The Competition Tribunal (Tribunal) has prohibited a merger between Mediclinic Southern Africa (Pty) Ltd (Mediclinic) and Matlosana Medical Health Services (Pty) Ltd (MMHS) in the North West province.

In terms of the proposed transaction Mediclinic would acquire a majority interest in MMHS.

MMHS owns and operates, inter alia, two multi-disciplinary private hospitals, Wilmed Park and Sunningdale Hospitals, in Klerksdorp (the target hospitals). Mediclinic, one of the largest hospital groups in South Africa, owns and operates, inter alia, Mediclinic Potchefstroom which is located about 50km from the target hospitals. Mediclinic Potchefstroom, Wilmed Park and Sunningdale all provide inpatient private hospital services in the Klerksdorp and Potchefstroom area.

The merging parties notified the large merger to the Competition Commission (Commission) on 29 September 2016. On 28 June 2017, the Commission after investigating the matter recommended to the Tribunal that the proposed merger should be prohibited on grounds that the joining together of Mediclinic Potchefstroom, Wilmed Park and Sunningdale hospitals would likely result in a significant increase in healthcare prices in the region. In addition, the Commission argued that the incentive to improve on non-price factors, such as patient experience and quality healthcare, would likely diminish after the merger. The Commission also argued that the acquisition would confer relatively greater bargaining power to Mediclinic vis-à-vis medical schemes.

The merging parties denied that the proposed merger would have any negative effects on competition and argued that it would lead to a number of pro-competitive efficiencies. This included improved costs of procurement and increased clinical quality and patient experience at the target hospitals.

The Tribunal engaged extensively with the merging parties on whether a potential remedy could be found to address the Commission’s competition concerns. The merging parties' proposed remedies were canvassed with a number of medical aids that gave valuable inputs to the Tribunal. However, despite different proposed remedies put up by the merging parties over several months, no appropriate remedy was tendered that would cure the substantial lessening of competition that would arise as a result of the proposed transaction.

The Tribunal has therefore prohibited the proposed merger.

Full reasons for prohibiting the transaction will be issued in due course.