Competition Act Can Apply to NHS Contracts

The Competition Act 1998 regulates competition within all or part of the UK market:

• Chapter I of the Act prohibits anti-competitive restrictions, agreements or concerted practices between undertakings.

• Chapter II of the Act prohibits undertakings who have a dominant position within a market from abusing that dominant position.

In November 2000, Bettacare Group Limited, a supplier of nursing home and residential care services in Northern Ireland, complained to the Director General of Fair Trading that the North and West Belfast Health and Social Services Trust was abusing its dominant position as sole purchaser of care services from Bettacare by offering unreasonably low contract prices.

The Director General rejected the complaint as he decided that, in this context, the Trust was not acting as an “undertaking” within the meaning of the Competition Act.  Bettacare appealed to the Competition Commission Appeal Tribunal.

The key issue before the Tribunal was whether the Trust, in discharging its social care functions, could be considered to be engaging in an “economic activity”.  Some actions of a public body are economic, and accordingly covered by the Competition Act, and others are the “exercise of official authority” and accordingly outside the scope of the Act.

In deciding this case, the Tribunal noted that the purpose behind the establishment of such Trusts (both under  the Northern Irish model and under the slightly different approach taken in Great Britain) was to facilitate a more market orientated approach with a system of contracting out allowing for greater competition between providers giving a wider choice for patients.

In contracting out services to providers such as Bettacare, the Tribunal considered the Trust to be engaging in an economic activity.  This reasoning was further strengthened by the fact that the Trust, in addition to funding care, also provided care itself in its own homes.

The Tribunal didn’t consider it relevant that the Trust was funded solely through taxation or that its primary purpose was social rather than economic.

The Tribunal overturned the Director General’s original decision to reject the complaint and remitted the case back to the Director General for consideration on its merits.

The Director General may decide to appeal the decision to the Northern Irish Court of Appeal.

This case is interesting as it is a timely reminder that even public sector bodies can be caught by the Act.  Undertakings which infringe the Act can be fined up to 10% of their gross UK turnover and those who suffer damages as a result of anti-competitive practices can seek damages before the Courts.

The Enterprise Bill currently before Parliament will provide for stronger remedies and, in the case of so called “hard core cartels”, the possibility of prison sentences.
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