CompuGROUP UK Ltd / iSOFT Group plc

OFT closed case: Anticipated acquisition of iSOFT Group plc by CompuGROUP UK Ltd.

Affected market: IT software for the healthcare industry

No. ME/3197/07

The OFT’s decision on reference under section 33(1) given on 24 August 2007. Full text of decision published 4 September 2007.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range by the OFT or at the request of the parties for reasons of commercial confidentiality.

PARTIES

CompuGROUP UK Ltd is a wholly owned subsidiary of CompuGROUP Holding AG (CompuGROUP) which develops and supplies software services to the health sector.
 
iSOFT Group plc (iSOFT) provides software and systems to healthcare provider organisations including the National Health Service (NHS) and its National Programme for Information Technology (NPfIT). [see note 1] In the 12 months ending 30 April 2006 iSOFT’s UK turnover was approximately £[ ] million.

TRANSACTION

CompuGROUP intends to acquire the entire issued and to be issued share capital of iSOFT. The transaction was notified by way of a merger notice on 30 July 2007. The statutory deadline expires on 28 August 2007.

JURISDICTION

As a result of this transaction CompuGROUP and iSOFT will cease to be distinct. The UK turnover of iSOFT exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore 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 transaction is not being notified in any other national jurisdiction.

FRAME OF REFERENCE

Product market

The parties submit that their activities do not overlap in the UK as CompuGROUP does not, currently, conduct business in the UK. However, outside the UK there is some limited overlap by product or geography in the supply of Hospital Information Systems (HIS) and in the supply of Doctor Information Systems (DIS), both of which cover a diverse range of products.

In terms of HIS, iSOFT supplies patient administration systems, departmental clinical systems, and electronic patient record systems.  CompuGROUP develops and supplies HIS which can consist of hospital management, personnel management and billing programmes for the operation of hospitals and a large number of interface solutions for the integration of various specialised departments and laboratories.

The functions of DIS range from general practice management software to billing systems for doctors and dentists through to comprehensive information solutions for doctors and dentists.

Geographic market

On the supply side, as noted in iSOFT/Torex [see note 2] Clinisys/Torex, [See note 3] IT software for the healthcare sector can be developed anywhere in the world. Accordingly, software suppliers located outside the UK may bid for contracts to supply healthcare IT software to the NHS and private hospitals/doctors in the UK.

However, on the demand side in the iSOFT/Torex decision, the OFT found that the key requirement in marketing and selling a new system is a local presence. Customers require a local presence particularly in order to ensure that the requisite installation expertise (and then maintenance and servicing) is readily available. This view was confirmed by a third party who agreed that it was important for a firm marketing in the UK to understand the nature of the UK market, specifically in relation to the NHS, and hence requires a presence in the UK.

However, the OFT’s conclusion on reference does not turn on the geographical frame of reference and hence it was not necessary to conclude on this point.

HORIZONTAL ISSUES

Market shares

iSOFT is engaged in the National Health Service's National Programme for IT (NPfIT) in England where it is the preferred application provider of core healthcare software to three of five regional clusters across England under a subcontract with Computer Science Corporation (CSC), the Local Service Provider for the three regions.

CompuGROUP has never supplied the UK market, nor bid for any contracts hence there is no overlap in the UK.

THIRD PARTY VIEWS

Third parties contacted by the OFT were unconcerned about this transaction.

ASSESSMENT

In considering the relevant geographical scope of the frame of reference, the OFT found that, consistent with the iSOFT/Torex decision, a key requirement in marketing and selling an information system to hospitals and doctors, is a local UK presence. As CompuGROUP has never supplied the UK market, there are no areas of overlap between CompuGROUP and iSOFT. The OFT has not received any substantial competition concerns from third parties.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES

  1. The NPfIT aims to create a single integrated record for patients (in England) that will allow primary and secondary health care providers access to that record.
  2. Completed acquisition by iSOFT Group plc of Torex plc, OFT decision of 24 March 2004.
  3. Anticipated acquisition by Clinisys Solutions Ltd of Torex Systems Ltd, OFT decision of 2 January 2005.

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