation” for the market inquiry into the private healthcare sector, which is headed by retired Chief Justice Sandile Ngcobo. The public and affected stakeholders are invited to make written submissions on these before Monday, 30 June 2014 (South African Competition Commission direct e-mail address: health@compcom.co.za).

Notably, the statement of issues includes the role of the public sector in competition in the market for healthcare. This was a key sticking point for observers and stakeholders, as the initial framing of the inquiry appeared solely focused on the private players, failing to take into account the competitive restraints imposed by the strong public insurance schemes and other state-related participants in the healthcare arena.  (AAT published on this and related issues here and here.)

Other topics include, predictably from an antitrust point of view, regulation, market power and dominance, barriers to entry, as well as consumer-protection aspects. Taken together, the areas of concern have been grouped by the Commission’s inquiry panel into six possible theories of harm, which the Commission defines as follows: “A theory of harm refers simply to a hypothesis about how harm to competition might arise in a market to the detriment of consumers and to the detriment of efficient and innovative outcomes in that market.” (Statement of Issues at para. 9 and 53, as follows):

  1. Theory of harm 1: Market power and distortions in healthcare
    financing.
  2. Theory of harm 2: Market power and distortions in relation to
    healthcare facilities.
  3. Theory of harm 3: Market power and distortions in relation to
    healthcare practitioners.
  4. Theory of harm 4: Barriers to entry and expansion at various levels
    of the healthcare value chain.
  5. Theory of harm 5: Imperfect information.
  6. Theory of harm 6: Regulatory framework.

Private Health-Care Sector Inquiry: Time Table & Details

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Inquiry panel’s head details logistics

On 16 April 2014, the South African Competition Commission held a media briefing, in which the administrative guidelines, the administrative timetable and statement of issues for the inquiry were announced.  AAT previously reported on the health-care sector investigation here.

Addressing the media and other stakeholders at the briefing, the chairperson of the inquiry, former Chief Justice Sandile Ngcobo, provided a brief explanation of what a market inquiry is, provided an overview of its possible outcomes, the Competition Commission and panel’s approach, the use of information during the inquiry and the management of confidential information.

Furthermore, the former Chief Justice elaborated on the important dates and timelines of the inquiry, the statement of issues, theories of harm and that stakeholders ought to provide accurate information in order to assist the panel.

The important dates are:

Date Event
31 May Statement of Issues and Administrative Guidelines issues for public comment
30 June Deadline for submission of public comment on Statement of Issues and Administrative Guidelines
1 July – 31 July Incorporation of comments on Statement of Issues and Administrative Guidelines
01 August Publication of final Statement of Issues and Administrative Guidelines
01 August Call for submissions on subject matter of the inquiry
March and April 2015 Public hearings
November 2015 Forecasted completion of the inquiry

Philips & innovation in Africa: Driving worldwide growth

Philips’ CEO Frans van Houten recognizes untapped potential, invests in Africa

new multi-part series

In February, AAT launched its multi-part series on innovation & antitrust as a thematic collection focusing on the concept of innovation markets and how competition and IP laws are able to address the, by definition, novel issues that arise.  Recently, and timely so, Philips has joined this debate.

Philips & the future of African innovation: From “things” to “ideas”

For one, Frans van Houten, its President and CEO, has been quoted as saying: “Innovation is our lifeblood and will be the main driver of profitable growth going forward. … I intend to drive innovation with more intensity to help us win new customers.”

Notably, Philips changed its official company slogan from “We make things better” to “We create better ideas.

Mr. van Houten (source: Philips)

Even more pertinent, Mr. van Houten not only recognizes the crucial forward-looking importance of innovation.  Unlike many Western corporate leaders, he positively links it with the economic growth prospects of Africa.  In an insightful piece entitled “How Africa’s innovation will change the world” (published on the Davos World Economic Forum blog), Mr. van Houten discusses the promises, challenges, and realities of African innovation and resulting economic growth.

The article highlights the intuitive, yet elusive, insight that challenges become opportunities when looked at with an inventive spirit.  It also addresses the importance of multi-disciplinary approaches (such as the one at the foundation of our #AntitrustInnovation series, combining law, economics, and business innovation) and that of partnerships:

Seven years ago, millions of Kenyans were struggling to access basic financial services such as a bank account; they were unable to transfer money or receive microcredit. Then, a locally developed mobile payment system called M-Pesa [see AAT coverage here; — Ed.] radically changed everything. Today, more than two-thirds of Kenya’s population uses M-Pesa to make and receive payments and an estimated 43% of the country’s GDP flows through the system. This is transforming life in the country, increasing income in rural households and spawning a range of start-ups.

This speedy adoption of mobile payments captures the enterprising spirit of African innovation. It reflects the resourcefulness with which people in Africa find local solutions to local issues. It also shows how Africa’s challenges are opportunities in disguise and how the continent can bypass development stages without paying for their replacement. Mobile phones, for example, were rapidly adopted in Africa because of the lack of fixed telecom infrastructure. And solar panels are being adopted faster than in other parts of the world, because kerosene is so expensive that the payback time for investments in solar power is months rather than years.

Healthcare is another exciting area. According to a report from the World Economic Forum, Africa faces 28% of the global disease burden with only 3% of the world’s healthcare workforce. In response, Africa is adopting new operating models and technologies. By training health extension workers to focus on education, family planning and sanitation, Ethiopia achieved a 32% drop in child mortality and 38% drop in maternal mortality. In Kenya, e-learning has taught 12,000 nurses how to treat major diseases such as HIV and malaria, compared to the 100 nurses a year that can be taught in a classroom.

Africa is also embracing new business models that tap into the vitality of the country’s communities. Philips, for example, teamed up with Inyenyeri, a Rwandan NGO, to give families access to an innovative cookstove. Crucially, the cookstove is given away for free and families pay for the stove by harvesting twigs, leaves and grass. This biomass is compressed into fuel pellets, half of which are returned to the family for personal use and half of which are sold by the NGO. The cookstove is produced in Africa, highly energy efficient and, because it is smoke free, significantly healthier.

This example also shows the power of partnerships, without which many African innovations would not come to fruition. Solar-powered light centres, for example, increase the social activity and productivity of communities by generating light after sundown. These communities, however, are often unable to invest in a light centre, so this technology is rolled out through NGOs and governments. Sometimes these light centres are used to power medical equipment such as an ultrasound, or refrigerators that store vaccines. This type of cooperation ensures that innovation generates both financial and social value.

The complexity of Africa’s challenges also requires a multidisciplinary approach to innovation. Kenya, for example, is investing in systems that encourage open innovation. This sees local universities and small and medium enterprises join forces with NGOs, governmental organizations and foreign multinationals such as IBM and Philips, which have set up regional research and innovation centres in Nairobi. Nairobi is also home to iHub, a booming community of local entrepreneurs, investors and some of the world’s leading technology firms.

For innovation to really succeed in Africa, other factors need to be addressed, too. There is a lack of prototyping equipment and workshops, so local innovators depend on Europe or China, making the process costly and cumbersome. And while there are good patent laws in place, there are still too many counterfeit versions of successful products. Also, international firms should source locally and work with local distributors, whenever possible. And governments should focus their development money on stimulating entrepreneurship and innovation.

While in Africa millions of people still live on less than $2.50 a day, the continent looks set to have a brighter future thanks to local solutions for finance, healthcare and energy that could become globally relevant. M-Pesa, for example, has already been rolled out in other African countries, India, Afghanistan and Eastern Europe. Perhaps sooner than we think, African innovations will help the rest of the world create lasting social and economic value.

[Frans van Houten, President and CEO, Royal Philips, emphasis and links added, How Africa’s innovation will change the world” published on Davos World Economic Forum blog.]

Investment: done

More than just writing op-ed pieces, Philips’ leadership has put its money where it matters: On March 20, 2014, the company (with 23-plus billion Euros in annual revenue) announced that it was establishing a “Research & Innovation Hub” in Nairobi, Kenya.  The full Philips statement says:

  • The Philips Africa Innovation Hub in Kenya will be the center for developing innovations “in Africa-for Africa” in the areas of healthcare, lighting and healthy living

  • Hub underlines Philips’ commitment to invest in Africa and provide Africa-relevant innovations to address key challenges facing the continent

 Nairobi, KenyaRoyal Philips (NYSE: PHG, AEX: PHIA) today announced the establishment of its Africa Innovation Hub in Nairobi, Kenya, which underlines the company’s commitment to invest in Africa. The Philips Africa Innovation Hub will work both on the creation of new inventions, as well as bringing these inventions to the market.

The Philips Africa Innovation Hub will do application-focused scientific and user studies to address key challenges like improving access to lighting and affordable healthcare as well as developing innovations to meet the aspirational needs of the rising middle class in Africa.

The Philips Africa Innovation Hub will be located at the Philips East African Headquarters in Nairobi, where African talents and international researchers will operate on the concept of “open innovation” and will work in close collaboration with the R&D ecosystem of Kenya and Africa. Philips is in discussions with local organizations and Universities on R&D collaborations to co-create meaningful solutions for Africa.

“We welcome the establishment of Philips’ Innovation Hub in Kenya; Philips is a globally recognized innovation powerhouse and their selection of Nairobi as the site to establish their African Innovation hub is a testament to the Kenyan government’s commitment to nurture the drive for research and innovation in the region”, says, Hon’ble Adan Mohammed, Cabinet Secretary for Industrialization. “We lend our full support to the investment being made by Philips and look forward to the outcomes of their Africa-specific research and projects that can contribute to transforming society, business and government across the continent”.

JJ van Dongen, Senior Vice President & CEO Philips Africa states: “Philips is passionate to invent, apply technology and partner to help people succeed. Our ambition is to create impactful innovations that matter to people and address the key challenges that confront society. With Kenya as a leader in the continent in science and entrepreneurship as well as a hub of collaboration on technology and innovation, Nairobi, is the ideal location to establish Philips’ African research presence. We want to tap into the city’s vibrant R&D eco-system and contribute to the process of co-creating new solutions, new business models and meaningful partnerships to provide innovations that make an impact.”
Enhancing people’s lives in Africa though meaningful innovations
Some innovations that Philips was already working on have now become part of the Innovation Hub, hence, the Philips Africa Innovation Hub will kick-off with ventures that are under development as well as in the pilot phase; these include:

Respiratory rate Monitor to support pneumonia diagnosis: Pneumonia is the leading cause of death among children under the age of five, resulting in 1.1 million deaths worldwide annually¹. Of these, 99% of deaths occur in developing countries in low-resource settings, which typically entail rural areas with very limited or poor healthcare facilities or with low-skilled health workers. The current diagnostic tools in such settings are not easy to use, can easily distract the workers from an accurate conclusion, and thus lead to a poor diagnosis.

The Innovation hub is working on the development and clinical testing of a robust and affordable Automated Respiratory Rate Monitor that aims to support the diagnosis of pneumonia among infants and children, using smart sensing technology on the body which is intended to be more accurate and reliable compared to manual processes being currently observed. This device will be specially designed for use by community health workers and nurses in rural areas. In Kenya, discussions are on with the Kenya Medical Research Institute (KEMRI) to further develop this project and co-create an effective solution tailored to circumstances in rural Africa.

Community care services: The development and testing of a work-flow innovation designed to reduce the number of avoidable maternal and child deaths. The purpose of the workflow is to enable remote area health centers to diagnose, triage, treat, stabilize and (prepare for) transport expectant mothers that come in for a check-up and treatment.

Smokeless cook stove: Philips has designed and is manufacturing this innovative stove to improve the lives of those who rely on wood or biomass for their daily cooking. These specially designed stoves are extremely efficient and significantly reduce the use of wood as fuel. The cook stove can reduce smoke and carbon monoxide emissions by more than 90% compared to an open fire² thus reducing the health risks of indoor cooking. The contribution of the innovation hub is to create new go-to-market models for these stoves.

Consumer solar solutions: Today an estimated 560 million Africans live without electricity; Philips is committed to improving access to lighting in Africa, for the majority of the population that lives in off-grid communities. The Innovation hub is designing and developing new consumer products using the combination of solar power and energy efficient LED technology. New go-to-market models are also being established to ensure these solutions become accessible to people that would not be able to afford them otherwise.

The Philips Africa Innovation Hub while headquartered in Kenya, will be responsible for pan-African research and projects and will have operations across Africa, linked to the Philips regional offices across the continent; the hub will be headed by Dr. Maarten van Herpen and will work in close collaboration with the Philips research labs in Bangalore, Shanghai and Eindhoven.

¹ Source : Unicef  www.unicef.org/media/media_70890.html
² Reference source:  Water boiling test version 4.2.2 done at accredited stove laboratory, Aprovecho Research Center, Oregon, USA.

 

Antitrust sectoral healthcare inquiry

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Clarification of scope and timetable of sector investigation

According to official statements by the South African Competition Commission (“Commission”), the agency has clarified the administrative guidelines, administrative timetable, and statement of issues.  AAT has reported previously on the sectoral healthcare inquiry by the Commission, critically noting the apparent exclusion of the public healthcare segment, to the detriment of the private care providers.

Theories of harm – “just” theories

The Commission’s main document on the “stakeholder engagement meeting last week states as follows regarding its theories of harm:

[I]n order for the market inquiry to make determinations, it has developed a set of ideas or hypothesis about how harmful competitive effects might arise in the relevant markets under consideration. These ideas are generally referred to as “theories of harm”.
‘It is important to emphasise that these theories of harm are simply hypotheses, or tools, that will enable us to identify whether there are features or a combination of features that may prevent, distort, or restrict competition in the private healthcare markets. Theories of harm are not findings of harm; but are simply analytical tools to guide our analysis. They will be deepened and revised as the inquiry’s thinking develops,’ adds former Chief Judge Ngcobo.

Public comments, and timetable

The agency is “inviting stakeholders to make further comments” on its theories of harm, noting that:

The inquiry is set to follow a very precise and tight administrative timetable which is mindful of the timelines for gathering information including an invitation for written submissions, public hearings, site visits, seminars, and workshops and conducting surveys. Broadly, key milestones will include the issuing of information requests no later than 01 August 2014. The first round of public hearings will take place between 01 March 2015 to 30 April 2015 then from May 2015, the inquiry will analyse and review the information gathered. Presently, the panel aims to make provisional findings and recommendations available for public comment in October 2015.

healthcareinquirytimetabl

Commissioner calls agency’s work “reactive”, will appeal SABMiller case, counters “toothless dog” moniker

South Africa Flag

Revelations from Bonakele’s interview with CNBC Africa

South African interim Competition Commissioner Tembinkosi Bonakele called his agency, the Competition Commission (“Commission”), a “kind of reactive” enforcement body, aiming primarily to uncover cartel conduct.  In an interview with CNBC Africa‘s “Beyond Markets” segment, journalist Nozipho Mbanjwa asked the acting Commissioner tough questions on the Commission’s enforcement tactics, legislative mandate, fines imposed, the adequacy of the Commission’s capitalization, and whether the South African antitrust watchdog was, in fact, a “toothless dog.”

Bonakele held his ground, referring multiple times to the Commission’s recent successes, including the construction cartel, the bread case, cooking oils, and other “basic products” matters on which he said his agency would place the largest focus going forward.

The Acting Commissioner

The Acting Commissioner

Some of the highlights from the interview:

  • Bonakele is “quite satisfied” with the agency’s funding and performance of its 180 staff, but may ask for “more funding” specifically for the Commission’s sectoral health-care inquiry.
  • The Commission will focus its cartel-busting efforts on sectors in the basic products category such as foods and health-care.
  • The Commission will “definitely appeal” its loss of the SABMiller abuse-of-dominance matter, a “very tricky kind of offence in terms of competition law” according to Bonakele.  He said he did “not like” the 7-year long duration of the SABMiller saga, but felt compelled to extend the matter by bringing the case before the Competition Appeal Court.
  • “No comment” on the “classic” Unilever investigation.
  • On the much-maligned MultiChoice broadcaster, Bonakele called the company a “monopoly created by legislation” in a regulated market, and deferred to parliament to rectify the situation.
  • The Commission receives approximately 30% of its funds from revenues that are the result of merger filing fees.

South Africa Healthcare panel- a swing to the left?

While it certainly appears that the newly appointed panel to the first ever market inquiry into the South African private healthcare sector consists of a number of members who have a strong medical background, there is a concern, however, that this is significantly skewed in favour of those who have more of a public healthcare background.

This brings into question the degree to which the inquiry will be focused more on the question of accessibility of healthcare to all citizens (An aspect for which South African government has the main responsibility) on the one hand, and the perceived inefficiencies within the private healthcare sector where members/patients pay a premium for access to the latter.

The only economist on the panel is, interestingly, not from South Africa which may bring to question his ability to effectively understand the South African private healthcare sector, how it has evolved in the last two decades, particularly given the changes observed in regulations governing the different levels of the value chain.

A clear concern will be how well the panel will appreciate any commercial arguments, which would undoubtedly be brought forward by the industry, particularly providers.  At the end of the day these are private entities which rely on investors who seek certain levels of return, often irrespective of where those returns come from.

The Competition Commission should  be able to provide some assistance, however, given the level of attrition experienced at the Commission in the last 18 months the quality of those resources remains an issue.

A second aspect is the apparent exclusion of an assessment of the public sector.  Since government is ultimately tasked with providing healthcare services to the vast majority of unemployed in South Africa, these would be the very same majority which could never afford private healthcare today.  Ignoring the public sector is tantamount to ignoring the real issue.

The panel comprises of former Chief Justice Sandile Ngcobo, Professor Sharon Fonn, Dr Ntuthuko Bhengu, Dr Lungiswa Nkonki and Cornelis van Gent.  A brief overview of panel members is as follows:

  • Former Chief Justice Sandile Ngcobo served as the Chief Justice of the Constitutional Court from 2009 to 2011.
  • Professor Sharon Fonn is a medical doctor and registered public health specialist and she is currently the acting dean of the Faculty of Health Sciences at the University of the Witwatersrand.
  • Dr Nthuthuko Bhengu holds an MBChB and his most recent executive appointments have been with Metropolitan Health, Clinix Health Group and Biotech Laboratories.
  • Dr. Lungiswa Nkonki holds a PhD in health economics and is currently a senior lecturer at the University of Stellenbosch.
  • Cornelis van Gent is an economist with experience in competition economics, economic regulation and competition in healthcare markets.

The Commission Doth Protest Too Much?

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The defensive justification for the Commission’s healthcare inquiry by its acting chief has widely caused eyebrows to be raised…

As reported, the South African Competition Commission (“Commission”) has launched its first-ever market inquiry into the South African private healthcare sector.

The sector has recently been the subject of significant attention from the Commission, the South African health minister in particular, and the S.A. government in general. In spite of the perilous state of South Africa’s public health system, the government appears to have invested more time in deflecting from the obvious problems in the public branch by subjecting the private sector to a costly investigation.  From a procedural-history point of view, it is interesting to note that the market inquiry provision was brought into effect by way of Section 6 of the amended South African Competition Act. Although there were other areas of the legislation to be amended, it is noteworthy that only the market inquiry provision was brought into effect.

Many have suspected that the motivation behind the private healthcare inquiry was based on aspirations from outside the ambit of the Commission, particularly since the launch of the South African government’s National Health Insurance policy scheme (designed to achieve the noble aim of universal health insurance coverage, not entirely unlike the United States’ “Obamacare” effort) may ultimately cause the demise of a robust private healthcare sector.

Independence of Commission questioned

With this in mind, what is perhaps most interesting is a recent public submission made by the newly appointed 37-year old Acting Competition Commissioner Tembinkosi Bonakele in the South African media.  In an article co-authored with Ms. Paremoer, the Commission principal responsible for the healthcare inquiry, entitled Market inquiries an important advocacy tool (also published in the Sunday Times), Bonakele attempts to deflect any suggestions of government involvement in (or other ministerial influence over the pursuit of) the market inquiry. This approach seems at odds with Mr Bonakele’s predecessor, Shan Ramburuth – who was unceremoniously let go by the same government in a public display of shaming last year – in seeking to justify the motivation behind the private healthcare inquiry.  (We note that the present government has an apparent history of “letting go” unruly cabinet members in unusual and rather bombastic fashion, see here and here.)

Ramburuth’s Commission had previously stated expressly, for instance, that the inquiry was intended at least in part to review the sector for collusive behaviour, while Mr. Bonakele now disavows this rationale and claims that any such findings would merely be a side effect of the inquiry (“[o]f course, during such an inquiry, we may come across anti-competitive practices that need to be rooted out”).

In his piece, the Acting Commissioner seeks to reassure those who “remain confused about the […] intended market inquiry,” and states that the “inquiry is not a stalking horse“:

“we are simply seeking to understand how to improve efficiency and competition” in what he calls the “complicated web” of the healthcare industry.

Is this a case of Shakespearean “the [man] doth protest too much”, especially when keeping in mind that the private healthcare sector has previously been acknowledged to be competitive and efficient.  Mr. Bonakele has previously emphasised his independence, despite being referred to in the press as Minister “Patel’s man”:

“I haven’t responded to the media debate out there because I don’t think one has to stand on a mountain and say ‘I’m independent’. Actions speak louder than words.” [Source: BDLive]

Acting Commissioner Bonakele

The aim of the inquiry, according to the Acting Commissioner, is to improve competition and efficiency in the sector to such a degree that the ordinary man on the street will have full access. A very noble goal indeed, but when juxtaposed with the fundamental function and intention of the NHI,it is highly contradictory: the private healthcare sector is, by definition, not in the business of providing access to everybody. The public NHI body’s own slogan, on the other hand, shows that the national insurance programme fulfills precisely that role: “NHI is premised on the ideology that all South Africans are entitled to access quality healthcare services.”

What is perhaps of greater concern (with a wider applicability than just the healthcare sector, public or private) to competition-law enforcement in South Africa as a whole, is the confluence of the government’s industrial policy ambitions with otherwise supposedly independent Commission investigations and its competition adjudication based in the pure law & economics of antitrust. As previously reported in our piece on political interventionism in South African competition law, the Commission should seek to demonstrate its complete independence from the cabinet and executive branch as a whole, and avoid falling into the trap FTC Chairwoman Edith Ramirez warned against: the “proper goals” of competition law are best solved when a competition authority is focused on competitive effects and on consumer welfare and its analysis is not “interrupted to meet social and political goals.”

In sum, one must hope that Mr. Bonakele can be taken at his word when he says that, while “[m]aybe people think the minister will use the commission as a tool, but it’s just not possible. This is a legal process we are talking about.