Office of Fair Trading (OFT) closed Competition Act 1998 case.
Summary of work
Below is a summary of non-infringement decisions made under the Competition Act 1998 in respect of complaints concerning the activities of various groups of anaesthetists.
The Office of Fair Trading has concluded that the following anaesthetists’ groups have not infringed the prohibition imposed by Section 2(1) (the Chapter I prohibition) of the Competition Act 1998: Southampton Anaesthetic Services (SAS); Norwich Anaesthetists Group (NAG); Morriston Cardiac Anaesthetic Group (MCAG); Tunbridge Wells Group of Anaesthetists (TWGA), Fylde Group of Anaesthetists (Fylde), and Guildford Anaesthetic Services (GAS).
The OFT’s investigation was initiated by a complaint made in May 2001. The complainant alleges that anaesthetists in a number of local areas had formed themselves into groups and agreed within those groups the prices that each anaesthetist will charge for their private professional services. During the investigation a complaint from an individual was received in respect of NAG.
Following an initial examination of the complaints there were reasonable grounds for suspecting that the aforementioned groups had agreed within their groups the prices that each anaesthetist would charge for their private professional services.
Consequently, the powers under s27 of the Act, to enter any premises in connection with the investigation without a warrant and require production of documents relevant to the investigation, were exercised in relation to all of the anaesthetists' groups save for NAG and GAS. Notice was given of the visits. Formal notices under s26 of the Act requiring the provision of specified information and documents for the purposes of the investigation were sent to all the anaesthetists’ groups.
Based on the analysis of the documents and information gathered during the investigation, the OFT considers that each of the aforementioned groups, save for GAS, operates as a single undertaking for the purposes of competition law and therefore an agreement between the members of each group (within their respective groups) as to the levels of fees to be charged for their private professional services, will not amount to an agreement between undertakings. A summary of the relevant facts in respect of each group are set out below.
The Chapter I prohibition applies to agreements between undertakings, decisions by associations of undertakings or concerted practices, which may affect trade within the United Kingdom (see note 1), and which have as their object or effect the appreciable prevention, restriction or distortion of competition within the United Kingdom, unless they are exempted or excluded in accordance with the provisions of Part 1 of the Act.
An undertaking, in the context of competition law, includes any natural or legal person capable of carrying on commercial or economic activities. It includes, inter alia, companies, firms, businesses, partnerships and individuals operating as sole traders (see note 2).
The Chapter I prohibition does not apply to agreements between entities which form a single economic unit or undertaking.
Where the general business practices of a group of individuals are such that the group engages in commercial or economic activity on a market and its individual members do not engage in that same commercial or economic activity on a market other than through the group for as long as they continue to be members of the group, then the group will be treated as a single undertaking rather than as an association of several undertakings for the purposes of the Competition Act 1998.
Such a group will be treated as single undertaking only if it operates and presents itself as a single entity on the market, for example where the members generate profits for the common benefit of the group, operate under a common name, share administrative functions such as joint billing, have a bank account (or accounts) in the name of the group and/or a single set of accounts is produced in respect of the group’s commercial activities.
An agreement between the members of such a group in relation to the acts of the group will not amount to an agreement between undertakings.
In respect of GAS, the OFT considers that each of the members of GAS do act on the market as separate undertakings. The OFT has concluded that its members have not agreed between themselves the prices that they charge for their private professional services, hence there is no agreement that appreciably prevents, restricts or distorts competition.
The OFT has therefore concluded that the members of SAS, NAG, Fylde, TWGA, MCAG and GAS have not infringed the Chapter I prohibition.
SAS is a company limited by guarantee.
NAG is a formal partnership.
Fylde has no written rules or constitution, but does operates a joint billing arrangement as, not only are invoices billed in the name of the Fylde Group but cheques are to be made payable to the group rather than to the individual anaesthetist. Fylde has a joint bank account and the members of the group share income generated by private practice. Therefore, on the basis of these facts, it is concluded that Fylde operates as a single undertaking for the purpose of competition law.
TWGA have been acting in accordance with the terms of a draft partnership agreement from 1 March 2001. As a non-registerable agreement under the Restrictive Trade Practices Act 1976 (see note 3) an agreement between the members of TWGA would benefit from a transitional period of one year under the Act (see note 4) commencing from the starting date of the Act, 1 March 2000. Therefore, the relevant period for considering whether there has been a breach of the Chapter I prohibition is 1 March 2001 onwards.
The terms of the partnership agreement include that all income from private and waiting list work will be deemed as belonging to TWGA rather than to the partner performing the work. Furthermore, all partners receive a parity share of the profits. Other relevant facts in respect of the operation of TWGA include: that it has a business account for all incomings and expenditure; all partners are named on the account and two signatories will suffice to action a bank order; and group accounts are produced by the group accountant. Therefore, on the basis of these facts the OFT has concluded that TWGA has been operating as a partnership in accordance with the terms of the draft partnership agreement since 1 March 2001.
MCAG has no formal legal structure, but all private professional services and income derived is shared equally amongst its members. MCAG has its own bank account, centralised billing and produces group accounts. Therefore, the OFT is of the view that MCAG operates as a single undertaking for the purpose of competition law.
- Under section 2(3) of the Act, subsection (1) applies only if the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom and under section 2(7), ' United Kingdom' means in relation to an agreement which operates or is intended to operate only in a part of the United Kingdom, that part.
- OFT401, ‘The Chapter I Prohibition’, para 2.5.
- As an agreement in repect of the provision of medical services, the agreement would be exempt under Schedule 1 of the Restrictive Trade Practices Act 1976.
- Schedule 13 of the Competition Act 1998, OFT406, 'Transitional Arrangements'.