Is it news that Competition Law will apply to the NHS?


During Prime Minister’s Questions this afternoon, Ed Miliband asked the Prime Minister about the provisions of the Health and Social Care Bill which made the NHS subject to EU competition law. However, it wasn’t clear that he was making any particular point. Perhaps the allegation is that the NHS ought not to be subject to laws regulating economic activity. If that is the case, then that particular horse may well have bolted nearly a decade ago.

The NHS is already potentially subject to EU competition law. The European Court of Justice (ECJ) ruled in the Fenin case that the Spanish health service’s purchasing body could in principle have been abusing a dominant position on the market for the purchasing of pharmaceuticals contrary to what is now Article 102 of the Treaty on the Functioning of the European Union (TFEU). On the facts in that case the ECJ found that that particular body was not active on a market because it exercised so called “social solidarity” functions rather than economic ones and so was not subject to EU competition law. It is not at all certain that the much more marketised NHS, even prior to the reforms in the Bill would have fitted in the same definition.

Before the final judgment of the ECJ in Fenin the Office of Fair Trading investigated allegations of abuse of dominance by a NHS trust in the terms on which it purchased public care home services in the Bettercare case under Chapter II of the Competition Act 1998. For most practical purposes the provisions of Chapter II of the Competition Act and Article 102 TFEU are the same and the Competition Act requires the OFT to interpret it so that it is consistent with the caselaw under Article 102. The OFT concluded that the Competition Act did not apply on the basis that the NHS purchasing body was not an undertaking (ie that it was not carrying out economic activities). However, the Competition Commission Appeals Tribunal (CCAT, now renamed the Competition Appeal Tribunal or CAT) upheld an appeal by Bettercare and ruled that it would be possible for an NHS purchasing body to be an undertaking subject to competition law. The OFT then re-investigated the complaint, but as the final judgment had not yet been delivered in Fenin it was unable to conclude that the NHS Trust purchasing body was not subject to competition law. Instead, the case was closed on the basis that in any event, even if it were to be subject to competition law on the facts in the case there had been no abuse of a dominant position.

Fenin did not close the door on the NHS being subject to UK or EU competition law and the detailed analysis of the facts by the CCAT provide ample grounds on which NHS bodies can already be considered to be subject to that law distinguishing them from the finding of fact in Fenin.

So, the allegation made in Parliament is not really news in that respect. What is interesting is that the Bill, by giving Monitor concurrent competition law enforcement powers to the OFT and clearly envisaging that it could use them generally to investigate under both UK and EU competition law changes the prejudice or gut feeling that the OFT had in Bettercare that NHS purchasing bodies fall outside the scope of competition law.

Regulators tend to shy away from limiting their jurisdiction, particularly when they have been given a large new jurisdiction to play with. Monitor is therefore unlikely to be as squeamish as the OFT was in 2000-2003 in Bettercare about applying competition powers to activities of the NHS. It is worth noting however that the competition powers in Chapter 2 of the Bill also include specific provisions regarding procurement practices by the NHS (sections 63 and 64). This provides Monitor with an alternative enforcement mechanism in relation to cases like Bettercare – rather than investigating procurements for being conducted abusively in breach of competition law, it will be open to Monitor to take less draconian action. It may be that in practice, compliance with the regulations regarding procurement practices to be made by Monitor would be a good defence against abuse allegations. After all, it would be embarrassing for Monitor to find that it was easy to comply with its good practice regulations on procurement while behaving anti-competitively.

This may lead to the odd situation where legislation has made the NHS more clearly subject to competition law but at the same time has made it less likely in practice that competition law would be applied to the specific procurement transactions that have yielded most complaints. At least by the UK authorities. Where alleged anti-competitive behaviour might have a cross-border impact, perhaps the EU angle is relevant. Maybe the real allegation at PMQs was a UKIP-baiting “do you really want the eurocrats at the Commission to be investigating our NHS”?

Update

Interestingly, nearly six months after I wrote this blog post, the 38 Degrees campaign has been urging people to write to their MPs to get them to vote against the Bill partly on the basis of legal advice about the “new” applicability of competition law to the NHS. One MP has responded in detail to constituents emailing him in the terms suggested by 38 Degrees by pointing out that competition and procurement law already applied.

http://bit.ly/oLCRn4

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4 thoughts on “Is it news that Competition Law will apply to the NHS?

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