The Background: The Australian Competition and Consumer Commission ("ACCC") has proposed allowing health insurer Hospitals Contribution Fund of Australia Limited ("HCF") and participating dentists to agree on the maximum price they will charge HCF members for basic preventative and diagnostic dental services.
The Significance: The proposed authorisation signals that otherwise potentially anticompetitive price-fixing arrangements may proceed with statutory immunity when the public benefit exceeds the anticompetitive effect.
The ACCC, in March 2018, released a Draft Determination stating that it proposes allowing health insurer HCF and participating dentists to agree on the maximum price they will charge HCF members for basic preventative and diagnostic dental services. Under the proposal, dentists that either operate under HCF's vertically integrated Direct Clinic Network ("DCN"), or participate in HCF's More for Teeth Program ("MFT") as preferred providers, would agree to cap fees for these basic services so that members do not have to pay a gap.
HCF also proposes increasing the number of DCN clinics in areas surrounding MFT providers in Australian cities, starting with Melbourne. The proposed cap arrangement between DCN clinics and MFT providers will be active for 10 years (in total, "Conduct").
HCF submitted its application for authorisation in October 2017, and five submissions were received before the ACCC released its Draft Determination proposing to authorise the Conduct.
The ACCC's Draft Determination proposing to authorise the Conduct is important as it demonstrates that statutory immunity, including protection from the ACCC or third-party action in relation to the authorised conduct, is available where there is an overriding public benefit outweighing any anticompetitive effect arising from the authorised conduct.
ACCC Draft Preliminary Authorisation
Under section 88 of Australia's Competition and Consumer Act 2010 ("CCA"), the ACCC may grant authorisations to parties proposing a course of conduct that may potentially be found to be in breach of the core competition law provisions in Part IV of the CCA. Prior to making a determination regarding a proposal, section 90A of the CCA requires the ACCC to prepare a draft determination to be considered by interested parties.
The ACCC proposes to authorise the Conduct on the basis that the operation of the MFT program and DCN clinics is likely to lower the cost and increase the use of preventative dental services, resulting in a net public benefit that outweighs any public detriment.
The ACCC proposed that MFT and DCN clinic providers are likely to continue to be subject to competition from other insurance and dental service providers for the following reasons:
In the ACCC consultation process, the Australian Dental Association ("ADA") submitted a number of arguments against the Conduct. In the Draft Determination, however, the ACCC did not appear to be persuaded.
The ADA submitted that:
In its preliminary assessment of the proposal, the ACCC responded to the ADA's submissions, arguing that:
The proposed authorisation is significant because it reminds parties that otherwise potentially anticompetitive price-fixing arrangements may proceed with statutory immunity, provided there is a discernible public benefit to be gained that outweighs the limited relative impact of the anticompetitive arrangement.
Parties with a commercial benefit from engaging in similar conduct may take comfort from the ACCC's cost/benefit approach to this matter. However, the ACCC authorisation process does require careful planning and consideration, having regard to the time required (i.e., six or more months) and the nature and extent of information that must accompany the authorisation application.
Further, as this Draft Determination relates only to authorised proposals, parties should maintain regular assessment of their conduct as it relates to section 46 of the CCA (the misuse of market power prohibition).
The ACCC is inviting further submissions on the Draft Determination, with a final determination to be released sometime in April 2018.
Two Key Takeaways