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Health Market Inquiry Final Report Gazetted

November 29, 2019

Department of Economic Development

29 November 2019

The Health Market Inquiry Final Findings and Recommendations Report has been published in Government Gazette 42861.

The Competition Commission released the findings and report in September 2019.

The Inquiry commenced in January 2014 and underwent a number of extensions.

The Inquiry was conducted in terms of Chapter 4A of the Competition Act of 1998.

According to the terms of reference, chapter 4A allows the Commission to conduct market inquiries in respect of the “general state of competition in a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm”.

The Inquiry looked at the general level of competition in private healthcare in South Africa.

It focused on healthcare financing and healthcare services.

One finding is that the South African private healthcare market is “characterised by high and rising costs of healthcare and medical scheme cover, and significant overutilization without stakeholders having been able to demonstrate associated improvements in health outcomes”.

Other findings include that the “market is characterised by highly concentrated funders and facilities markets, disempowered and uninformed consumers, a general absence of value-based purchasing, practitioners who are subject to little regulation and failures of accountability at many levels”.

The Competition Commission also found that the private sector has not been managed properly with the health department not using existing legislation to manage the private healthcare market, failing to ensure regular reviews as required by law and failing to hold regulators sufficiently accountable.

Consequently, the private sector can be described as neither efficient nor competitive.

The Commission also holds the view that a “more competitive private healthcare market will translate into lower costs and prices, more value-for-money for consumers and should promote innovation in the delivery and funding of healthcare”.

It declared that competition should occur on price, cost and quality and not on risk avoidance.

Recommendations include a set of interrelated interventions designed to promote systemic change to improve the context within which facilities, funders, and practitioners operate, and create a shift towards a pro-competitive environment; that the Competition Commission review its approach to creeping mergers to address high levels of concentration through effective merger review; the setting up of a dedicated healthcare regulatory authority to be known as the Supply Side Regulator for Healthcare; the creation of an Outcomes Monitoring and Reporting Organisation as a platform for providers, patients and all other stakeholders in the provision of healthcare to generate patient-centred and scientifically robust information on outcomes of healthcare; adjust HPCSA ethical rules to promote innovation in models of care to allow for multidisciplinary group practices and alternative care models so that fee-for-service ceases to be the dominant payment mechanism and the introduction of a risk-adjustment mechanism linked to the single, comprehensive, standardised base benefit option to remove any incentive by schemes to compete on risk.

Meanwhile, in Gazette 42869, the economic development department announced the completion of the Grocery Retail Market Inquiry.

The notice contains a summary of the findings and recommendations contained in the Final Report.

The Commission released the Final Report this week.

The Inquiry got underway in 2015.

The Competition Commission initiated the Inquiry to understand the general state of competition in the retail sector.

It focused on:


• The structure of the industry;
• The renting of retail space in malls; and
• The impact that big retail chains have on competition, jobs and small business development.

Provisional findings and preliminary recommendations were published at the end of May 2019.

Final findings and recommendations focus on exclusive leases, fair trading practices and regulatory and competitiveness support.

The Inquiry calls for exclusive leases at shopping malls to end.

In order to achieve this, the enforcement of exclusivity clauses against specialist and SMME stores in shopping malls and all grocery retailers in non-urban areas needs to end; no exclusivity in new lease agreements or in lease renewals and all remaining exclusivity clauses to be phased out over a five-year period.

The proposal is that this is achieved through voluntary undertakings by national supermarket chains.

“The recommendation is that the Commission should, within 6 months from today, continue the Inquiry’s process and secure voluntary compliance with the recommendations, failing which legislation in the form of regulations or a code of practice should be introduced along the lines of the recommendations.”

As regards fair trading practices, the Inquiry also calls for equal treatment with regard to the granting of rebates by suppliers.

Suppliers of FMCG products must ensure that the trade terms are uniformly available to all retailers, wholesalers and buyer groups; the trade terms offered have an objective justification based on cost savings, efficiencies or sales promotions; the trade terms and conditions of qualification are communicated and applied uniformly; the rebate size is linked to the value provided, rather than simply the volume purchased; and they take measures to support qualification for rebates by wholesalers and buyer groups that supply the small and independent trade.

The Inquiry recommends that attempts be made over the next six months to secure voluntary commitments by FMCG suppliers to the recommendations.

“If this is not successful, then government should move to legislate this framework and provide for an Ombud to police it.”

The Inquiry also recommends that shopping mall owners must “use fair, transparent and commercially justifiable criteria to determine differences in rental rates, lease deposits and shop fitting allowances within a property and ensure that rental escalation formulae are uniform across customers unless there are commercially justifiable reasons for differences”.

The Inquiry also wants to see greater support provided to informal and township trading businesses at the local municipality level.

It calls for the removal of regulatory obstacles and steps taken to set up infrastructure in support of informal and township businesses and ensure that new developments provide space for “independent and historically disadvantaged retailers”.

In a separate matter, the department announced the granting by the Commission of an unconditional exemption to South African Airways SOC Limited and Air Mauritius Limited.

The airlines are exempted from certain provisions of Chapter 2 of the Competition Act for a period of 5 years.

They filed an application for exemption in December 2018.

“The scope of the exemption application involves SAA and MK cooperating by entering into a Joint Venture (“JV”) on the Johannesburg (“JHB”) and Mauritius (“MRU”) route as well as the behind and beyond routes.”

The exemption, published in Gazette 42861, came into effect on 21 October 2019 and applies until 31 October 2024.