Affected market: Supply of healthcare products
No. ME/2824/07
Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.
The OFT's decision on reference under section 22(1) given on 1 May 2007. Full text of decision published 15 May 2007.
Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.
PARTIES
Getinge AB (Getinge) is a Swedish company listed on the Swedish stock exchange. It is a global provider of equipment and systems in healthcare and life sciences sectors. It is particularly active in extended care, infection control and medical systems. Getinge's worldwide turnover for 2005 was approximately £877m. Of this, approximately £96.7m, or 11 per cent, was realised in the UK by the Getinge subsidiaries Pegasus, Arjo and Maquet. For ease, all overlap products supplied by the Getinge subsidiaries are referred to as being supplied by Getinge.
Huntleigh Technology plc (Huntleigh) is a public limited company incorporated in the UK and listed on the London Stock Exchange. It is a well-established UK based group providing non-invasive healthcare devices and instrumentation for use in acute care and home care settings. Huntleigh is involved in the design, manufacture, distribution and rental of medical equipment world-wide, with representation in over 120 countries. Its business is divided into four main areas of operation:
Huntleigh's total worldwide revenue for 2005 was £199.8m. Of this, UK revenue accounted for £69.8m.
TRANSACTION
Getinge, through its subsidiary Getinge Extended Care UK Limited, acquired Huntleigh on 3 January 2007. The parties notified the acquisition on 8 January 2007. The statutory deadline expires on 5 May 2007. It has not been possible to meet the administrative deadline of 12 March 2007. The transaction has been notified and cleared in the USA and Germany. Additionally the transaction was voluntarily notified in Australia given the overlap in PAC products in Australia.
The rationale for the transaction stems from the largely complementary nature of the parties' international operations and product ranges. Getinge believes that the combination of the two businesses can collectively deliver an improved product and service offering to customers.
JURISDICTION
As a result of this transaction Getinge and Huntleigh have ceased to be distinct. The parties overlap in the supply of PAC products, amongst others, and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met, as the parties have a combined share of supply of over 25 per cent. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.
THIRD PARTY RESPONSES
Third party responses have been varied. A number of competitors have expressed concerns that the merger would make Huntleigh a 'dominant' player. Most of these have been expressed in terms of the ability of the merged company to offer a strong portfolio of products to the NHS and therefore foreclose competitors in individual product offerings. Some customers also expressed concerns that the merger reduces their choice.
However, a number of competitors and most customers were unconcerned about the merger, and did not think that it would have an impact on pricing or service in the sector. This was mostly seen to be because of the presence of other competitors, actual and potential, and of the buyer power of NHS.
ASSESSMENT
The merger gives rise to an overlap in the supply of a range of healthcare equipment in the UK. In patient transporters, shower trolleys and patient lifters, the merger gives rise to a modest increment of less than 5 per cent with combined share no higher than [25-30] per cent. No competition concerns arise in these sectors.
The parties are also the first and third largest UK players in two product areas being PACs (APMs in particular) and healthcare beds. In healthcare beds, the vast majority of Getinge's previous sales in the UK are accounted for by a distribution contract with Linet, which is to be terminated as a result of the transaction. Therefore the actual increment arising from and attributable to the merger itself is much lower than the historic shares of supply suggest. With or without the Linet sales, the merger gives rise to an increment of, at most [6-8] per cent. There are two other suppliers larger than Getinge and a number of other suppliers of similar or smaller size. Given this market structure and the lack of concerns from customers, the OFT does not believe that the merger will give rise to a substantial lessening of competition in the supply of healthcare beds.
As regards APMs, there is some disagreement between the parties and some third parties' on Huntleigh's pre-merger shares of supply. Some third parties suggest there could be areas of APM supply where the parties' share could be over 60 per cent. The parties' estimates of shares of supply are supported by the independent GIA report and by the responses the OFT has received from other competitors. The available evidence indicates that there are a number of other credible competitors in the provision of APM, including Hill-Rom, Parkhouse, KCI, Talley and Karomed, so post-merger there are a sufficient number of alternative suppliers for customers. The NHS (and other central procurement agencies), which was the focus of most third party concerns, has a substantial degree of buyer power, and adopts purchasing practises aimed at maximising that advantage. The OFT also noted that NHS Scotland has not accredited Getinge for the supply of APM and for Northern Ireland Getinge is only one of four accredited suppliers. This indicates that the loss of Getinge as an independent supplier is not significant.
While there do appear to be some barriers to de novo entry, the number of players that exist already, and the evidence of recent entry in APM and PACs, is in itself an indication that they are not insurmountable. Expansion both across product areas and geographically would appear to be easy.
A number of third parties raised concerns regarding the portfolio of products that the merger of Getinge and Huntleigh brings together. In so far as there are contracts for TBM already, the available evidence indicates that Getinge was not a particularly effective competitor in this area. There is no evidence that indicates that parties will be in the unique position of being able to force hospital customers to accept a bundle of products. While the ability to offer a broader bundle of products may have some advantages, it would not be in the interest of hospitals to favour ever-wider contracts if there is not sufficient competition in the provision of such contracts.
Consequently, on the basis of all the evidence it has received in this case, the OFT does not believe that it is or may be the case that the merger has resulted or 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 22(1) of the Act.
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