FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Little Company of Mary Health Care Limited [2015] FCA 1144

Upon the Court accepting the Undertaking given by the first respondent, Little Company of Mary Health Care Limited (LCMHC), in paragraph 4 below:

THE COURT BY CONSENT DECLARES THAT:

1.    From March 2011 to the date of this Order the respondents engaged in the practice of exclusive dealing by:

(a)    acquiring and offering to acquire services from medical practitioners who had been granted, and held, access and clinical privileges to perform procedures (Accredited Medical Practitioners) at day surgery facilities operated by LCMHC (Day Surgery Facilities) through its subsidiary, Calvary Health Care Riverina Limited (Calvary Riverina);

(b)    on condition that a provision in the Private Hospital By-Laws applying to the Calvary Riverina Day Surgery Facilities gave LCMHC and/or Calvary Riverina the qualified ability to refuse to grant accreditation to a medical practitioner, or to revoke the accreditation of an Accredited Medical Practitioner, who owned or controlled an entity that was in competition with the services offered by LCMHC and/or Calvary Riverina;

which conduct had the likely effect of substantially lessening competition in the market in which day surgery services in Wagga Wagga, New South Wales were supplied, in contravention of s 47(1) of the Competition and Consumer Act 2010 (Cth).

THE COURT BY CONSENT ORDERS THAT:

2.    The respondents pay the applicant’s costs of and incidental to the proceeding, agreed in the sum of $100,000.

3.    The proceedings be otherwise dismissed.

THE COURT NOTES THAT:

4.    The first respondent undertakes to the Court that, within 14 days of the Court making orders in the form of the annexed short minutes of order, it will delete or otherwise remove clauses 13.1(m) and 24.2(a)(vii) of the 2014 Calvary Private Hospital By-Laws.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1    These proceedings concern the market in which day surgery services in Wagga Wagga, New South Wales were supplied from March 2011 to October 2015.

2    One of the issues in the proceedings is whether the respondents engaged in the practice of exclusive dealing by acquiring and offering to acquire services from medical practitioners who had been granted, and held, access and clinical privileges to perform procedures at day surgery facilities operated by the respondents on condition that a provision in the Private Hospital By-Laws applying to the Calvary Riverina Day Surgery Facilities gave the respondents the qualified ability to refuse to grant accreditation to a medical practitioner, or to revoke the accreditation of an accredited medical practitioner, who owned or controlled an entity that was in competition with the services provided by the respondents.

3    The parties have filed a statement of agreed facts, joint submissions and proposed consent orders to resolve these proceedings. By its Amended Application and Amended Statement of Claim filed in court this morning, the Australian Competition and Consumer Commission (ACCC) does not seek a pecuniary penalty.

4    The statement of agreed facts is for the purpose of this proceeding only and it is pursuant to s 191 of the Evidence Act 1995 (Cth) that the respondents have made the admissions in that statement. Other than the admissions contained in the facts agreed in that statement, the respondents make no admissions in relation to, and do not agree with, the other matters pleaded by the applicant in the Amended Statement of Claim.

Conduct and admitted contraventions

5    The statement of agreed facts, provided in accordance with s 191 of the Evidence Act, identified that the first respondent, Little Company of Mary Health Care Ltd (LCMHC) was engaged in, amongst other things, the supply of private and public hospital services in Australia. The second respondent, Calvary Health Care Riverina Limited (Calvary Riverina) was engaged in, amongst other things, the supply of private hospital services in Wagga Wagga, New South Wales.

6    From at least March 2007, LCMHC operated the Calvary Health Care Riverina Private Hospital (Calvary Riverina Private Hospital) in Wagga Wagga, New South Wales through its subsidiary Calvary Riverina.

7    From at least March 2007, LCMHC and/or Calvary Riverina operated day surgery facilities in Wagga Wagga as a division of the Calvary Riverina Private Hospital.

8    From at least March 2007, LCMHC and/or Calvary Riverina, through the Calvary Riverina Private Hospital and the Calvary Riverina Day Surgery Facilities, provided a range of private hospital services in Wagga Wagga, including day surgery services and non-day surgery services.

9    There was demand in Wagga Wagga and the surrounding areas by patients for day surgery services.

10    The demand in Wagga Wagga and the surrounding areas for day surgery services by private patients was generally met by operators of private hospitals and private day surgery centres located in Wagga Wagga and the surrounding areas.

11    The applicant contended that LCMHC and Calvary Riverina were in competition in the provision of day surgery services to private patients with private hospitals and day surgery centres located in Wagga Wagga and the surrounding areas while the respondents contended that LCMHC and Calvary Riverina were in competition in the provision of day surgery services to private patients with private hospitals, private day surgery centres and public hospitals located in Wagga Wagga and the surrounding areas. Nothing turns on that difference in the parties’ contentions.

12    Thus the parties agreed that LCMHC and Calvary Riverina were in competition in the provision of day surgery services to private patients with, at least, private hospitals and some day surgery centres located in Wagga Wagga and the surrounding areas.

13    There existed a market in which day surgery services, amongst other surgery services, were supplied in Wagga Wagga and the surrounding areas.

14    From about March 2007, day surgery procedures were performed at Calvary Riverina Day Surgery Facilities by medical practitioners who had been granted access and clinical privileges to provide medical services at Calvary Riverina Private Hospital (Accredited Medical Practitioners).

15    From about March 2007 until about March 2011, by reason of clauses 13 and 15 of the LCMHC By-Laws then in effect (2007 By-Laws), medical practitioners wishing to perform day surgery procedures and all other procedures at Calvary Riverina Private Hospital were required to apply to LCMHC for accreditation and to have their application accepted.

16    From about March 2011, by reason of clauses 13.1(a), 13(c) and 15(b) of the By-Laws then in effect, medical practitioners wishing to perform day surgery procedures and all other procedures at Calvary Riverina Private Hospital were required to complete and submit a medical application form to LCMHC for accreditation and to have their application accepted.

17    From at least March 2007, by completing the medical application form, medical practitioners were required to declare in writing that he or she had read, accepted and agreed to observe each and all of the LCMHC By-Laws, as may be amended or replaced from time to time.

18    Upon acceptance by LCMHC of an application for accreditation, there was a contract between an Accredited Medical Practitioner and LCMHC that required the parties to comply with the By-Laws in force from time to time.

19    From at least March 2007 accreditation of LCMHC was not exclusive, such that Accredited Medical Practitioners were allowed to perform day surgery procedures at day surgery facilities that were in competition with LCMHC and/or its subsidiaries; and provide medical services at any facility that was in competition with LCMHC and/or its subsidiaries.

20    On 17 March 2011, LCMHC approved updated Private Hospital By-Laws (2011 By-Laws) which included terms concerning the eligibility for or termination of accreditation of a health practitioner who took a position in an organisation which acted in competition with the services offered by LCMHC. Medical practitioners who became aware of the 2011 amendments may have taken them into account in considering whether to establish a new private hospital or private day surgery centre located in Wagga Wagga and the surrounding areas supplying day surgery services to private patients in competition with LCMHC and/or Calvary Riverina.

21    By medical practitioners accepting accreditation on terms that included the 2011 amendments, those practitioners were able to supply a service to LCMHC and/or Calvary Riverina, and LCMHC and/or Calvary Riverina were able to acquire a service from those practitioners, namely the benefit of day surgery procedures performed on patients at Calvary Riverina Day Surgery Facilities amongst other medical services provided to patients by Accredited Medical Practitioners at Calvary Riverina Private Hospital.

22    LCMHC and/or Calvary Riverina offered to and acquired services from Accredited Medical Practitioners from March 2011 to June 2014 in accordance with the 2011 By-Laws.

23    Between about March 2011 and June 2014, LCMHC and/or Calvary Riverina did not refuse to grant or renew accreditation to, or revoke the accreditation of, any medical practitioner at any of the private hospitals, including Calvary Riverina Private Hospital and the Calvary Riverina Day Surgery Facilities, pursuant to the 2011 amendments.

24    On 23 June 2014, LCMHC approved proposed updated Private Hospital By-Laws (2014 By-Laws) which would apply at Calvary Riverina Private Hospital, amongst others, including Calvary Riverina Day Surgery Facilities. The 2014 By-Laws included terms concerning the eligibility for or termination of accreditation of a health practitioner who took a position in an organisation where the practitioner had or would have an interest or duty which conflicted or competed with the practitioner’s obligations under the By-Laws to promote and support the business and objectives of LCMHC. Medical practitioners who became aware of the 2014 amendments may have taken them into account in considering whether to establish a new private hospital or private day surgery centre located in Wagga Wagga and the surrounding areas supplying day surgery services to private patients in competition with LCMHC and/or Calvary Riverina.

25    By medical practitioners accepting accreditation on terms that included the 2014 amendments, Accredited Medical Practitioners were able to supply a service to LCMHC and/or Calvary Riverina, and LCMHC and/or Calvary Riverina were able to acquire a service from Accredited Medical Practitioners, namely, the benefit of day surgery procedures performed on patients at Calvary Riverina Day Surgery Facilities, amongst other medical services provided to patients by Accredited Medical Practitioners at Calvary Riverina Private Hospital.

26    LCMHC and/or Calvary Riverina offered to and acquired services from Accredited Medical Practitioners from July 2014 in accordance with the 2014 By-Laws.

27    Between around July 2014 and October 2015, LCMHC and/or Calvary Riverina did not refuse to grant or renew accreditation to, or revoke the accreditation of, any medical practitioner at any of their private hospitals, including Calvary Riverina Private Hospital and the Calvary Riverina Day Surgery Facilities pursuant to the 2014 amendments.

28    At all material times, both under the 2011 By-Laws and under the 2014 By-Laws, the LCMHC Board had discretion over the accreditation process, including whether to grant, suspend or terminate accreditation.

29    From March 2011 to 12 October 2015, LCMHC and/or Calvary Riverina:

(1)    offered to acquire, and acquired, a service from Accredited Medical Practitioners, namely, the benefit of day surgery procedures performed on patients at Calvary Riverina Day Surgery Facilities;

(2)    had, in accordance with the 2011 amendments and the 2014 amendments (as applicable), the qualified ability to refuse to grant accreditation to medical practitioners, or to revoke the accreditation of an Accredited Medical Practitioner, who also owned or controlled an entity that was in competition with the services offered by LCMHC and/or Calvary Riverina;

(3)    in circumstances where some medical practitioners accredited to practice at Calvary Riverina Day Surgery Facilities became aware of the 2011 amendments and/or or the 2014 amendments and may have taken those amendments into account in considering whether to establish a new private hospital or private day surgery centre located in Wagga Wagga and the surrounding areas supplying day surgery services to private patients in competition with LCMHC and/or Calvary Riverina,

which conduct had the likely effect of substantially lessening competition in the market in which day surgery services in Wagga Wagga were supplied.

30    The respondents admitted, for the purposes of these proceedings only, that from March 2011 to 12 October 2015 they engaged in the practice of exclusive dealing, which conduct had the likely effect of substantially lessening competition in the market in which day surgery services in Wagga Wagga, New South Wales were supplied, in contravention by each of them of s 47(1) of the Competition and Consumer Act.

31    Given the admissions by the respondents that they contravened s 47(1) in that manner, the ACCC did not press the remaining allegations in the Amended Application and Amended Statement of Claim and the parties sought to have the proceeding otherwise dismissed on the terms set out in the short minutes of order annexed to the parties’ joint submissions.

Consideration

32    The Court has a discretionary power granted by s 21 of the Federal Court of Australia Act 1976 (Cth) and the question for decision is whether to exercise it so as to grant declaratory relief.

33    I am satisfied that the proposed declaration relates to conduct that contravenes s 47 of the Competition and Consumer Act and that the matters in issue have been identified and particularised by the parties with precision. I am also satisfied that it is in the public interest for the ACCC to seek to have the declarations made and for the declarations to be made: Forster v Jododex Australia Pty Ltd [1972] HCA 61; 127 CLR 421 at 437-438. A significant legal controversy in the case is being resolved. I also find that each of the respondents is a proper contradictor because each has agreed to admit that it has contravened the Competition and Consumer Act and is the proposed subject of the declaration: see Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56; 201 FCR 378.

34    I find the declaration sought is appropriate as recording the Court’s disapproval of the conduct engaged in by the respondents in contravention of the Competition and Consumer Act. The declaration will also serve the public interest in defining and publicising the type of conduct that constitutes a contravention of s 47 of the Competition and Consumer Act, thus informing the public of the contravening conduct, giving effect to the purposes of the Competition and Consumer Act and tending to deter other corporations from contravening the Competition and Consumer Act, in particular s 47: see Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730 at [6] per RD Nicholson J.

Conclusion and orders

35    For these reasons and on the basis of the facts set out in the statement of agreed facts, I make the declaration and orders sought by the parties.

Associate:

Dated:    26 October 2015