Australia: Healthcare and Competition Update – ACCC Follow

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Proposed changes to Australia’s merger control regime were submitted to Parliament last month following extensive public consultation. For more information on these reforms, see the reminders here , here , and here .

As a key element of the reform, the new legislation will enable the ACCC to require the treasurer to designate certain sectors of the economy for which all mergers, acquisitions or other transactions require ACCC approval, regardless of the size of the transaction.

Comments made by the ACCC and Treasury during the reform consultation process indicate that the ACCC will use the increased powers under the new regime to scrutinize transactions in pathology and radiology oncology.

Back in March 2023, the ACCC identified the pathology sector as an area of ​​concern due to significant market concentration. This concern was also reflected in the ACCC’s submission to the Treasury Competition Working Group in January this year. Likewise, Finance Minister Jim Chalmers confirmed in his second reading speech of the bill that the government would consider designation requirements for the radiology oncology sector.

Designations under the new regime are expected to result in significant increases in time and costs for parties involved in transactions in these industries.

Recently, ACCC Chair Gina Cass-Gottlieb made it clear in an interview with the Australian Financial Review (AFR) that once the new law is passed by Parliament, the ACCC will require the Treasurer to designate pathology and Oncology-Radiology sector because of the ACCC’s concerns about concentration in these markets.

Regarding the radiation oncology sector, the ACCC has previously expressed concerns about market concentration in cancer radiation clinics, with the majority of private radiation clinics in Australia being operated by two companies. Furthermore, the ACCC noted in its summary submission to Treasury in March 2023 that the pathology services industry is highly concentrated, with a small number of providers retaining significant market share over time. The ACCC’s view in this regard is reflected in its use of existing powers to block transactions in the market for the supply of community pathology services. In December 2023, it blocked a merger between Australia’s second- and third-largest pathology providers on the grounds that it would lead to a significant reduction in competition in the market.

Finally, the ACCC expressed continued concern about a series of acquisitions and consolidations by private equity firms in the cancer radiology and pathology sectors. The ACCC initially identified serial acquisitions as an issue affecting the pathology sector in its submission to the Competition Working Group in January 2024. In this regard, Ms Cass-Gottlieb’s comments indicate that the ACCC expects the designated features proposed in the new merger law to enhance the visibility of such transactions and ensure that they are subject to ACCC scrutiny.

Businesses should expect that, unlike the current voluntary notification system, transactions within these industries will be subject to review by the ACCC following the implementation of the reforms. The time and cost for companies to seek ACCC clearance for these transactions is also expected to increase.