Office of Fair Trading
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OFT clears London pathology joint venture

The OFT yesterday gave merger control clearance to a joint venture between University College London Hospitals NHS Foundation Trust, Royal Free London NHS Foundation Trust and The Doctors Laboratory Limited.

Following its review, the OFT has concluded that the merger would not substantially lessen competition. The evidence showed that incentives to ensure high quality services for GPs, commissioners, hospitals, and ultimately patients, would still be in place after the merger.

The OFT carefully considered the impact of the joint venture on the supply of routine pathology tests to GPs and community service providers as well as the provision of routine, urgent, and non-urgent pathology tests and specialist pathology tests to NHS hospitals.

As part of its assessment, the OFT considered the extent to which the parties to the merger are competing. Its review found that competition between them was limited and that, in any event, there would be a sufficient number of other providers available to customers of pathology services.

Ensuring the interests of patients remain paramount when reviewing public hospital mergers is central to the OFT's merger review process. On 17 October the OFT, the Competition Commission and Monitor published a short joint statement clarifying how they work together. The document makes clear that the merger system can take into account the financial difficulties of hospitals and also states how Monitor will take a more active role in advising trusts which are considering mergers.

Nelson Jung, Director of Mergers at the OFT and the Decision Maker in this case, said:

'We understand that a number of pathology providers, both in the public and private sector, are forming joint ventures following the review of pathology services in the UK led by Lord Carter. We would expect this review to drive these providers to compete more strongly in future.

'Following this merger, sufficient choice of providers would still be present to contribute to better quality care for patients and better value for money for taxpayers.

'This is the first pathology joint venture notified to us. We hope that our decision will help other providers considering joint ventures to assess whether they should notify the OFT and how we will review them.'

NOTES

  1. The Independent Review of NHS Pathology Services in England chaired by Lord Carter of Coles (2006 and 2008) estimated that significant savings could be made by the NHS through consolidating pathology services. Pathology services include the detection of diseases through the use of a variety of investigative techniques. NHS pathology services assist in identifying sources of disease and reducing the possible risks of further spread.
  2. The Reference Test - The OFT has a duty to make a reference to the Competition Commission (CC) in relation to anticipated mergers if the OFT believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation the creation of which may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
  3. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply or acquisition of goods or services of any description, a 25 per cent share of supply or acquisition in the UK (or a substantial part thereof) is created or enhanced.
  4. In this case the OFT has found that there is no realistic prospect of a substantial lessening of competition.
  5. In April 2014, the Competition and Markets Authority (the CMA) will become the UK's lead competition and consumer body. The CMA will bring together the existing competition and certain consumer protection functions of the OFT and the responsibilities of the CC, as amended by the Enterprise and Regulatory Reform Act 2013. The CMA, which is a non-Ministerial government department, was established on 1 October 2013 but will not be taking on responsibility for cases or other work until 1 April 2014. See the CMA's home page for more information.

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