Price-fixing detectives are on your case
Louise Banér
Louise Banér, director of the Competition and Markets Authority, gives advice to readers on how to avoid breaching anti-cartel rules.
Fair competition is a fundamental component of a healthy and successful economy. When businesses agree to avoid competing with each other, they undermine this, with harmful consequences for consumers.
In the case of private medical healthcare, this may mean patients paying more and having less choice.
Earlier this year, I led an investigation into price fixing in the private ophthalmology sector. This resulted in the Competition and Markets Authority (CMA) imposing a fine of £1.2m on a private hospital group for facilitating a price-fixing arrangement for self-pay ophthalmology consultation fees, as well as fining six consultants involved.
This case is not the only instance where the CMA has taken action in the private medical healthcare sector.
In 2015, we imposed a fine of c£380,000 on Consultant Eye Surgeons Partnership (CESP) Ltd, which broke competition law by agreeing prices, recommending its members refuse to accept lower fees from an insurer and facilitating the sharing of confidential business intentions, including on future pricing, between members.
Just prior to this, in 2014, we also published the final report of our market investigation into private healthcare, which included recommendations on pricing transparency that are now being implemented by the Private Healthcare Information Network.
On the radar
The private healthcare sector is therefore firmly on the CMA’s radar and the purpose of this article is to help private practitioners learn from our previous investigations and avoid making similar mistakes.
A key message is that competition law and the rules that govern businesses apply equally to you, as private practitioners, as they do to large corporations.
Yet we know from research with a broad range of businesses across the country that awareness and understanding of competition law remains low.
Only 57% of those we polled know that it is illegal to fix prices and 41% don’t know that attending a meeting where rivals agree prices is illegal.
Over half (59%) don’t know that agreeing to split up markets and share customers with competitors is illegal.
This lack of understanding of competition rules is worrying. Not knowing that a business practice is illegal is no excuse for wrongdoing and the consequences of getting caught are serious (see box on the right)
I and colleagues at the CMA believe that the majority of private practitioners want, above all, to do the right thing for their patients and to comply with the law. The good news is that we have advice and information to help you.
Below I set out some key points that can act as a guide.
Re-cap on competition rules – what you need to know
It is illegal to fix prices or to exchange or share confidential and commercially sensitive pricing information, such as future pricing intentions, with competing service providers such as independent consultants in private practice or between private healthcare groups.
It is illegal to facilitate price-fixing agreements between consultants in private practice by suggesting or allowing an arrangement where competing service providers co-ordinate or agree to fix prices for their patients.
Equally, it is illegal to facilitate the exchange or sharing of confidential and commercially sensitive pricing information, such as future pricing intentions, between competing independent consultants in private practice.
It is illegal to agree to divide or share markets – such as particular places – or customers between competitors.
It doesn’t matter if not all your competitors are involved; all it takes to set up an illegal agreement or arrangement is at least two competitors and one or more emails or a meeting.
Price-fixing covers more than agreeing to raise prices. You will still be breaking the law if your prices stay the same and you have agreed with one or more of your competitors not to lower them.
You can find out what prices are charged by your competitors where this information is publicly available, but you must not discuss with rivals their future prices or pricing intentions.
If you are approached to join an illegal arrangement, reject the approach immediately and unequivocally, seek legal advice and report the incident to the CMA.
Be clear on who your competitors are
Your competitors are typically other private medical practitioners and private clinics and hospitals who offer services that patients and commissioners of care would consider substitutes for the services you offer – such as for the same procedure and in the same geographic market.
The exception is where two or more medical practitioners form a business – for example, a group such as a limited liability partnership – and do all their private work exclusively for that business.
Subject to certain conditions, and provided you cease your activities as a sole trader, you and your business partners are likely to be viewed as a single economic unit – known in competition law as a ‘single undertaking’ – rather than as competing businesses.
If you work for such a group, then your competitors are those medical practitioners, competing groups and private clinics who offer services that are substitutes for the services your group offers.
Agreeing fees in a group
If your group is acting as one undertaking, then an agreement about fees charged by that group is not considered an agreement between competitors. It is an internal management decision only.
Groups and their members may wish to take specialist legal advice on whether the group constitutes a single economic unit and therefore one undertaking for competition law purposes.
Agreeing fees in a group when also working outside the group
If you also work outside the group as a sole trader, then you do not form a single undertaking with the group.
This means that you may be directly competing with the group and/or its members if they also work outside the group as sole traders.
If you work both within and outside a group, then consider establishing clear rules on who is allowed to receive the group’s pricing information which relates to offering similar services to customers in the same geographic market.
For example, you could change the type of membership to limit the exchange of competitively sensitive information and the co-ordination of commercial response by competitors.
Whatever structure is chosen, to be compliant it will need to avoid the exchange of commercially sensitive information between competitors.
Circumstances which do not pose a risk to competition law
Competition law does not prevent you from adapting yourself intelligently to the existing or anticipated conduct of your competitors, which may include charging the same fees as other professionals in your field.
The law does prohibit, as I have explained above, any direct or indirect contact by which a private medical practitioner may influence the commercial conduct of competitors, such as the prices they will charge.
It is important to note that there are many circumstances where private medical practitioners can co-operate and exchange information with their competitors to achieve positive outcomes for patients.
These could include the joint purchasing of services, educational activities or exchanging information for the purpose of improving services to patients, such as offering new and additional services and extending opening hours. For more detail on this, see our specific advice: Private medical professionals: information on competition law.
What to do if you think you may have broken the law
However, if you find yourself in a situation where you think the law may have been broken, there are significant benefits to coming forward and being one of the first to report the illegality – provided you fully co-operate with a CMA investigation. This can include avoiding being fined.
Even after an investigation has started, you can still benefit from reduced fines through our leniency programme.
Individuals may also be eligible for immunity from prosecution and director disqualification if they come forward independently and co-operate with us.
If you think you could be at risk of breaking the law, always seek independent legal advice.
For more information on how best to spot and report anti-competitive practices, visit: gov.uk/cheating-or-competing.
