Commerce Commission files proceedings against Waikato pathology service providers

The Commerce Commission has filed proceedings in the High Court against pathology service providers New Zealand Diagnostic Group Limited, its wholly-owned subsidiary Hamilton Medical Laboratory Holdings Limited (collectively NZDG) and Pathology Associates Limited (PAL).

The Commission alleges that starting in 2003 the companies agreed not to compete to acquire clients from each other in the Waikato area pending a proposed merger of their operations. That merger never materialised.

The alleged collusion between the private providers included warning the competing provider when GPs were interested in switching to another provider. The Commission also alleges that this agreement evolved into a full "moratorium on competition", including competition with the Waikato Hospital Laboratory, which had recently expanded into the community pathology testing market dominated by the private providers.

Commerce Commission Chair Paula Rebstock said, "The Commission is concerned if inappropriate co-ordination between competitors prior to any proposed merger taking effect, otherwise known as "gun-jumping", limits competition between those parties. Parties who are intending to merge must continue to compete and should be aware that the restrictive trade practice provisions of the Commerce Act continue to apply to them."

"In taking proceedings in this case, the Commission hopes to reinforce the benefits of competition to the health sector and underline the illegality of anti-competitive pre-merger coordination," said Ms Rebstock.

The Commission will be making no further comment while the matter is before the courts.

Background
Community pathology services include the collection and laboratory testing of tissues and cells to help physicians diagnose medical conditions.

During the period relevant to these proceedings, NZDG and PAL provided community testing pathology services in the Waikato pursuant to contractual arrangements with the Waikato District Health Board (WDHB).

In December 2006, the WDHB held a competitive tender to supply pathology services in the Waikato, resulting in a single provider being awarded a contract to provide pathology services from January 2008.